The Housing Market in Hong Kong is Under Pressure Due to the Weakening Economy
Because Hong Kong is hampered by a deteriorating economy and market uncertainty continues, local developers are adopting increasingly conservative bidding techniques in government land sales, according to JLL, a global property consultancy. directorys
Early in the year, mainland Chinese developers were particularly active, acquiring three of the first eight residential sites released by public tender as part of its globalization efforts. The developers' pessimistic view was reflected in the land sales results, with five of the winning offers falling below market estimates. Residential land prices in some regions have dropped by as much as 20% in the last year, according to our examination of government land sales data. This trend is likely to continue in the short term, with mainland developer interest beginning to wane in the second quarter.
In the first quarter, home sales fell to their lowest point on record, before rising somewhat in the second quarter. Despite this, average monthly sales volumes in the first half plummeted 38.3% y-o-y to 3,320, compared to a monthly average of 5,377 in the same period last year. From January to March, home sales were lower than the previous market lows, which occurred during the SARS pandemic in May 2003, when monthly transactions fell to 4,130.
In the primary market, a growing number of developers are offering financing solutions to prospective purchasers as an alternative to lowering asking prices or offering greater discounts to assist promote sales. Even However, such aggressive financing plans have usually been limited to developers with superior financial standing and larger balance sheets, who have an advantage over smaller firms. The market's reaction to these plans, on the other hand, has been uneven.
In the first half, capital values of mass residential properties fell 6.4 percent in the secondary market, as increased volatility in the local stock market and the threat of more interest rate hikes prompted more homeowners to willingly drop their prices. The biggest obstacle to entrance for property purchasers is strict Loan-to-Value restrictions, which function as a barrier to entry, particularly in the secondary market, where buyers are unable to take advantage of financing choices and rebates. Luxury residential property capital prices, which had been doing well, are now starting to sag, down 1.9 percent in the first half.
The ultra-luxury property market, which has mostly maintained its buying enthusiasm throughout the first half of the year, is one section of the market that continues to defy the trend. A total of 55 homes priced over HKD 100 million were sold, which is 15% less than the same period last year, but the average transaction value grew by 8% to HKD 304 million, demonstrating purchasers' willingness to pay a premium for properties that seldom come to market.
Economic uncertainty and less positive hiring intentions continued to impair leasing demand for luxury residential properties in the residential leasing market. Rentals remained under pressure as more renters downgraded to units with lower monthly payments.
According to Joseph Tsang, Managing Director and Head of Capital Markets at JLL, " "The government's punitive tactics have stifled market upgrades and will continue to do so. With more than 35,000 units expected to be released in the next 12 months, developers will need to keep up their aggressive sales methods to attract purchasers. Housing prices in areas like Yuen Long and Tsuen Wan, which are expected to see the most new launches in the next 12 months, are likely to be the hardest hit. Home prices are projected to stay under pressure, given the uncertainty in the interest rate outlook and the faltering results in the government's land sales market. As a result, despite recent signs of stabilization, we continue to believe that the capital value of mass residential will fall 10-15% this year, while the value of luxury residential will fall "5% to 10%."
"Against a boom in rental supply and creeping vacancy at the high end of the market, the residential leasing market will become increasingly tenant-friendly. The leasing market will continue to be challenged by a lackluster hiring outlook and a bleak economic outlook. As a result, we anticipate a 5-10% decrease in rentals ""This is the year."