APPD Market Report Article

Hong Kong

May 26, 2024

Cathie Chung, Senior Director, Hong Kong

5.7%

HKD 39.8

Rents
Rising

Buyer sentiment in primary market improves after relaxing measures

  • In February, the Financial Secretary announced the removal of all cooling measures in the Budget Speech, while HKMA increased the maximum LTV ratios and suspended stress test requirements for mortgage lending. Stimulated by the property relaxation measures, the Primary market recorded over 4,000 transactions in March, surpassing the monthly average of 896 in 2023 by fourfold.
  • As sizable first-hand units were launched at or below prevailing secondary prices, home sales shifted significantly towards projects in the Primary market, such as Belgravia Place and Blue Coast, leading to the absence of notable improvement in the Secondary market. The mass residential capital values fell by 1.0% q-o-q in 1Q24, moderating the 5.7% decline in 4Q23.

Private housing land supply falls by 26.3% in FY2024–25

  • In 4Q23, there were 12 Occupation Permits issued for luxury residential units, including seven units at ’86A-86D Pok Fu Lam Road’ in Mid-levels and four units at ‘Montego Bay’ in Yau Tong.
  • The 2024–25 Land Sale Programme covered eight residential sites, offering about 5,690 units. Meanwhile, projects from URA, MTRC and private development/redevelopment are expected to provide 9,460 units. The total private housing land supply in FY2024–25 is projected to yield 15,150 units, 26.3% below that in the previous year. 

Demand in the high-end segment strengthens

  • In 1Q24, the transaction volume for residential properties valued at or above HKD 20 million increased by 25.1% q-o-q, while luxury residential capital values dropped by 0.9% q-o-q, with the decline slowing down from the 3.8% drop in the previous quarter. Among major luxury sales transactions, a house at 23-39 Blue Pool Road in Happy Valley sold for HKD 230.0 million, or HKD 50,011 per sq ft, SA.
  • In 1Q24, the leasing transaction volume fell by 23.6% q-o-q, while enquiries and viewings related to potential deals expected to close in the summer have shown improvement. Meanwhile, luxury residential rents have risen by 0.4% q-o-q. Notably, luxury residential rent growth in Kowloon has outperformed Hong Kong Island and the New Territories over the past three quarters.

Outlook: Strong supply and elevated rates to exert pressure on price

  • Developers’ strategy to set prices at or below prevailing secondary prices should further suppress demand in the Secondary market. For secondary prices to stabilise, a substantial absorption of completed and pre-sale properties is essential. This process could be lengthened if mortgage rates stay elevated. Luxury residential capital values are expected to drop by around 5% in 2024.
  • The strong inflow of non-local talent and the gradual return of expatriates should continue to drive up rents in the luxury leasing market. Luxury residential rents are expected to rise by 0%–5% in 2024.

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

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