Residential transaction shows downward trend, property market begins to consolidate

• Economic recovery in Hong Kong drove
  upsurge of residential property transactions by 15% y-o-y in 3Q 21. With
  purchasing power gradually unleashed, transaction volume has gone down since
  August and is expected to shrink in September. Property market will enter
  consolidation phase.
• Despite a downward trend in transaction
  volume, home prices are expected to progress steadily in 4Q with room to rise
  by maximum 3%.
• New project sales from property
  developers are expected to continue in 4Q, and primary sales will dominate the
  market

HONG KONG SAR – Media OutReach
– 15 September 2021 – Global real estate services firm Cushman & Wakefield
publishes Hong Kong Residential Markets Review and Forecast 3Q 2021 today. With
the purchasing power of the market unleashed at a certain level and consumed in
1H 21, available affordable units reduced, and diminished bargaining space for
owners, the transaction volume has displayed a downward trend.

Chart 1: Total S&Ps forecasted to hit 25,661 cases in 3Q

Chart 2: Residential S&Ps forecasted to hit 17,825 cases in 3Q

Chart 3: Overall home price increased by 4.3% since 2021

Chart 4: Price at City One Shatin (Phase 4) forecasted to rise by 2.1% q-o-q in 3Q

Chart 5: Price at Taikoo Shing (Kao Shan Terrace) forecasted to increase by 2.5% y-o-y in 3Q

Chart 6: Price at Residence Bel-Air (Phase 2) forecasted to rise by 4.9% in 3Q

Chart 7: About 8,900 new flats potentially available from September to December

Mr Keith Chan, Director, Head of
Research, Hong Kong, Cushman and Wakefield comments, “Transaction in the
market has been active since 2021. The total number of sales and purchase
agreements (S&Ps) in the first 9 moths is estimated to be 77,369 cases, ie.
an upsurge of 27% y-o-y (Chart 1), while the number of residential S&Ps is
57,956 cases, both reaching a histocical high since 2012. However, the number
of residential S&Ps in 3Q 21 is forecasted to be 17,825 cases, representing
a plunge of 19% q-o-q (Chart 2). This is mainly due to the fact that affordable
units have been gradually consumed by the market. With limited availability of
residential units, owners’ bargaining space has narrowed and they even began to
raise prices. Buyers took a wait-and-see attitude, waiting for the market to
cool down, leading a see-saw situation between the two. Transaction became
slow, bringing the property market to consolidation phase.The downward trend is
expected to continue with S&Ps falling to 4,700 cases in September (Chart
2).”

Mr Edgar Lai, Director,
Valuation and Advisory, Hong Kong, Cushman & Wakefield comments,
“In terms of property price, overall home price has risen by 4.3% since 2021
and is expected to surpass the peak of May 2019 soon. The average price at City
One Shatin has already made its historical high (Chart 4), and that at Taikoo
Shing has also risen by 2.5% q-o-q (Chart 5). Luxury homes such as Residence
Bel-Air show similar performance as common residential homes with a 15% rise
since 2021 (Chart 6), only less than 3% from its record high. We forecasted a full year increment of
8% to 10% in 1Q 21. We expect property price will rise steadily in 4Q with a
further increment of maximum 3%.”

Commenting on the market outlook, Mr Edgar Lai further commented, “Following a round
of active transactions, we expect that the purchasing power previously
accumulated in the property market has been released. Buyers also become more
cautious after prices have recorded certain increment so far. Moreover, banks
are less active in getting business at year end as it is traditional an
off-season period for mortgage. In this regard, we expect that both transaction
volume and property price increment will continue to slow down in 4Q. Property
prices have reached historical-high and the property market will enter a period
of consolidation. We forecast
that about 8,900 new units will be ready for primary sale from September to
December (Chart 7), of which many come from large-scale developments. 76% of
these are located in the New Territories and the rest across Hong Kong. If primary sales
performance is good, the outcome will be conducive to the stable development of
the market. We have forecasted residential price growth of 8% to 10% throughout
2021 by start of the year. With home prices expected to progress
steadily in 4Q, we would estimate a maximum 3% growth by end of the year.”