What could the Year of the Rabbit hold after such a bruising time from the Tiger? Let’s take stock.

What could the Year of the Rabbit hold after such a bruising time from the Tiger? Let’s take stock.

Now that the Year of the Tiger has slunk away, I am not sorry to see it go. The triple whammy of the COVID-19 pandemic’s Fifth Wave, the havoc wreaked by anti-pandemic measures, and the three prime interest rate hikes have certainly taken their toll.

Tight border controls between Hong Kong, the rest of China, and other nations trapped us in an internal cycle as locals dominated purchasing power. The viral rollercoaster made it challenging to predict where the market was headed next, especially given the sharp drop in tourist numbers.

Meanwhile, those interest-rate hikes stoked acquisition costs, making prospective buyers much more cautious and forcing the secondary market transaction volume downward. Slender negotiating margins, and even further haggling over prices, eventually caused property prices to lose their support, and the myth that property could only increase in value was severely dented. Sellers could only expand their discounts and hope.

According to Land Registry data, supplemented by data from agencies, as of 10 January 2023 (Tuesday), 55,225 transactions were recorded in the Year of the Tiger’s overall property market for approximately HK$556.4 billion.

Compared to the 92,120 registrations in the Year of the Ox (12 February 2021 to 31 January 2222), transactions decreased by 35,020 year-on-year or a sharp 38%. This result ended the two-year expansion from the Year of the Pig (5 Feb 19 to 24 Jan 20)and the Year of the Rat (1996-1997), which had the fewest transactions. Compared to the previous Year of the Tiger (14 Feb 10 to 2 Feb 11), which had 153,600 transactions, last year dropped 62%. In addition, with the simultaneous decline in property prices and transaction volume, the registration amount also fell sharply.

I analysed 137 significant residential developments using different agencies to track their 2022 performance by unit and current asking unit rates.

The RVD’s latest residential Index (as of November 2022) fell 13.8% from 393.9 to 339.4 for the year. According to Midland’s latest research of more than 137 significant residential developments, I found 22 estates had fallen more than 20% compared to December 2021’s unit rate and compared the latest asking prices from Centaline agency. According to their unit prices, these 22 estates’ had risen about 5.6% to 15.8% compared to the end of 2021.??

Seventy-two estates dropped between 10% to 20%, and their updated asking prices were up 4% to 24% at 19 January, according to Centaline Agency.

Source Midland/Centaline

Thirty-five more estates’ unit prices fell less than 10%, and their latest asking prices were up from 3% to 17%, depending on how much they had sunk in Q4 2022.??

Eight estates started their recovery in December 2022, increasing by 0.7% to 17.3%, reflecting the turning point of the ”Open Border” announcement on 29 December. Their asking unit prices were 3.4% to 14.5% higher than at the end of December.?

Due to the customs clearance effect in the Year of the Rabbit, the market expects a more significant economic and market recovery, supported by the return of purchasing power. I predict overall property transactions, coming off a low base, will rebound sharply in the Year of the Rabbit, jumping more than 25%, passing the 70,000 mark, and expect value to reach HK$700 billion in 2023.

I expect more than 50,000 secondary residential transactions, an increase of 25% compared to Year of the Tiger’s number of a little more than 37,000. The same will be valid for primary residential transactions, estimated to reach 14,000 to 15,000. Compared to the Year of the Tiger’s roughly 10,000 cases, this would increase by 50%.

Retail consumption, tourism and catering industries, which the epidemic has severely hit in the past three years, are expected to benefit from the vastly increased traffic between mainland China and Hong Kong.

However, it must also be noted that some international banks have lowered their economic growth forecast for the fourth quarter of last year to a negative 1.4%. The economic growth forecast for the first quarter of this year was lowered to 1.4% to reflect weak global demand. The mainland also needs to face its own financial problems. The stock market needs to be carefully observed, favourable conditions promoted, and those who intend to enter it should avoid being overly optimistic. The US Fed will discuss the interest rate again in February. The market seems to think any increase will not be as severe this time and will signal the end of the interest hike cycle.

Hong Kong will announce the 2023-24 Budget on 22 February, and it could massively affect the real estate market, especially if the special stamp duty on the residential sector is relaxed. Home buyers, investors and foreign funds will watch the budget closely before making their Q2 plans.

Rabbits are small, with long ears and large, powerful hind legs. Those long ears listen to all around them for clues to help the rabbit make the best choices. Knowledge is our strength, our powerful hind legs that will allow us to jump has high as possible in this new year. We should be like rabbits this year and consume news daily, paying extra attention to politics, finance, real estate and the latest PRC policies to make the best choices.

Let's welcome the Year of the Rabbit! To all my readers, Kung Hei Fat Choi.