Hong Kong residential prices drop for fifth consecutive month 

Prices declined by 1.7% in September.

According to Knight Frank, Hong Kong residential prices, beset with headwinds, slackened for the fifth consecutive month. Overall residential prices fell by another 1.7% MoM in September. 

The year-to-date (YTD) increment reversed to a 0.8% decline, the lowest since April 2017, leading to a 7.8% YoY plunge, according to the Rating and Valuation Department (RVD). 

Here’s more from Knight Frank:

The market anticipated a relaxation of property “cooling measures” in the Policy Address, delivered by the Chief Executive in late October. The total number of residential transactions shrank further to 25.8% MoM, according to the Land Registry. Primary sale transactions plummeted by a significant 63.1% MoM, and secondary sales fell by 25.8% MoM. 

Still, a few big-ticket transactions were recorded in the sales market. A 4,527-sq-ft duplex in Tower 2, Phase 4 of Residence Bel-Air, in Pokfulam, was sold for HK$216.8 million (or HK$47,890 per sq ft). Another 3,054-sq-ft high floor unit in Tower 6 of Ultima, in Ho Man Tin, was sold for HK$185.6 million (or HK$60,773 per sq ft). 

The leasing market, in contrast, remained robust, with upward momentum driven by mainland expatriates, coupled with new stimulus in attracting talent. Flats with monthly rents from HK$20,000 to HK$45,000 were most popular among mainland expats. Overall residential rents climbed by another 0.6% MoM in September according to the RVD, given the influx of entrants, up for the eighth straight month, registering 6.2% YTD growth. 

The luxury leasing sector is also befitting from new arrivals. Notable leasing transactions included a 7,605-sq-ft house in Cooper Road in Jardine’s Lookout, which was leased for HK$780,000 per month (or HK$103 per sq ft) and a 2,997 house at King’s Park Hill, Ho Man Tin, which was leased for HK$235,000 per month (or HK$78 per sq ft).

Under the bleak economic conditions and uncertain timeline of future interest rate hikes or cuts, we believe that the relaxation of the cooling measures will be unlikely to reverse the downward trend in home prices. The property market will take time to adjust to the easing of the stamp duty and the implementation of the ‘pay later, exempt first’ scheme for nonlocal talent. 

Nonetheless, as Hong Kong welcomed 70,000 new people under its recruitment schemes in the first 10 months of 2023, doubling the Government’s target, the new arrangements could attract non-local talent who wish to become Hongkongers to purchase flats in Hong Kong in the medium to long term. Moreover, as the overseas student intake ceiling at Hong Kong’s eight government-funded universities was raised from 20% to 40%, we expect sustained rental demand to result in resilient growth in the leasing market.