The residential property market in Hong Kong has registered gains for two straight months, driving prices to a four-month high.

According to the Rating and Valuation Department, the price index of private domestic units stood at 345.9 last month, a 2.2% month-on-month rise, surpassing January’s 1.1% increase.

However, February’s reading represented an annual 9.8% decline.

Compared to the index’s all-time high of 398.1 in September 2021, the cumulative decline in Hong Kong’s property prices had narrowed to 13.1%.

Home prices in Hong Kong are forecast to make a slow rally this year, says S&P Global Ratings, with all Covid restrictions now lifted and normal travel having resumed with the Chinese mainland. This could bolster homebuyer confidence due to an improved economic outlook, Asia News Network reports.

“We expect Hong Kong’s residential property prices to rebound by 5% to 8% in 2023, following a 16% correction in 2022,” according to S&P Global rating credit analyst Edward Chan.

“Backed by solid pent-up demand, the primary residential property transaction volume is likely to rise to between 15,000 and 17,000 units this year – from 10,315 units in 2022,” he added.

Chan went on to say that if homebuyer demand is weaker than forecast, developers could reduce prices further in an attempt to boost sales.

Sentiment within Hong Kong’s residential property market is expected to recover as normal travel with the mainland returns, yet a rise in transactions could be more gradual, says real estate advisory firm Jones Lang LaSalle (JLL).

The statistics from JLL reveal 3,051 residential transactions were registered in January, a fall of 18.7% over last year’s monthly average of 3,755 monthly transactions. 

In addition, just 34 transactions involving buyers’ stamp duty were registered in January 2023, compared to the monthly average of 53 last year.

“The rising home prices since the beginning of this year may not last. Once the pent-up demand is digested, turnover is likely to decline again. We expect buyers to remain lukewarm and adopt a wait-and-see attitude until there is a visible pick-up in the local economy. Investors will continue to be sidelined until punitive stamp duties are removed,” said the executive director of research at JLL in Hong Kong, Nelson Wong.