Residential market sentiment deteriorates in August

Rental demand recorded its first negative reading in the survey's history.

Confidence in the residential property market fell to -76 in August as the ongoing trade tensions and political unrest continued to dampen market sentiment, according to the latest Hong Kong Residential Market Survey by the Royal Institution of Chartered Surveyors (RICS) and real estate platform Spacious.

Both buyer and rental demand reported significant deterioration, with rental demand recording its first negative reading in the survey's history, falling below a negative 10% net balance.

During the most intense period of protests, nearly 70% of respondents cited some degree of price decline over the past three months, the report said.

Aggregate prices are expected to fall 4.6% across Hong Kong in the next 12 months as sales volumes and rents slip by 5.3% and 2.5%, respectively, over the same period-- a reversal from just two months ago, when in the June survey contributors expected a twelve month increase in prices, sales volumes and rents of 3.7%, 1.7% and 3.9% respectively.

“The market outlook prediction seems to be a significant reversal since June, where survey contributors anticipated an increase on all three of these metrics,” said Sean Ellison, RICS Senior Economist for Asia-Pacific. “Overall, prices, sales volumes and rents are expected to dwindle in the near term.”

The current market sentiment is comparable to when trade tensions first escalated in October 2018 (-78) and when interest rates were expected to increase in February 2016 (-86).

Survey respondents reported significant contraction in buyer demand, particularly from mainland China.