Hong Kong Luxury Property Market Slows in 2019

Less than 100 luxury residential units will be completed in 2019

According to JLL's latest Residential Sales Market Monitor Report, less than 100 new luxury units (1,722 sq. ft or above) will be completed in Hong Kong's traditional luxury residential areas, including The Peak, Southern district, Kowloon Tong, Homantin and Mid-Levels, in 2019.

JLL's Residential Price Index shows capital values in the mass residential property market having retreated by 4.2% since peaking at the end of August 2018, ending 27-months of consecutive growth. The luxury segment, however, has been more resilient, with capital values remaining largely flat in the fourth quarter of 2018.

Notable big deals lately included the sale of a house at Ultima in Homantin for HKD333.8 million and another at Serenity Point in Sai Kung for HKD188.0 million. In both instances, the transactions set new record highs for their respective areas, in terms of unit price.

Henry Mok, Senior Director of Capital Markets at JLL reports, "The different profile of buyers in the two market segments plays a key role in the dichotomy in price trends. While the luxury residential segment is being supported by cash-rich investors that stay fixated on acquiring their dream homes, the mass segment is more sensitive to market sentiment and filled with buyers that are more pragmatic when making purchasing decisions. With the market still being dominated by negative sentiment, many in the latter will opt to take a wait-and-see approach in a bid to capture bigger price cuts and lower transaction costs."

"Looking back at the previous market downturn in 2016, when uncertainty arising from a US Fed rate hike at the end of 2015 and Brexit weighed on Hong Kong housing market, capital values in the mass segment retreated by 10.1%. The luxury segment recorded a more modest decline of 1.9%. Taking into account that there will less than 100 units completed in traditional luxury areas in 2019, the top-end of the market is likely to remain more resilient to faltering market sentiment through the current downturn, especially if it is shorter and milder than expected" he added.

Denis Ma, Head of Research at JLL added, "Needless to say, uncertainty prevails amid an escalation in trade tensions between China and the US, which could disrupt global economic growth and dampen investment activity. As a small and open economy, Hong Kong will be affected. In this regard, the current market outlook remains heavily dependent on how the trade war plays out, the outcomes of which will dictate market sentiment.