Hong Kong luxury residential rents to rise by up to 5% this year

Meanwhile, prime residential capital values are forecast to drop by up to 5%.

Elevated interest rates will likely continue to dampen the luxury housing demand. According to JLL, the underperformance of the stock market, with Hang Seng index falling to its lowest point this year in September, will likely drag on the price recovery of luxury residential properties.

“We maintain our forecast that luxury residential capital values are expected to drop by 0%–5% in 2023,” the analyst said.

Here’s more from JLL:

Non-local talents are expected to shift from hotels and serviced apartments to traditional multifamily leasing as they settle down, giving a boost to leasing demand. As external trade and the financial market improve, the return of expatriates in the coming quarters should also drive luxury properties take-up. Luxury residential rents are expected to rise by 0%–5% in 2023.

Rising mortgage rates worsen market sentiment

Primary transaction volume fell to a six-month low of 742 units in August. Although most new projects were launched at considerable price discounts, not all managed to achieve high sell-through rates. On their respective first day of project launch, The Coast Line II in Yau Tong offloaded all 626 units in August, while MORI in Tuen Mun sold 33 of 158 units in September.

The decline of home prices has accelerated, and the housing market showed minimal response to multiple relaxations of mortgage rules amid rising mortgage rates. HSBC and BOC hiked prime rates by 12.5 bps, raised HIBOR-based mortgage rate caps by 50 bps to 4.125%, and reduced cash rebates in 3Q23. The mass residential capital values fell 2.5% q-o-q in the quarter.

Only one residential site to be tendered in 3Q FY2023/24

In 2Q23, the number of Occupation Permits issued for luxury units rose to 64 units, including 50 units at 21 Borrett Road (Phase 2) and 6 units at 52-54 Stanley Village Road.

In 3Q FY2023/24, the government will tender a residential site at Cheung Sha, expected to yield about 110 units. The MTRC will tender Package 1 of Tung Chung East Station, providing 1,200 units. URA will put up two development projects in Kowloon City and Ma Tau Wai, yielding 1,450 units in total. The private housing land supply in 3Q would support the development of around 3,200 units.

Market activity in the high-end market slows down

In 3Q23, the transaction volume for residential properties valued at or above HKD 20 million has fallen by 51.5% q-o-q, and luxury capital values have dropped by 1.6% q-o-q. Among a scarce number of luxury sales transactions, a house at Severn 8 on the Peak was sold for HKD 300 million (HKD 59,207 per sq ft, saleable area).

During the summer holiday peak season, the leasing market experienced a boost in take-up. In 3Q23, the leasing transaction volume in the luxury market rose by 58.5% q-o-q, and luxury rents rose by 2.2%. Anecdotal evidence suggests that the scale of expat employee relocations to Hong Kong remained small. Leasing demand was primarily supported by local and Mainland Chinese families.

Note: Hong Kong Residential refers to Hong Kong's overall luxury residential market.

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Here’s a rundown of Brisbane’s residential market performance in Q3

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Here’s a rundown of Brisbane’s residential market performance in Q3

New apartment supply remains very low in 2024.In a recent report, JLL said buyer sentiment in the existing housing market in Brisbane has stayed strong, underpinned by a strong inflow of people into the region and also by a lack of available stock in many areas that is keeping competitive tensions high.“New apartment demand is particularly constrained by a lack of available stock, particularly for mass market projects. Sales of luxury apartment projects remain stronger, underpinned by downsizers that continued to be buoyed by strong price growth in existing properties,” the report said.Here’s more from JLL:New apartment supply in Brisbane completions will be higher in 2024 than over recent years, but remains very low. Development conditions remain tough and even securing a builder is a challenge due to so much infrastructure and Olympic work in the pipeline.Rental vacancy remained a low 1.1% in September 2024 (SQM Research). Vacancy has now been around 1% for several years and with little supply relief on the horizon there is unlikely to be much change any time soon.Strong price growth starts to moderateBrisbane existing apartment prices have surged over the past year on the back of limited supply of both new and existing stock and pushed by rising build costs. Nevertheless, the pace of growth is starting to slow.Rents have also surged in Brisbane on the back of tight vacancy the past few years. Nevertheless, affordability is now stretched across many parts of the market and this is increasingly seeing rental growth stall in recent months.Outlook: Supply deficits to buildWhile underlying apartment demand is likely to continue to lift, ongoing tough development conditions will keep new supply levels low, and the supply shortfall is likely to grow increasingly wide.Stretched affordability is likely to remain the only constraint on rents and prices in the near term and the moderation of price growth is likely to continue. However, the increasing supply deficit will likely still support further robust growth over the medium term.Note: Brisbane Residential refers to Inner Brisbane apartments.

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