Full-Year Price Growth Up to 3%, Driven by New Homes
Improved Infrastructure Narrows Price Gap Between Urban Areas and New Territories
- Q2 residential transactions expected to rise by 48% q-o-q to reach 14,900 deals, with price decline moderated
- Railway infrastructure and transportation continue to be robustly developed, enhancing and shortening travelling times, and expected to bring up property prices in the New Territories, with growth potential to outperform urban prices
- We expect the 2H residential market to be driven by new homes, with full-year transactions forecast to fall by 20-25% y-o-y, with a market price increase of no more than 3% by year-end
Cushman & Wakefield announced its Q2 2022 Hong Kong Residential Market Review and Outlook today. With the fifth wave of the pandemic gradually being brought under control, the city’s residential market has been progressively recovering since the month of April. Total transactions for Q2 are now expected to reach 14,900, up 48% q-o-q, although this still represents a drop of 32% y-o-y (Chart 1). The year-to-date prices fell marginally and are expected to further stabilize. Some popular housing estates recorded slight quarterly growth, demonstrating signs of healthy end-user demand. In 2H 2022, the residential market will continue to be driven by primary sales, particularly for buyers looking for upgrading options. We expect property prices will rise by no more than 3% this year. In the longer run, infrastructure projects will continue to improve connectivity in Hong Kong, thereby narrowing the price gap between the New Territories and urban areas. This will also accelerate urban renewal and benefit the city’s residential real estate markets.
Due to the pandemic and geopolitical tensions displayed earlier this year, residential transactions in Q1 were sluggish. However, as local COVID-19 infections began to drop sharply and social distancing measures were gradually eased, primary sales activities resumed, with transactions picking up significantly in Q2. The number of sales and purchase agreements in the first two months of Q2 (10,099 deals) had already surpassed the total of 10,056 deals in Q1. Furthermore, the number of transactions in the primary market rose nearly six-fold m-o-m, from 258 deals in April to 1,492 deals in May, while the secondary market also performed well to reach 4,700 deals in May.
Keith Chan, Director, Head of Research, Hong Kong, Cushman and Wakefield, commented: "During the height of the fifth pandemic wave, primary sales and projects were delayed due to restrictions. From March to April, primary transactions’ share of the overall market reached just 6-7%, but later rose to 24% in May, reflecting recovery in overall sentiment driven by the rebound of primary sales. It is estimated that circa 4,800 transactions will be recorded in June, contributing to circa 14,900 transactions in Q2, a sharp increase of 48% q-o-q, but still down 32% y-o-y."
Chart 1: Total residential S&Ps expected to reach 14,900 in Q2 2022
Despite the increase in transactions recorded, overall residential prices are still down year-to-date. However, the discounted unit sales momentum will likely moderate, and therefore, the price decline will gradually slow. As per the latest government data, a price drop of about 2% was recorded from January to April.
Edgar Lai, Senior Director, Valuation and Advisory, Hong Kong, Cushman & Wakefield shared: "Although overall property prices are still down, some popular housing estates have begun to rebound due to high demand. Relatively speaking, smaller lump sum units such as City One Shatin rose by 1.1% q-o-q (Chart 2); while Taikoo Shing, representing the mid-price market, was flat (Chart 3). Meanwhile, luxury residential, such as Residence Bel-Air, edged up by 0.7% q-o-q (Chart 4)."
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
The completion of the MTR’s East Rail Line Cross-Harbour Extension marks the first continuous rail line project to fully interconnect the New Territories, Kowloon and Hong Kong Island. In addition, the cross-bay link tunnel connecting Tseung Kwan O and Lam Tin is expected to start operating in 2H this year, further connecting the future Route 6 highway to the east and west of Kowloon by 2026.
Edgar Lai explained: "As the railway network and infrastructure become more accessible, travel times are shortened, and connectivity between the urban areas and the New Territories is further enhanced. It is expected that the price gap between the New Territories areas and the urban areas will be narrowed. For example, the opening of the MTR Tseung Kwan O Line has helped pushed property prices in Tseung Kwan O noticeably, outperforming the other housing estates along the Kwun Tong line by a 10-20% premium. At the same time, the pace of urban renewal has also been accelerated, thanks to the development of various infrastructure projects. For example, the URA recently announced large-scale redevelopment plans in the Kowloon City area and To Kwa Wan area.”
Keith Chan concluded: "In the long run, the infrastructure improvements will benefit the local property market, but home buyers will inevitably face many challenges, such as rising interest rates driven by inflation, and the uncertain pace of economic recovery in the near-term. Nevertheless, after a relatively muted market for three consecutive quarters, end-users are expected to become more active, driven by buyers who are looking for their first homes or upgrading. Subsequently, it is expected that transactions in 2H will be supported by strong primary sales, and will gradually extend to the secondary market. Nevertheless, due to the high base of transaction volume last year, we expect the number of residential transactions to drop by circa 20-25% y-o-y by year-end. Property prices will generally stabilize throughout the year, and we maintain a forecast of no more than a 3% increment in 2022.”
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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.
