External uncertainties have clouded luxury residential market sentiment.
- External uncertainties including the COVID-19 situation, prolonged border closure, stock market turbulence as well as various Mainland policies acted together to cool luxury residential sentiment in the last quarter of 2021.
- Luxury volumes declined dramatically in Q4, in particular in the HK$20-HK$50m price bracket, with the noticeable exception of the HK$100m+ market as large houses and redevelopment sites remained in demand.
- The tender of the residential site on South Bay Road in Repulse Bay was the third super-luxury site tendered in a year after the two Mansfield Road sites on the Peak sold in late 2020 / early 2021 but was the first in Southside in more than five years.
- The mass market also saw prices enduring a bumpy ride in Q4, with affordability reaching 56.8%, a new high since the 1999 period. Debt levels are another concern as residential mortgage debt reached HK$1,720 billion in November 2021, an all-time high.
- The government began tackling the ‘shoebox apartment’ issue by setting a minimum unit size at 280 sq ft for its latest Tuen Mun site tender this quarter, with another MTR site likely to follow suit. Hong Kong’s 170 sq ft average unit size per capita has been among the lowest across major regional cities.
- Looking ahead, luxury market sentiment will be mixed, with border closures, emigration and capital outflows, as well as possible rate hikes likely challenges in the first half of 2022.