- Both luxury and mass residential prices rebounded in Q1
- Negative real interest rates and stable affordability will continue to support home prices
- Primary launches are again attracting market attention
We expect such trends to continue, which should lead to steadily rising home prices and volumes in the near term, but external uncertainties, in particular the recent twists and turns in the US / China trade negotiations, could cloud any meaningful recovery especially in the mass residential market.
Residential prices in both the luxury and mass segments all rebounded in Q1 as a result (townhouse +1.5%; Hong Kong Island luxury apartment +2.0%; Kowloon / New Territories luxury apartment +0.3%; mass residential +0.8%). In particular, both townhouse and luxury apartment prices on Hong Kong Island recorded strong growth amidst renewed interest from both Mainland and local wealthies.
Mr. Simon Smith, Senior Director, Research & Consultancy commented: “Investment sentiment has been buoyed by the reviving stock market, negative real interest rates and stable affordability levels given the end of the current rate hike cycle. Developers’ eagerness to deliver primary projects in both the luxury and mass markets should lead to a rebound in both volumes and prices in the near term.”
Mr. Keith Chang, Managing Director, Savills Realty Limited said: “While the latest RVD forecast reveals steadily increasing housing supply over this year and next (around 20,000 units in each year), the proportion of Nano units is expected to rise in 2019 to 2020 to average around 42%, a 20-year high. This highlights the trade-off between increasing housing supply and average living space.”
Ms. Edina Wong, Senior Director, Residential Services said: “With inflation expected to remain fairly stable at around 2% over the next two years, negative real interest rates are expected to persist, providing further support to home prices. Another factor supporting the residential market is stable affordability levels, which have been on a rising trend since 2016 but have hovered around 50% recently.”
Mr. Patrick Chau, Senior Director, Residential Development & Investment added: “The luxury sector, buoyed by strong sales of primary projects such as Mount Nicholson, 90 Repulse Bay Road and 8 Deep Water Bay Drive, as well as returning interest from both Mainland and local HNWIs, is likely to see more headline deals concluded over the next few months with potential launches of a few more prestigious projects, especially in Mid-Levels, for example, Sun Hung Kai’s Stubbs Road project and Cheung Kong’s Borrett Road project spring to mind.”