Hong Kong Residential Sales - Apr 2022

Both local and external uncertainties are dampening luxury residential market sentiment as volumes hit new lows and values begin to weaken.

• External events including Russia’s invasion of the Ukraine, tougher US regulation of China tech stocks have hit the local stock market hard and dampened property investment sentiment in general, while the recent Omicron outbreak poses a further threat to the local luxury residential market.
• Luxury volumes (over HK$50 million) declined dramatically in Q1/2022 to 91, the lowest since the social unrest of Q3/2019, with the lower price bracket enduring the largest drop.  Luxury prices softened by between 1.5% and 2.7% as a result.
• Luxury sites in traditional luxury enclaves are still in demand with a South Bay Road site tendered for a record high average price of HK$62,355 per sq ft.  Only a handful of luxury sites are to be put up for tender by the Government in 2022/2023, with a Cape Road site the most eye-catching.
• Stretched affordability and weak market sentiment all contributed to mass price adjustments in Q1/2022, which declined by 2.4% across the board.
• While the local COVID situation is largely contained, the lockdown of major Chinese cities may increasingly impact China’s economy and Mainland HNWIs appetite for luxury properties in Hong Kong.
• With the US Fed likely to increase interest rates more aggressively, the local negative real interest rate environment could be put to the test, though there is still some way to go before reverting to positive territory.