Hong Kong's housing market, which experienced a brief surge in the first quarter, is now facing a significant downturn. Property transactions have plummeted, and sellers are reducing prices to close deals in a market expected to continue its downward trend throughout the year. The decline in transaction volume since March indicates a reversal in home prices, and some property owners are selling at a loss. The proportion of non-local and local buyers has also decreased, further contributing to the market correction. Analysts anticipate the correction period to last until the end of 2023, with a potential rebound in the first half of 2024.
According to property agents and analysts, the initial surge in Hong Kong’s housing market during the first quarter was very short-lived. Sales have now plummeted, and sellers are reducing prices in order to close deals amidst a downward trend that is expected to persist throughout the year.
Data from Midland Realty reveals that since the final week of March, the number of property transactions per week in the city has dropped to fewer than 80, with one instance recording only 35 transactions. This decline comes after a 7% rise in home prices during the first quarter, as highlighted by Ken Yeung, a property analyst at Citi, in a research note published earlier this month.
Ken Yeung, a property analyst at Citi, stated that the decline in the housing market comes after a notable 7% growth in home prices during the first quarter. Yeung expressed surprise at the swift and temporary nature of this recent recovery, noting that residential transaction volumes in Hong Kong have been diminishing since March 23.
According to property agents at Centaline, the current low weekly transaction volume in the secondary market for two consecutive months suggests that home prices in Hong Kong are likely experiencing a downward trend once again. This is further supported by recent occurrences where some property owners have sold their flats at a loss.
Data from the Inland Revenue Department indicates that in April, the proportion of home sales in Hong Kong involving non-local buyers stood at a mere 1.5%. This figure has remained below 2% both before and after China’s reopening, which is significantly lower than the average of 5.2% observed between 2018 and the first half of 2019.
Moreover, local investors are also exhibiting reduced interest in purchasing second homes. In April, their share of transactions amounted to just 2.7%, compared to the 6.1% recorded between 2018 and the first half of 2019
Based on historical trends, when the weekly volume of secondary market transactions drops below 80 deals, there has been a historical inability for home prices to quickly recover. Given the data observed since late March, it is believed that the market is currently entering a correction period.
The anticipated duration of this correction is expected to extend until the conclusion of 2023, as stated by the analyst. However, they also suggested that there might be a potential rebound in home prices in the first half of 2024 when the United States begins to reduce interest rates and a peak season commences around the Lunar New Year period.
Earlier this month, JLL, a real estate consultancy, made a forecast indicating that the upward momentum of home prices in Hong Kong would diminish in the near future. According to Norry Lee, the senior director of JLL’s projects strategy and consultancy department, the rising interest rates are impacting the purchasing interests of both local and mainland buyers.
However, Cathie Chung, JLL’s senior director of research, pointed out that Hong Kong’s investment-immigration scheme and tax incentives, combined with Singapore’s substantial increase in stamp duty for additional buyers, are expected to provide support to housing demand in the coming period.
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