Hong Kong home sales fall to earth following end-of-curbs flight, dragged by gravity of high rates, inventory

Hong Kong’s residential property market seems to have burned through a burst of activity that followed the removal of cooling measures in late February, as high inventory levels and interest rates conspire to return short-term buying sentiment to a more normal level.

“In the aftermath of the government’s decision to dial back cooling measures, initial market enthusiasm has shown signs of dampening,” JLL said in a report on Thursday. While market participants had projected a robust increase in transaction volume and price, data suggests the market is losing steam.

“The current price and volume rebound is likely more short-lived than the ‘little spring’ after the border reopening last year,” JLL said.

In the primary market, transactions popped up significantly as soon as the government removed the property curbs. A total of 4,141 new residential units were sold in March, compared with 262 in February, according to data provider Dataelements, which tracks new residential properties in Hong Kong. The number dropped by more than 50 per cent to 1,880 units in April and slid a further 32 per cent to 1,273 in May.

“We interpret this surge as a release of pent-up demand and anticipate moderating transactions in the coming months,” JLL’s report said. It added that the number of provisional primary units – a leading indicator of future sales agreements – reached about 4,200 in March but declined to about 1,700 in April, suggesting a market deceleration.

March’s transaction number was a historical high last seen in the 1990s, said Buggle Lau Ka-fai, chief analyst for real estate agency Midland Realty. As a result, the sum of primary transactions in the first five months of 2024 has already reached the full-year level in 2022 and 2023.