APPD Market Report Article

Hong Kong

August 26, 2022

Nelson Wong, Executive Director, Hong Kong

1.1%

HKD 38.6

Rents
Stable

Pent-up demand boosts market activities

  • Market activity picked up as social distancing measures were relaxed. A number of new launches were introduced to the market, achieving mixed sell-through rates. For instance, ‘Silicon Hill (Phase 1)’ in Tai Po sold more than 97% of the 576 units after four rounds of launches. However, Henderson Land sold only 66% of the 182 units at ‘Baker Circle . Dover’ in Hung Hom in the first launch.
  • As the market entered its traditional peak season for home searches, near the end of the quarter, increasing home viewings and enquiries were recorded. With travel restrictions still in place, local demand continued to support the leasing market.

Vacancy rate edges up due to the fifth viral wave

  • According to the latest data by the Rating and Valuation Department, the vacancy rate of luxury units dropped to 7.8% as at end-2021, compared with 10.0% in 2020, due to the containment of COVID-19. However, the fifth viral wave once again puts market activities on hold, driving up the vacancy rate slightly in end-2Q22.
  • In the luxury residential segment, occupation permits for 164 units are expected to be issued in 2Q22. Notable projects include ‘Villa Lucca’ by HKR International and Hysan Development (75 units) in Tai Po and ’21 Borrett Road (Phase 2)’ by CK Asset (50 units) in Mid-Levels.

Prime luxury properties achieve decent prices

  • Market sentiment has improved in the leasing market, with increasing transactions recorded. In 2Q22, luxury residential rental values rebounded by 1.0% q-o-q, after dropping 1.8% in the previous quarter.
  • The sales market in the luxury sector continued to be characterised by low transaction volume and slow velocity. A number of notable transactions were registered in both the primary and secondary markets. Luxury capital values picked up by 1.2% q-o-q in 2Q22, although the YTD growth remained negative at -1.3% y-o-y.

Outlook: Transaction volume stays low with minor price corrections

  • Despite the relaxed social distancing measures, the luxury market remained relatively inactive compared to the mass market. Barring major changes in policies and the market environment, the buying sentiment is expected to stay subdued. Therefore, the forecast for luxury capital values to drop by 0-5% in 2022 remains unchanged.
  • In the rental market, rental values are confronted with downward pressure amid population net outflow, notably among the expatriates in the city. Hence the forecast for luxury rental values to decline in the range of 0-5% remains unchanged.

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

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