Secondary luxury homes sell at significantly lower prices in Hong Kong

Four homes on the Peak were sold for more than 40% lower than other nearby sites.

In a recent report, Knight Frank said Hong Kong’s home prices fell to the lowest level in nearly eight years. This is due to pressure from first-hand price reductions, high interest rates, economic uncertainty and the negative impact of deteriorating wealth effect in the investment market. 

“Home prices decreased by 1.2% MoM and 13.1% year on year (YoY) in June, according to the Rating and Valuation Department. This marks two consecutive months of decline after a temporary uptick following the government’s removal of property curbs,” the report said.

Here’s more from Knight Frank:

Total residential transactions fell for three months in a row after the highest single-month number of transactions (more than 8,500) in April. The number of transactions MoM remained stable at 3,723 in July. 

The trend of secondary luxury stock selling at significant reductions persisted. Notable transactions included four homes with a total of GFA 16,986 sq ft at 46 Plantation Road on the Peak, which were sold for HK$ 1.1 billion, or HK$64,759 per sq ft. The price was discounted more than 40% compared to a nearby luxury property transaction in 2017. Another example includes a 6,493-sq-ft house with a 6,000-sq-ft garden at 8 Purves Road, Jardine’s Lookout, which was sold for HK$360 million, or HK$55,444 per sq ft. This represented a reduction of over 60% compared to the asking price three years ago. 

The rental market, in contrast, continued to outperform, with rents reaching a four-and-a-half-year high. The private residential rent index rose by 0.16% MoM, marking a cumulative rise of 2.49% over four months. There is a strong wait-and-see atmosphere in the sales market, with some prospective buyers switching from buying to renting. The supply of rental properties during the summer holiday continued to be in short supply, and listings have been absorbed quickly. Units with rents ranging from HK$20,000 to HK$50,000 are popular among locals and the new arrivals from the Chinese mainland. 

Looking ahead, both homeowners and buyers are adopting a wait-and-see attitude amid the continued high interest rates. The market expects a high chance of the first Fed rate cut in September, yet the pace of local banks to follow suit is uncertain. Therefore, we expect that interest rates should remain high for now. The decline in home prices in 2H 2024 may slow down but we are unlikely to see a rebound this year.