Market Expected to Recover Lost Ground in 2H, Upcoming Three Months Crucial to Recovery, Subject to Pandemic Control
- Impacted by the fifth wave of COVID-19, and heightened geopolitical tensions, total residential transaction activity is now estimated at 9,187 deals, down 49% y-o-y
- Overall average home prices are expected to drop 5% q-o-q in Q1, with a milder fall in the luxury sector
- Assuming effective control of the pandemic in the next three months, the property market should regain momentum in 2H, with expected price growth of up to 3% y-o-y for 2022
Cushman & Wakefield announced its Q1 2022 Hong Kong Residential Market Review and Outlook report today. Impacted by the fifth wave of the pandemic, Hong Kong’s total residential transaction volume logged the lowest point since the 6,221 deals recorded in Q1 2016, while the overall average residential price is expected to fall by 5% q-o-q. However, despite the overall market being severely hit by the pandemic, end-user demand remains healthy. As the number of recorded positive COVID cases is now expected to start to decline, the recently proposed revision of the mortgage insurance programme and a potential reopening of the border will likely spur a market rebound.
Keith Chan, Director, Head of Research, Hong Kong, Cushman and Wakefield commented: “Total residential sales and purchase agreements (S&Ps) in Q1 2022 are estimated to reach 9,187 deals, a fall of 49% y-o-y, and the lowest activity recorded since the onset of the pandemic in early 2020 (Chart 1). Given the continued tightening of social distancing measures, together with intensified geopolitical uncertainties, most buyers are adopting a wait and see attitude. With the aforementioned factors, coupled with developers’ likely intentions to delay project completion timelines, we expect transaction volumes will fall further from the 4,275 agreements recorded in January to around 2,000 in March.”
Chart 1: Total S&P expected to reach 9,187 in Q1 2022
Edgar Lai, Director, Valuation and Advisory, Hong Kong, Cushman & Wakefield shared: “The secondary market has been hit by the pandemic, with the overall price slipping by 2.2% from its peak in September 2021. Prices at City One Shatin, a proxy for the mass market, have decreased by 5.2% q-o-q (Chart 2). Similarly, prices at Taikoo Shing, a proxy of the middle market, dropped by 4.9% q-o-q (Chart 3). On the other hand, Residence Bel-Air, representing the luxury market, has shown greater resilience with a relatively milder fall of 4.1% q-o-q (Chart 4). Typically, luxury property owners have greater holding power and can contribute to relatively more stable prices.”
Chart 2: Residential Price Changes at City One Shatin
Chart 3: Residential Price Changes at Taikoo Shing
Chart 4: Residential Price Changes at Residence Bel-Air
Commenting on the market outlook, Keith Chan highlighted: “Control of the pandemic in the next three months will be crucial to the domestic property market. If the pandemic is brought under control before mid-year, and the social distancing measures and border controls are gradually relaxed, the Financial Secretary’s recently announced relaxation measures in the mortgage insurance program policy will likely help the market recover, and will stimulate demand that was previously excluded from the program. With the aforementioned assumptions, the property market is expected to recover in the second half of the year. We expect it will be driven by first-hand properties, with gradual momentum growing into the second-hand market. Given the high base in 2021, the total transaction volume in 2022 is expected to drop by 15% to 18%. Overall average home prices will likely reach the bottom by 1H and start to recover by 2H, and we hold growth expectations at between 0% and 3% for 2022.”
About Cushman & Wakefield
Cushman & Wakefield (NYSE: CWK) is a leading global real estate services firm that delivers exceptional value for real estate occupiers and owners. Cushman & Wakefield is among the largest real estate services firms in the world, with approximately 50,000 employees in over 400 offices and 60 countries. In Greater China, a network of 22 offices serves local markets across the region, earning recognition and winning multiple awards for industry-leading performance. In 2021, the firm had revenue of $9.4 billion across core services including valuation, consulting, project & development services, capital markets, project & occupier services, industrial & logistics, retail and others. To learn more, visit www.cushmanwakefield.com or follow us on LinkedIn.
