Optimistic investors unleashed their purchasing power in Q1 for exceptional results
Hongkongers took advantage of the Easter holiday to travel, recording a net outflow of nearly 600,000 person-times. Official figures show that almost 860,000 residents left, and only 245,000 visitors arrived during the first three days of the long weekend.
The holiday mood and stock market turbulence quietened the secondary residential market. Primary properties that were earlier selling, like hotcakes, are not being snapped up as quickly as before. Developers are even offering discounts on leftover units. The market seems to be regaining its breath after its breakneck climb.?
Taking Midland Research’s April residential transaction figures as at 20 April, transaction volume in the primary and secondary markets dropped by 49.1% and 59.3%, respectively.?
The leading cause of the rapid rebound in February and March was the sudden release of purchasing power that had accumulated during the epidemic after the border opening.
Based on the Land Registry’s official statistics, 14,023 transactions were recorded in the primary and secondary markets for a combined value of HK$119.979 billion in Q1 2022.
Q1 figures from the previous four years – 2019 to 2022, indicate that Q1 2023 figures were the second highest, with 2021 still on top.???
Once that accumulation of purchasing power has been depleted, it is normal for the market to slow. The home price competition between buyers and sellers will continue in the secondary market. Developers will continue liquidating their remaining units at competitive prices in the primary market. For example, units in the jointly developed Phase 2 of the Grand Jete project in Tuen Mun were offered at 15% under the price of the first phase in 2022.
New projects are being constructed faster than their units are sold, as buyers seem more interested in completed projects. Developers will launch more units in future and monitor the market reaction to adjust the price lists and sell as much as possible.??
Overall commercial transactions followed the residential sector’s example. According to Midland Research figures, as at 20 April, office, industrial and retail volume and consideration in March dropped by 45.9%, 56% and 61.5%, respectively.
According to official Land Registry statistics, 973 transactions worth HK$12.299 billion were recorded in Q1, more than double the same period last year. Volume rose across the board, with office sales performing best, increasing 1.5 times MoM to 110. Industrial also performed well, with 240 transactions for an MoM increase of about 84.6%.
Retail remained steady, with 101 registrations recorded in March, an increase of about 7.4% MoM.
Affected by the epidemic for more than three years, industrial and shop prices have declined. Medium and small-priced properties will dominate the future commercial market due to the impact of the US Fed's interest rate hike. However, due to the slow inflation decline in the US, the high interest rate environment will continue. Large-property transactions will remain muted, but some investors with sufficient capital can buy low- and medium-priced commercial properties at a considerable discount.
Prices are still hovering at the lower end of the market. Confidence has been restored with Hong Kong’s fully opened border and its return to economic normal. Investors will take this opportunity to "bottom fish." Activity will likely increase in direct market sales in the industrial and office buildings, and prices will continue to rise for industrial and retail buildings.
The Hong Kong stock market is fluctuating, and the real estate market has just started its rebound. These shifts will attract investors and foreign funds who want to put more capital into Hong Kong real estate to secure revenue and growth. Property almost always resists deprecation, especially in land-challenged Hong Kong, and remains a secure source of future wealth.?????