Hong Kong residential transaction volume drops 35.1% to 5,546 cases in May

Blame it on the steep decline in primary sales.

According to a Knight Frank report, in the past three months, more than 7,000 new homes were sold, but the initial enthusiasm once the property cooling regulations were lifted has started to wane. 

Overall transaction volume cooled down in May after a significant rise in April, falling by 35.1% MoM in May to 5,546 cases. 

Here’s more from Knight Frank:

Primary sales dropped significantly by 46.8% MoM to 1,934 in May but were still up by 38.5% YoY. First-hand sales were supported mainly by developers’ discounted inventory and new launches near MTR stations, such as The YOHO Hub II in Yuen Long and Onmantin in Ho Man Tin. Both projects were in high demand among first-time buyers and existing homeowners who have been looking for new flats within the same district. 

Residential property prices edged up slightly by 0.3% MoM in April, marking two consecutive months of growth and a cumulative increase of 2.1%, but they still fell by 12.8% YoY, according to the Rating and Valuation Department. There continued to be cases of massive repricing in the market. A 737 sq ft flat in a blue-chip estate in Eastern District was sold at a 26% discount from its asking price HK$11.8 million, about 7% below its purchase price a decade ago.

The luxury residential segment remained resilient. The most notable transaction recorded during the month was at 33 Island Road in Deep Water Bay, where a 4,812 sq ft house was sold for HK$468 million, or HK$97,257 per sq ft. 

By the end of May, various talent immigration programs in Hong Kong had received over 300,000 applications, and over 120,000 people had arrived, surpassing the annual target of 35,000 new professionals, according to the Labour and Welfare Bureau. The influx of new talent has provided support for the leasing market, driving the rental index to increase for two consecutive months by 0.9% MoM and 4.5% YoY in May. 

Looking ahead, the unfavourable economic climate and high interest-rate environment will continue to put pressure on home prices. We expect home prices to continue to move downwards in the second half of the year. Owing to the abundance of unsold inventory and the absence of other positive factors, a rebound in prices is expected to take much longer. We maintain our forecast for home prices to fall by 5% in 2024.