Hong Kong Home Sales to Hit Six-Year Low Says Cushman & Wakefield

Hong Kong home sales are set to fall to a six-year low in the first quarter of this year, with the city expected to record just 9,187 housing transactions through the end of this month, according to a recent report. That predicted total represents a year-on-year decline of 49 percent as the Asian commercial hub struggles with heightened geopolitical tensions and the city’s most severe COVID-19 outbreak ever, Cushman & Wakefield said in its research document published this month.

“Given the continued tightening of social distancing measures, together with intensified geopolitical uncertainties, most buyers are adopting a wait and see attitude,” said Keith Chan, director and head of research at Cushman & Wakefield Hong Kong. These factors, coupled with developers delaying project completion, are bringing transaction volumes down from the 4,275 agreements recorded in January to around 2,000 in March.

The predicted drop for the month puts transaction volumes 48 percent lower than the 3,870 deals recorded at the onset of the pandemic in March 2020, with the property services firm also expecting average home prices to fall 5 percent on a quarterly basis in the three months to March 2022.

Risk Factors Swirl

Cushman & Wakefield had forecast last December that Hong Kong home prices would climb between 5 and 10 percent this year, while also highlighting risk factors including the emerging Omicron virus variant, global quantitative tightening and geopolitical tensions.

“With two of the three risk factors now in play, we expect home prices to fall in the first half of 2022,” Chan said. He added that residential prices could rebound in the last six months of 2022 to reach a full-year increase of as much as 3 percent — although this would be down 7 percentage points from the high end of its earlier forecast.

Plans announced by the Hong Kong government to raise borrowing limits on home mortgages are expected to support residential market recovery, especially if the pandemic is controlled before mid-year and travel restrictions relax, according to Chan. Given last year’s surge in residential deals, however, full-year transaction volumes are expected to fall by 15 to 18 percent in 2022.

Luxury Still in Style

While overall home prices in Hong Kong are predicted to fall 5 percent by the end of the first quarter, the luxury sector can expect a milder decline of 4 percent in the first three months of the year, said Chan, who cited prices at the Residence Bel-Air in Hong Kong Island’s Pok Fu Lam area for reference.

The latest transaction at Residence Bel-Air, where units have sold at average prices of HK$20 million ($2.6 million) or more, was a mid-level flat in the project’s sixth phase that was purchased by an unnamed buyer for HK$18.6 million, according to records from Centaline Property Agency.

Before Hong Kong was hit by its latest wave of COVID-19, luxury deals were still breaking records at the beginning of the year. In January, a unit at the Mount Nicholson development on Victoria Peak sold for HK$583.2 million to an unnamed buyer, making it the second most expensive home ever sold in Asia on a price per square foot basis.

Within that same month, a 3,548 square foot (329 square metre) house at Nan Fung Development’s 8 Deep Water Bay Drive sold for HK$393.2 million to an undisclosed buyer, according to Midland Realty records.

In the land sale market, a luxury residential site in Repulse Bay was sold last month to local developer SEA Holdings through a government tender at a record-high price of HK$1.19 billion.