Market activities slow down after the release of pent-up demand

• With 8,551 deals in April, which hit the highest level since 2012, the residential transaction volume dropped to 5,546 and 3,856 deals in May and June, respectively. Sentiment is likely to remain subdued into H2 2024, barring unexpected rate cuts.
• Pricing of recent project launches continues to surprise the market with new lows, but many developers still find it hard to boost sell-through rates. The mass residential capital values rose by 0.3% q-o-q in Q2 2024.

Completion of luxury residential properties comes to fruition

• The luxury residential segment saw the completion of 184 units in Q1 2024, including 92 units at ‘8 Castle Road’ in Mid-Levels and 70 at ‘9 Yin Ping Road’ in Shek Kip Mei. A total of 622 luxury residential units are expected to be completed in 2024.
• In Q2 2024, the government put up two residential sites for tender, including CWIL 185 in Chai Wan under the Private Subsidised Sale Flat-Pilot Scheme and STTL 623 in Siu Lek Yuen. Both tenders will close in July.

Transaction volume in the high-end segment surges after policy relaxation

• In Q2 2024, the luxury leasing transaction volume experienced a notable increase of 37.7% q-o-q. Luxury residential rents edged up by 1.2% in Q2 2024, marking the fifth consecutive quarter of gains.
• In Q2 2024, the transaction volume for residential properties valued at or above HKD 20 million increased by 234.9% q-o-q to 1,286 deals, the highest level since Q2 2021. Meanwhile, luxury residential capital values rebounded by 0.7% q-o-q.

Outlook: Continued price correction amid suppressed market activity

• The expected continued inflow of southbound capital is likely to be offset by diminished interest from local buyers, who are facing greater challenges in securing mortgages. Luxury residential capital values are expected to drop by 5%–10% in 2024.
• Mainland Chinese families have consistently been the most active tenant group, but the potential growth of their housing budgets is limited by the weakened job market. Luxury residential rents are expected to rise by 0%–5% in 2024.