Q1 home prices record fastest recovery of 20% growth in two months as trade tensions ease
Hometransaction volume in January already double that of December2018 and the total volume in Q1 looked set to grow by 58% q-o-q
Home pricesof selected popular estates saw the fastest recovery since 2012 with 20-28% ofgrowth from trough level in last December, lagging behind the last peak by about5-6%
Propertyinvestment market impacted by weakened sources of capital and remained subduedin performance.
HONG KONG, CHINA - MediaOutReach - 19 March 2019 - Cushman & Wakefield, a global leader in commercial real estateservices, noted that the residential market in Q1 2019 rebounded with homesales growing by an estimated 58% q-o-q, and by up to 20-28% in price growthfrom the last trough level for some popular estates, amid a truce between Chinaand the U.S. on trade talks that avoided further escalation in tensions for thetime being. The property investment market, on the other hand, remained subduedas the transaction volume dropped by 42% q-o-q in Q1, as the curbs on capitalflows in mainland China combined with local investors remaining on theside-lines have led to the dwindled investment volume in the Hong Kong market.
Thanks to the release of pent-up demand, thenumber of Agreements of Sale and Purchase (Residential Building Units) recordedin the Land Registry in January 2019 was 4,543, which was 2.2 times the December2018 figure of 2,060. Given home sales in February of 4,089 units and continuingmomentum in March expected to lead to an estimated 5,500 S&Ps in the month, the total home sales volume in Q1 will reach an estimated 14,132, orup 58% q-o-q. Furthermore, secondary sales accounted for more than half thetotal home sales in both January and February, a sign of improved confidenceon the part of buyers.
MrAlva To, Cushman & Wakefield's Vice President, Greater China & Head ofConsulting, Greater China commented,"We mentioned the China-U.S. trade tensions were the biggest uncertaintyaffecting the global economy and the Hong Kong residential market during thelast quarter, but home purchases will resume if the uncertainties start toclear up. During Q1, with both countries seeking to resolve the bilateral tradeissues to avoid further deterioration of the situation, market confidence graduallyreturned, leading to a relatively quick recovery."
Home prices fell to a trough from mid-December2018 to mid-January 2019 but have since picked up increasingly strongly. As ofMarch, the current prices of some popular estates have come up from their troughlevel by 20% to close to 30%. In other words, the past two months have witnessed the fastestrecovery in home prices in these respective estates ever. The most significant growth was in City One Shatin, which recordedgrowth of 28% from the trough level, while Taikoo Shing recorded growth of 20% fromthe trough. Luxury homes such as Bel-Air Residence (up 8.8%) and TheHarbourside (up 10.6%) recorded smaller but still remarkable rebounds in theirhome prices. It is worth noting that the prices of both the mass residential andluxury estates above are about 5-6% from their respective peak levels in lastAugust.
MrTo said, "Apart from eased tensions inthe China-U.S. trade talks, a slower-than-expected pace of rate hikes this yearhas also helped improve the market sentiment. In a context of low unemploymentrate, reduced supply in residential land sites and increased supply of publichousing, we can expect strong interest in home purchases. If there is nofurther impact from external factors, say if the trade talks continue to movein a favorable direction, the upbeat momentum will continue into Q2 and bringabout further increases in both mass and luxury home prices, which will returnto their peak levels of last August by end of Q2 this year."
In contrast, sentiment in the propertyinvestment market remained weak. The number of major deals (each with aconsideration of over HK$100 million) continued to dwindle to 32 in Q1 thusfar, which was down by 42% from the last quarter, with a total consideration ofHK$7.4 billion that was close to a drop of 77% q-o-q.
There was a decline in almost all sectors interms of both transaction volume and consideration, apart from one en-blocoffice transaction in Q1 which had a bigger consideration than its counterpartin Q4 2018. Similar to last quarter though, most buyers' interests remainedfocused on the luxury residential sector.
MrTom Ko, Cushman & Wakefield's Executive Director, Capital Markets in HongKong, said, "Tightened capital from theMainland and local buyers showing no urgency to make purchases have left onlyfunds actively on the prowl. The weakened sources of capital in the marketexplained the decline in both transaction volume and consideration in Q1. However, over the past two years thereis gradual increase in institution funds' activity in terms of transactionvolumes and considerations. We expect whenthere is meaningful progress in the China-U.S. trade talks, the uncertaintiesaffecting the market will clear up further and give a boost to the performanceof the property investment market."
About Cushman & Wakefield
Cushman & Wakefield (NYSE: CWK) isa leading global real estate services firm that delivers exceptional value forreal estate occupiers and owners. Cushman & Wakefield is among the largestreal estate services firms with 51,000 employees in approximately 400 officesand 70 countries. Across Greater China, there are 20 offices servicing thelocal market. The company won four of the top awards in the Euromoney Survey2017 & 2018 in the categories of Overall, Agency Letting/Sales, Valuationand Research in China. In 2018, the firm had revenue of $8.2 billion acrosscore services of property, facilities and project management, leasing, capitalmarkets, advisory and other services. To learn more, visit www.cushmanwakefield.com.hk or follow us on LinkedIn (https://www.linkedin.com/company/cushman-&-wakefield-greater-china)
