Hong Kong residential prices to rise
According to JLL’s Year-end Hong Kong Residential and Land Market Review 2016, notwithstanding the latest stamp duty measure, residential prices are expected to rise up to 5% next year. The competitive in land market will continue next year due to the influx of mainland developers and new local players. It has become harder for Hong Kong heavyweight developers to win development sites.
Average monthly residential sales rebounded 55% y-o-y to 6,123 in the second half of 2016. A buoyant stock market, post-Brexit capital inflows seeking safe-haven investments and strong pricing the public land sales market all contributed to the uplift. Capital values of mass residential properties rebounded by 9.5% (as of October) from their in-year lows (last trough in May 2016), reversing much of decline recorded earlier in the year to post full-year growth of 1.6%. Capital values in the luxury segment of the market stayed largely flat in 2016, reflecting the greater resilience of that market; especially in the very top-end of the market where capital values have remained solid throughout the year.
Joseph Tsang, Managing Director and Head of Capital Markets at JLL said: “Under the latest cooling measure, residential sales volumes will shrink over the short-term as buyers adopt a wait-and-see attitude. Developers will need to reassess their sales strategies. But this measure is unlikely to have a huge impact on capital values, given strong pent-up demand, large number of cash-rich buyers in the market (including mainland Chinese buyers), and still low mortgage rates. Hence, while volumes are likely to soften, we expect capital values of mass and luxury residential to remain broadly stable and rise by up to 5% in 2017. The rental market for luxury properties, on the other hand, is forecasted to fall by up to 5% given the ongoing tenant downgrading trends that have characterized the market for the past 12-months.