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Downward Hong Kong Home Price Pressures Persist in Mid-2016

Downward Hong Kong Home Price Pressures Persist in Mid-2016


Recent stabilization in residential sales short-lived
 
According to global real estate consultant JLL's Hong Kong Residential Sales Market Report, recent signs of stabilization of Hong Kong's residential property sales do not indicate the property market has turned a corner.

Improved market sentiment saw home sales climb to an 11-month high in May 2016. Land Registry data released in June show that the volume of residential property transactions in May reached 4,620, up 0.7% m-o-m though the total value of home sales slid 20.3% m-o-m to HK$32.6 billion.

The primary sales market, which accounted for 1,538 transactions, continued to steal the limelight, with developers achieving commendable sales velocities at recently launched projects. The positive buying sentiment can be attributed to three factors: seemingly cheaper pricing of inventory put on sale; a lower expectation of a hike in interest rates in the second half of the year; and a pick-up in secondary residential capital values. The 0.9% m-o-m rise in capital value of secondary homes in June has had an uplifting effect on buyer sentiment.

Despite the stabilization of prices in recent months, the market should face increasing downward pressure. In view of the surge in large-scale launches on the pipeline, including projects recently granted with pre-sale consents--Grand YOHO Development (Phase 1) in Yuen Long (1,128 units) and The Met. Blossom in Ma On Shan (640 units), developers will likely slash prices further to lure buyers, pressuring secondary homeowners to nudge prices down in order to lock in gains.
 
"Exemplary sales at new launches have seen market sentiment turn more positive over the last two months and which in turn, have had a stimulating effect on the secondary residential market. But this is nothing more than a temporary rebound during the course of a downturn, and does not imply the property market is turning a corner," cautions Henry Mok, Regional Director of Capital Markets at JLL in Hong Kong. "Considering that several projects with more than 1,000 flats each will be launched onto the market in August, initial prices will likely be slashed to lure buyers, and may leave secondary home prices back into the downslide."

Stella Abraham, Head of Residential Leasing and Relocation Services at JLL said, "There were more transactions ranging between HKD150,000 and HKD200,000 recorded in the residential leasing market in the past few months as landlords have become more flexible with lease negotiations."

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