Hong Kong residential transactions drop 30% to 3,856 in June

Residential prices are not expected to rebound until the mortgage rate falls to about 3%.

After the withdrawal of cooling measures, Knight Frank said in a report that the pace of buyers entering the market accelerated significantly in March and April. The number of residential transactions rebounded to more than 8,500 in April, the highest single-month transaction number in the past decade. 

“However, owing to factors such as the delay in interest rate cuts, market uncertainty and the high volume of unsold new units, the number of transactions fell back to about 5,550 in May and slipped a further 30% to 3,856 in June,” the report said.

Here’s more from Knight Frank:

Home prices also increased after the withdrawal of cooling measures for two consecutive months in March and April. Home prices fell by 1.2% MoM in May 2024, however, 12.7% lower than the year before. Despite ongoing price cuts from developers, buyers remained cautious amid the continued high interest rates. The Uppland, the first phase in Gold Coast Bay, marked the first time in eight years that a new launch in Tuen Mun was priced under HK$10,000 per sq ft on average. This reflects that the positive impact of scrapping the property curbs has worn off after some pent-up demand was fulfilled. 

In the luxury residential segment, sales momentum demonstrated resilience. Some older secondary luxury stocks have been trading at significant discounts to peak values. For example, House 19 at Villa Rosa in Tai Tam, a 3,314 sq ft villa, was sold for HK$68 million, or HK$20,519 per sq ft. This marked a 47% discount to the transacted price at HK$129 million in 2011. 

The influx of talent has also bolstered the leasing market, driving the rental index to a four-and-a-half year high, and a MoM increase of 1%. We expect the leasing market to continue to be fuelled by the growing number of non-local students, the influx of professional talent and the return of expats. Some insurance companies registered overseas have expressed interest in relocating their offices to Hong Kong, according to an industry representative.

Looking ahead, we do not expect residential prices to rebound until the mortgage rate falls to about 3%. Developers also need to destock another 8,000–10,000 units before they can raise prices. This will take at least another six to nine months to achieve.