- Home transaction volume in January already double that of December 2018 and the total volume in Q1 looked set to grow by 58% q-o-q
- Home prices of selected popular estates saw the fastest recovery since 2012 with 20-28% of growth from trough level in last December, lagging behind the last peak by about 5-6%
- Property investment market impacted by weakened sources of capital and remained subdued in performance.
CHINA – 19 March 2019 – Cushman & Wakefield, a global leader in commercial real estate services, noted that the residential market in Q1 2019 rebounded with home sales growing by an estimated 58% q-o-q, and by up to 20-28% in price growth from the last trough level for some popular estates, amid a truce between China and the U.S. on trade talks that avoided further escalation in tensions for the time being. The property investment market, on the other hand, remained subdued as the transaction volume dropped by 42% q-o-q in Q1, as the curbs on capital flows in mainland China combined with local investors remaining on the side-lines have led to the dwindled investment volume in the Hong Kong market.
Thanks to the release of pent-up demand, the number of Agreements of Sale and Purchase (Residential Building Units) recorded in the Land Registry in January 2019 was 4,543, which was 2.2 times the December 2018 figure of 2,060. Given home sales in February of 4,089 units and continuing momentum in March expected to lead to an estimated 5,500 S&Ps in the month, the total home sales volume in Q1 will reach an estimated 14,132, or up 58% q-o-q. Furthermore, secondary sales accounted for more than half the total home sales in both January and February, a sign of improved confidence on the part of buyers.
Mr Alva To, Cushman & Wakefield’s Vice President, Greater China & Head of Consulting, Greater China commented, “We mentioned the China-U.S. trade tensions were the biggest uncertainty affecting the global economy and the Hong Kong residential market during the last quarter, but home purchases will resume if the uncertainties start to clear up. During Q1, with both countries seeking to resolve the bilateral trade issues to avoid further deterioration of the situation, market confidence gradually returned, leading to a relatively quick recovery.”
Home prices fell to a trough from mid-December 2018 to mid-January 2019 but have since picked up increasingly strongly. As of March, the current prices of some popular estates have come up from their trough level by 20% to close to 30%. In other words, the past two months have witnessed the fastest recovery in home prices in these respective estates ever. The most significant growth was in City One Shatin, which recorded growth of 28% from the trough level, while Taikoo Shing recorded growth of 20% from the trough. Luxury homes such as Bel-Air Residence (up 8.8%) and The Harbourside (up 10.6%) recorded smaller but still remarkable rebounds in their home prices. It is worth noting that the prices of both the mass residential and luxury estates above are about 5-6% from their respective peak levels in last August.
Mr To said, “Apart from eased tensions in the China-U.S. trade talks, a slower-than-expected pace of rate hikes this year has also helped improve the market sentiment. In a context of low unemployment rate, reduced supply in residential land sites and increased supply of public housing, we can expect strong interest in home purchases. If there is no further impact from external factors, say if the trade talks continue to move in a favorable direction, the upbeat momentum will continue into Q2 and bring about further increases in both mass and luxury home prices, which will return to their peak levels of last August by end of Q2 this year.”
In contrast, sentiment in the property investment market remained weak. The number of major deals (each with a consideration of over HK$100 million) continued to dwindle to 32 in Q1 thus far, which was down by 42% from the last quarter, with a total consideration of HK$7.4 billion that was close to a drop of 77% q-o-q.
There was a decline in almost all sectors in terms of both transaction volume and consideration, apart from one en-bloc office transaction in Q1 which had a bigger consideration than its counterpart in Q4 2018. Similar to last quarter though, most buyers’ interests remained focused on the luxury residential sector.
Mr Tom Ko, Cushman & Wakefield’s Executive Director, Capital Markets in Hong Kong, said, “Tightened capital from the Mainland and local buyers showing no urgency to make purchases have left only funds actively on the prowl. The weakened sources of capital in the market explained the decline in both transaction volume and consideration in Q1. However, over the past two years there is gradual increase in institution funds’ activity in terms of transaction volumes and considerations. We expect when there is meaningful progress in the China-U.S. trade talks, the uncertainties affecting the market will clear up further and give a boost to the performance of the property investment market.”