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HONG KONG

JLL: Capital values of residential expected to drop 0-5% in 2016


​HONG KONG, 9 December 2015 – Home prices started to fall in the second half of 2015 as home seekers once again adopted a wait-and-see attitude given rising concerns over the interest rate outlook and poor market sentiment. These factors will continue to weigh on the residential market in 2016, according to JLL in its Year-end Property Review 2015 published today. 


Home sales slumped in the second half of 2015. Average monthly sales volumes in the second half were 36.5% less than a year ago after being up 20.4% in the first half. Average monthly sales volume in the first eleven months decreased to 4,722 units, 11.2% fewer than 2014 levels of 5,317 flats. The slump in home sales was mainly due to home seekers adopting a wait-and-see attitude as record high prices, uncertainties on the interest rate and economic outlook dampened market sentiment. The stock market turmoil in the middle of the year and the economic slowdown in China also affected sales momentum. 

The year-to-date year-on-year sales of mass/medium residential units (priced below HK$20 million) has been negative since September, while the year-to-date year-on-year sales of luxury flats (worth between HK$20 million and HK$200 million) turned negative in October. Sales of ultra-luxury residential properties, however, remained strong, recording positive year-to-date year-on-year growth throughout the year, up 64.0% in the first eleven months – with demand from cash-rich buyers with a longer-term view on the market remaining largely intact.

With the government's cooling measures raising the entry barrier for buyers and lowering the appeal for owners to offload properties, sales volume in the secondary market dropped significantly, down 37.5% y-o-y between July and October. As a result, sales in the primary market gained a larger share of residential sales activity as developers offered aggressive financing schemes to draw buyers. About 28% of home sales were new flats in the first ten months, compared with an average of 15% over the last ten years.  The proportion of primary home sales is even higher for properties priced at HK$20 million or over (about 40% so far in 2015).

Secondary market home prices came under increasing pressure towards the latter part of the year as developers in the primary market lowered prices to nearby secondary market levels. Coupled with the stock market turmoil and heightened uncertainties about the interest rate hike, capital values of mass residential dropped 0.2% in the second half of the year after growing 6.5% in the first half. Luxury residential capital values have held up better, owing to the record-high transactions recorded in the market, encouraging home owners in the secondary market to hold firm on asking prices. As a result, capital values of luxury residential properties climbed 3.5% this year. Rental rates of luxury residential properties rose by 3.3% in 2015 as demand for rental properties improved in tandem with the recovery of the Central office market though signs of the market once again slowing were emerging towards the end of the year.

"We expect property transactions to remain low next year, dragged down by the slow momentum in the secondary sales market," explains Joseph Tsang, Managing Director of JLL Hong Kong. "Developers are likely to be less aggressive on asking prices and will continue to offer financing schemes to lure buyers as more new projects will be launched. We expect capital values of mass and luxury residential to drop 0-5% in 2016. But luxury rental may rise 0-5%."

Hong Kong Prime Residential Indicator - % Change

Sector

Capital Values*

(2015)

Rents*

(2015)

2016 Capital Values Forecast2016 Rental Forecast
Luxury+3.5%+3.3%-0-5%+0-5%
Mass+6.3%NIL-0-5%NIL

*Preliminary

– ends –​