1997’s record is broken as property transactions amount to date are 17.1% higher than the whole of 2020

It’s official! 1997’s record has been broken! Up until December 2 2021, 72,933 private property transactions had taken place in Hong Kong, compared to 62,292 for the entire 2020, a 17.1% YoY increase and a nine-year high. During the same period, sales value reached HKD698.35 billion, 27% higher than last year's total of about HKD549.9 billion and smashing 1997’s record by HKD21.25 billion.

The residential market has been buzzing over the past 11 months, with overall transactions reaching a nine-year high. A rebound in prices has been the driving factor behind the results.

Some 56,699 second-hand residential transactions have been recorded up until December 2, about 20.9% higher than the whole of last year. The value transacted was about HKD486 billion, which is about 28.8% higher than last year. The volume of second-hand sales hit a nine-year high, while the value was a 24-year high after 1997.

In first-hand sales, volume and transaction values to date exceeded the whole of last year. Some 16,234 private property registrations have been recorded so far this year (as at 2 December), up about 5.5% from the whole of last year, while the value registered for first-hand private property exceeded the HKD200 billion level, amounting to about HKD212.34 billion, about 23% higher than for the whole of last year. With the outstanding performance of first-hand sales and second-hand residential values, the transaction value of residential flats has reached a record high this year.

According to the Citi Residential Property Ownership Survey released in November, the number of people who expected property prices to rise further had fallen to 38% in the third quarter from 54% in the previous three-month period. However, the figure was still higher than last year’s result of 23% in the same period. This annual ownership survey has been running since 2010 and is based on a random sample of more than 500 Hong Kong respondents collected by the University of Hong Kong Social Sciences Research Centre in September.

“For the overall housing market, we expect home prices to have peaked in 2021 August, and it is potentially subject to a 7 to 10% downside until 2022 June,” Josephine Lee, head of retail banking at Citi Hong Kong, told media last month.

So should we be bracing for this sort of slide in 2022? Let’s examine the major drivers that have kept prices rising over the past 11 months. ?

Affordability/Repayment Ability for Buyers

According to the Census and Statistics Department's Quarterly Report on General Household Survey (from April to June 2021), the updated median monthly household income ranges from HKD35,000 to HKD100,000 a month. Potentially, then, more than 1 million households can afford flats between HKD4.25 million and HKD22 million. If we assume that half of these households are interested in buying property, that translates into tremendous purchasing power for 2022.

Future Supply and Supply in second hand market

Based on this year's statistics, we can predict that around 18,000 pre-sold units will arrive on the market in 2022. According to Centaline’s second-hand supply as at 2 Dec 2021, there are currently only 36,118 homes for sale – 8,785 in Hong Kong, 11,210 in Kowloon, and 16,123 in the New Territories. Up until December 2 2021, there have been 56,699 transactions of second hand market, and the second supply is keep constant in volume at 2021, however, buyer’s preference were changed and they plan to purchase flats in urban area, this stable second hand supply may not catch up this strong preference, so clearly, demand far outweighs supply. The appetite for residential flats will remain strong in 2022, and we will continue to struggle with sufficient supply.

Special Stamp Duty Restricts Residential Market Fluidity?

After paying for the flat, buyers need to stump up extra stamp duty if they re-sell within three years. This is why there has been scant growth of second-hand stock since the special stamp duty came into force.

Housing Demand from Extended Family

According to the Statistics and Census Department, 27,863 couples were married in 2020, and they most likely will be looking to buy or lease a new home.

Some parents’ wedding gift to their children is often financial support to pay the deposit for their children’s first home or buy that home entirely. This tradition will continue in 2022. Those unable to afford to buy will be looking for a home to rent.

According to Centaline agency’s latest records, only 12,565 homes are available for lease, 3,500 in Hong Kong, 3,234 in Kowloon and 5,831 in the New Territories. This proves how hard it will be to meet demand in the foreseeable future.

The Policy Address set up new home supply for the next 10 to 20 years. Buyers in Hong Kong will continue to enjoy low-interest rates in 2022, and the unemployment rate will continue to decrease. These factors will keep residential prices stable in 2022 and point to positive growth. On the other hand, we must remain alert for stock market corrections that temporarily affect market sentiment and “Omicron”, the new COVID-19 variant rapidly sweeping the globe.?Hopefully, there will be an appropriate vaccine soon.

* all transaction from Memfus Wong/Midland/Centaline?