The market’s resilience could be fading

As Hong Kong faces plummeting declines in residential real estate volumes, experts warn that falling prices may soon be on the horizon for the city, reports the South China Morning Post

According to a recent report by JLL, sales volumes dropped by 27.8 percent month-on-month to reach a 17-month low in July, based on August data. They attribute the falling sales levels to the lack of new launches in the primary sales market.

As volumes fall, however, prices still appear to remain resilient, growing at 1.1 percent month-on-month in August and 12.3 percent on a yearly basis.

Experts are projecting that such resilience could soon begin to wear, however – JP Morgan believes residential prices could fall between 5 and 10 percent in the three years to 2018 due to the slowdown marked by falling retail sales and the softening Mainland economy.

“Retail sales are declining and international brands are talking about network consolidation in Hong Kong,” said Cusson Leung, head of conglomerates and property research at JP Morgan.

“2016 will be a more difficult year when compared with 2015. Home prices could see a decline,” he finished.

“Home price growth momentum is definitely under pressure and could see a modest decline if the situation persists,” agrees Derek Chan, head of research at property agency Ricacorp.

Visitor numbers to the city from Mainland China fell by 9.8 percent year-on-year in July and retail sales fell for the fifth consecutive month too.

One sector still going strong, however, is the ultra high end segment, as High Net Worth Individuals focus their attentions on rare finds in premium locations. For instance, a house at the Peak reportedly sold for a record HKD151,653 (USD19,500) per square foot recently, according to JLL.

Developers in the luxury residential market are not overtly put off by the current turbulence either.

The South China Morning Post reports that K Wah International beat 12 other developers at the beginning of the month to win a residential site in Tai Po for HKD3.03 billion (USD390 million) when the market was expecting the winning bid to sit somewhere between HKD2.5-2.8 billion (USD 320-360 million).

Image is by mariusz kluzniak and is used under a Creative Commons licence

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Are we finally about to see a drop in Hong Kong’s residential prices?