A three-tier market emerging in Hong Kong residential

May 13, 2015 / By

Hong Kong’s residential property market continues to defy gravity through the early part of the year with JLL’s own in-house indices showing luxury and mass residential property prices rising by 0.8% and 3.5%, respectively, in 1Q15.

While the release of yet more cooling measures by the government in February has led to a pull-back in transaction volumes and slower price growth in the mass segment of the market, we believe that both will increase over the course of the year as buyers digest the new policy measures. Moreover, we expect buyers to return to the market given the recent rally in the local stock market and increasing possibility of the much awaited hike in interest rates being delayed until late this year or even into 2016.

For the luxury segment, the outlook is less clear. The lowering of LTV ratios and the introduction of the Buyers Stamp Duty in recent years has made it extra difficult for buyers to enter or upgrade in the market. Moreover, any uptick in demand that may arise from the recent stock market rally will likely be offset by a sharp rise in supply. Of the 1,000 odd new luxury residential units that are expected to be made available on the market this year, more than 900 have still yet to be launched. With competition among developers in the primary sales market heating up, we expect prices in the luxury segment to gradually soften.

That’s not to say that the pricing of all luxury properties will be affected.

In recent months, we have started to see a divergence in the performance of luxury properties with pricing for so-called “Super Luxury” properties (i.e. those priced over HKD 100 million) continuing to reach new record highs. A house at 31 Barker Road on The Peak, for example, was sold earlier in the year for HKD 420 million (HKD 126,544 per sq ft, Saleable). Although more luxury properties will be launched onto the market this year, the supply of “Super Luxury” properties remains limited. Coupled with the overall wealth of buyers in this segment of the market, we expect prices for “Super Luxury” properties to remain resilient against softening prices for general luxury properties.

Moving forward, what we are likely to see is the emergence of a three-tier market in the local residential sector with prices in the lower and very top-ends of the market holding up better than those in the low-to-mid range of the luxury market.


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