Ricacorp Properties: Rate cut effect remains to be observed, expected Hong Kong property prices to fall another 1% in September

According to the latest data released by the Hong Kong Rating and Valuation Department today, the private residential price index in August 2024 was reported at 292.1 points, a decrease of 1.72% from July's 297.2 points, marking the fourth consecutive month of decline and a cumulative decrease of 5.65%. Property prices hit a new low in 96 months (8 years) since September 2016. In the first 8 months of this year, property prices have fallen by 6.17%; compared to the historical high of 398.1 points in September 2021, the cumulative decline in property prices has expanded to 26.63%.

Chen Haichao, Director of the Property Research Department at Lee & Associates, stated that the downward trend in property prices continues, and the effects of interest rate cuts in the future are still to be observed. It is expected that in the initial stage, trading volume will increase, but the impact on property prices will only slow down the decline. To see a recovery, other economic factors and conditions need to come into play.

Chen Haichao pointed out that the downward trend in property prices in August remains unchanged, mainly due to the continued launch of new properties at low prices, putting continued pressure on second-hand property prices. Looking at the actual market conditions from late August to early September, the situation of new properties being sold at low prices has not changed, so it is expected that property prices in September will fall by another 1%, indicating that the third-quarter property price decline may expand to 4.40%.

With the US cutting interest rates by 0.5% and Hong Kong following with a 0.25% cut, and the potential for further rate cuts, it may stimulate the desire to enter the market. However, this is likely to first be reflected in trading volume, and there is no clear sign of a significant reversal in the downward trend of property prices. At most, it may only ease the decline. If the fourth quarter tends to move sideways narrowly, property prices are expected to fall by 7% for the whole year. However, if new properties continue to be sold at low prices and second-hand properties remain under pressure, the annual decline may expand to nearly 10%.

As for the rental index, the Rating and Valuation Department's data shows a further increase of 1.13% month-on-month in August, reaching 197.5 points, the fourth highest level since electronic records began in 1993, with only about a 1.3% difference from the historical high of 200.1 points in August 2019. Rents have been rising for 6 consecutive months since March this year, with a cumulative increase of 7.10%, and a total increase of 6.18% in the first 8 months of this year. Due to the demand for professionals and local housing, it is expected that rents will remain strong in September and the fourth quarter, with a final increase of over 9% for the whole year, with a high chance of reaching a new historical high within the year