APPD Market Report Article

Hong Kong

May 31, 2022

1.6%

HKD 38.2

Decline
Slowing

Low level of activity amid the epidemic

  • As the tight social distancing measures largely restricted home viewings, transaction volume was the lowest in two years. Most developers opted to postpone new launches. Still, amid very few new launches, a reasonably-priced project received heated responses. All 204 units put up for sale at ‘The Harmonie’ in Cheung Sha Wan, developed by Henderson Land, were sold in two rounds of launches.
  • The low level of activity also cast a shadow on the leasing market. Due to the prolonged travel restrictions, local tenants remained the major source of demand. Amid the epidemic and some expatriate departures, the market saw limited leasing transactions.

Government to tender 13 residential sites

  • In the luxury residential segment, occupation permits for 110 units are expected to be issued in 1Q22. Notable projects include ’21 Borrett Road (Phase 2)’ by CK Asset (50 units) in Mid-levels and ‘LP10’ by Nan Fung and MTRC (20 units) in Tseung Kwan O.
  • A total of 13 residential sites were listed in the FY2022/23 Land Sale Programme, capable of providing about 8,250 flats. Together with supply from URA, MTRC, private development and redevelopment sources, land supply for private housing for the coming financial year can potentially yield 17,940 flats, 39% above the government’s target of 12,900 private flats per year.

Luxury rent recovery reversed course in 1Q22

  • Following three quarters of consecutive growth, luxury rental recovery trend reversed course as a result of the dampened sentiment. In 1Q22, luxury residential rental values fell by 1.8% q-o-q, compared to the marginal growth of 0.2% in the previous quarter.
  • Similar to the mass residential segment, the luxury market quietened down in the quarter. Although the primary market could still see some eye-popping transactions, the secondary market lost momentum. Luxury capital values registered a drop of 2.5% q-o-q in 1Q22, after rising by 1.4% in 4Q21.

Outlook: Housing price corrections amid the lingering epidemic

  • Housing prices recorded corrections in 1Q22, driven by the low transaction volume. While sentiment is expected to recover as the COVID-19 situation stabilises, leading to a return of activity in 2H22, the market is likely to stay relatively flat. Given the drop in 1Q22 and anticipated soft 2Q22, we have revised our forecast for luxury capital values to drop in the range of 0-5% in 2022.
  • In the rental market, we expect to see more enquiries and viewing activities during the traditional home search season. However, considering the low level of activity and downgraded economic growth, we lowered our forecast for luxury rents to decline in the range of 0-5% in 2022.

Note: Hong Kong Residential refers to Hong Kong's overall luxury residential market.

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