The residential real estate market in Hong Kong is showing chinks in its armour. The sales volume and prices in July continued to fall from June after a slight rebound in May, according to the July property market report by Vigers Research.
According to the Hong Kong Land Registry, 8,930 sales and purchase agreements were filed in July, down 24.8% from the previous month. Transactions also dropped 19.7% on a year-on-year basis. Sales volume was valued at HK$32,697 million (about RM13.91 billion), representing declines of 43.1% month on month and 14% year on year.
July figures are less than half those in November 2007, during which 18,105 sales contracts were signed. In November 2007 alone, total sales volume was worth HK$32.7 billion, already down 4.3% from the previous month and down 14% from the previous year. A combination of inflation, weakening stock market, expected higher mortgage rates and the worldwide credit crisis have hit the local market hard, says Vigers.
Entering 2Q2008, the real estate market began to soften after five years of steady growth. As early as in March and April this year, the market was already showing signs of sales slowdown, with home prices having declined by 5% to 8% off their 2007 peak. It is expected that home prices will bottom out in the summer of 2009, by which time they will be 20% off the peak, with no appreciable gain in prices for another year.
According to the Vigers report, it is reasonable that after a 25% surge in prices between 2Q2007 and 1H2008, the marketplace would correct itself naturally and slowly become a buyer's market.
The highlights
Of the sales pacts filed in July, 7,433 were deals done for residential properties, amounting to HK$25,139 million in transaction volume, down 27.7% from June and 19.1% on a y-o-y basis. Total consideration dropped by 50.2% m-o-m and 12.5% y-o-y.
Prime residential locations, such as the Mid-levels, held up better than most other places due to limited supply. But neighbourhoods on the island side, where the inventory pool is bigger, like Taikoo Shing and South Horizons, have been hit harder, as are some developments on the Kowloon side and The New Territories. It is expected that the housing market will weaken measurably over the remaining months of this year.
Mass sector
Looking closer at the four developments indicative of the mass-market performance that Vigers Research has tracked, the upward trend was sustained in July but at a slower pace, beginning early 2008, with average capital values dropping 1.11% from 2Q2008 to HK$5,575 psf during the month. Taikoo Shing and Whampoa Garden saw mild growth of 1.35% and 0.88% compared with 2Q2008, reaching HK$7,500 psf and HK$5,700 psf respectively. Residence Oasis in (TKO) and City One Shatin prices were recorded at HK$5,000 psf and HK$4,100 psf in July respectively, seeing declines of 5.66% and 2.38% from 2Q2008.
Luxury market
The number of transactions of prime properties saw a sharp fall between June and July, with 332 deals struck worth about HK$10 million in July - a 70.8% dip from June and 17% from last year.
The median capital value of the tracked properties was HK$12,350 psf as of July, down 1.79% from 2Q2008. The Arch and The Waterfront were respectively priced at HK$14,700 psf and HK$10,300 psf in July, representing a decline of 3.92% and 1.9% from the previous quarter. Sales prices at Residence Bel-Air (Phase 3) were down 1.6%, falling to HK$12,300 psf in July, but in Hong Kong Parkview, they were up 0.83% to HK$12,100 psf in capital value.
Grade-A office market highlights
Sales and purchase agreements intended for office property transactions totalled 209 in July, down 14.7% from June. In terms of transaction numbers, July saw a 17-month record low since February 2007, in which 193 deals were registered for office property sales. This is mainly attributed to fewer transactions recorded for commercial properties, worth less than HK$50 million.
However, in terms of transaction pricing, July saw deals with a combined valued of HK$2,349 million, surging 35.9% from June, mainly because of the more active transactions in the high-priced sector with valuation of above HK$50 million.
For the sector below HK$50 million, transaction numbers and values fell to nine and HK$305 million respectively, down 40% and 34.9% from the previous month. Transactions in the range of HK$20 million and HK$50 million saw the most significant decline.
For the lower-priced sector of between HK$10 million and HK$20 million, the month saw 11 transactions with values amounting to HK$1411 million, up 83.3% and 199% from June.
Notable deals of Grade-A office properties of the month are a full-floor space in 9 Queen's Road, which fetched HK$250 million; two full-floor units in Cosco Tower, sold for HK$227 million and HK$223 million respectively; and three consecutive floors in Silver Fortune Plaza, sold for HK$211 million.
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