Luxury property buyers in Hong Kong take a break as new offerings slow
Sixty per cent fall in primary sales or sales of new flats in July is attributed to fewer launches
Sales of new homes in Hong Kong dipped sharply in July and August in a sign that the property market may have peaked, but prices remained stable, says a report by Knight Frank.
The Hong Kong Monthly Report by the international property consultant showed that home sales plunged in July and August with fewer primary units launched as buyers adopted a wait-and-see approach.
Residential sales plunged 42.4 per cent month-on-month in July to only 3,515, Knight Frank’s report shows. Primary sales or sales of new flats fell about 60 per cent to 952 transactions, as fewer new flats were launched. However, home prices remained stable or in some cases moved marginally upwards.
In the luxury segment, home sales of apartments worth HK$10 million or above plunged 48.6 per cent to 710 in August compared to the previous month.
David Ji, director and head of research and consultancy, Greater China at Knight Frank, says that even though home sales were down, there were still numerous inquiries from interested parties on the mainland, which showed the continued interest in Hong Kong properties.
David Chan, a director of Ricacorp Properties, says most flats coming onto the market in the latest round of sale launches were small- and medium-sized, with some configured as “microflats”, targeted primarily at first-time buyers. He adds that while the luxury market might be taking a breather, the demand for microflats would continue to rise.
Wong Leung-sing, senior associate director of research at Centaline, says the key property price indices increased for three straight weeks towards the end of August. Property prices climbed to record levels on two of the three weeks tracked. He believes the rising trend is likely to continue this month despite thin transaction volumes.
According to Centaline estimates, new home sales in August were 1,100 month-on-month, while aggregate sales value rose 1.3 per cent to HK$12.5 billion. The divergence between volume and price growths was a result of sales of more small flats during the month, Wong reasons.
This was shown by the rush to buy four flats from Chinachem this week when 1,300 buyers flocked to Nina Tower in Tsuen Wan to buy homes in Parc City Tsuen Wan.
The four flats were resale units after the buyers backed off from the deal after paying initial deposits.
Agents on the site said that the potential buyers’ bids were entered into a raffle to decide the lucky buyers.
The flats, ranging in size from 427 sq ft to 850 sq ft, were first sold on August 25, but the transactions were not completed. The original buyers agreed to pay from HK$6 million to HK$14.4 million each, according to the government’s Sales of First-hand Residential Properties Authority website.
Chan suggests that home viewing activity in the secondary market was also affected by adverse weather with two typhoons hitting the territory within the same week in August.
Secondary market sales continued to play second fiddle to the primary market, as developers offered access to high loan-to-value (LTV) mortgage options. Chan believes activity in the secondary market will remain subdued in the coming month as geopolitical risks weigh on sentiment.
Analysts expect property prices to continue to move higher in the next few months, as the US Federal Reserve kept interest rates unchanged in July, and have done little to suggest another interest-rate hike is on the cards for the rest of the year.
Ji expects residential prices to grow 2 to 5 per cent during the second half of 2017, led by the mass sector.
Other analysts also expect the mass residential market prices to trend upwards as they don’t foresee the authorities intervening or launching new measures.
They say that there is plenty of demand for smaller units, and expect developers continue to launch smaller units of 350 sq ft to 650 sq ft.
The Knight Frank report said that the rental market continued to see robust activity during the peak season before the start of the academic year.