• Interest rate hikes and pandemic uncertainties slowed the secondary market in Q3, with transactions for the quarter expected to reach 11,600 deals, a fall of 22% q-o-q

• Home prices further declined across market segments in Q3, with mass and middle markets expected to experience more notable corrections

• A trend-down in COVID cases from September could see home prices bottom out and stabilize in Q4, although 2022 full-year transactions are still expected to drop by 35% y-o-y

Edgar Lai, Senior Director, Valuation and Advisory, Hong Kong, Cushman & Wakefield shared: "The latest government figures indicate that overall residential prices have recorded a decline for the year-to-date, falling 4.5% in the first seven months. We have seen price corrections across multiple market segments. At City One Shatin, a proxy for smaller lump sum units, prices experienced a more notable drop of 7.1% q-o-q (Chart 2), while Taikoo Shing, representing the mid-price market, fell by 4.1% q-o-q (Chart 3). Meanwhile, prices in the luxury segment, such as Residence Bel-Air, held up relatively well with a more modest 2.1% decline q-o-q, as luxury property owners have stronger holding power and are less impacted by the external market."

Commenting on the market outlook, Edgar Lai added: "Compared with the peak last year, prices of some properties have already slipped 5-10%. Whilst COVID cases are expected to peak in September, we believe that home prices could potentially bottom out in September or October this year, and stabilize in the fourth quarter, bringing the full-year residential price change into a range of -5% to -8% y-o-y. On the supply side, the potential primary supply pipeline could reach over 10,000 units, many of which are in large-scale developments in key districts including Kai Tak, Tuen Mun, and Tin Shui Wai. Improvement in the economic environment and market sentiment in the next few months would further support the gradual recovery of transaction volume, backed by considerable demand from end-users. Overall, given the high base of last year, residential transaction volume is expected to drop by 35% y-o-y in 2022."

Rosanna Tang concluded: "Looking at the near-term future, home buyers may still face a combination of risk factors, including the interest rate hike and continuing economic uncertainties. However, we are pleased to see the new government leadership gradually relaxing the quarantine measures, and we believe it will give a boost to the residential market when details of the border reopening are further announced. We are also looking forward to the first Policy Address to be delivered by the new Chief Executive this October, which we hope will bring some positive messages, support and sentiment to the residential market."

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Photo caption: Left: Rosanna Tang, Executive Director, Head of Research, Hong Kong, Cushman & Wakefield Right: Edgar Lai, Senior Director, Valuation and Advisory, Hong Kong, Cushman & Wakefield

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References

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