Hong Kong Property Market Surges with Record $5.4 Billion in New Home Sales

Key Takeaway

• Hong Kong's new home sales soared to a record $5.4 billion in April, the highest since 1996, driven by government tax removals and developer discounts.
• Inventory of primary market properties increased by 6% to 91,300 units in Q4 2023, with developers cutting prices to clear unsold homes.
• Despite the surge, market normalization is expected as buyer demand stabilizes, reflecting broader global real estate trends and economic factors.

Hong Kong Property Market Surges

In April, Hong Kong's property market witnessed a significant surge in new home sales, reaching a record high since data collection began in 1996. The total value of firsthand residential property sales amounted to HK$42 billion ($5.4 billion), marking a more than threefold increase from March's transactions, as reported by Ricacorp Properties Ltd. This spike in sales, totaling 3,545 units, represents the highest number since 2006, following the government's decision to remove extra property taxes in February. Developers, including CK Asset Holdings Ltd. and Great Eagle Holdings Ltd., have responded by launching new projects at competitive prices, approximately 20% to 30% lower than those of nearby competitors, in an effort to attract buyers and clear inventory.

Inventory and Price Adjustments

The removal of property curbs has prompted developers to accelerate the release of new projects and offer discounts, aiming to address the backlog of unsold homes accumulated due to a previously weak property market. According to Jones Lang LaSalle, the inventory of properties in the primary market saw a 6% increase to 91,300 units in the fourth quarter of 2023 from the preceding three months. This adjustment comes after an average annual sale of only 13,000 new homes from 2021 to 2023, based on government data. Bloomberg Intelligence analysts predict that major developers like Sun Hung Kai Properties Ltd., Henderson Land Development Co., and New World Development Co. may also reduce their prices to remain competitive.

Market Stabilization Predicted

Despite the recent boom, Derek Chan, head of research at Ricacorp, anticipates a normalization in the market. He suggests that the influx of buyers has peaked, with the demand from those urgently seeking properties in the past months now largely met by the new projects. This viewpoint is echoed in other global markets, such as New York City, where a rise in mortgage rates has begun to temper the enthusiasm of developers and agents, despite a brief uptick in luxury condo sales. Marketproof CEO Kael Goodman highlighted a stabilization in the new development market, attributed to limited new inventory and elevated mortgage rates.

Global Property Trends

The property market trends in Hong Kong reflect broader global dynamics, with varying impacts across different regions. In Las Vegas, for instance, the median price of condos and townhouses reached a record high of $290,000 in April, a 7.4% increase from the previous year, driven by a continuous demand that outpaces supply. Meanwhile, in Los Angeles, a significant feeder market for Las Vegas, condo transactions in the $800,000 to $1 million range saw a substantial increase, indicating a robust demand for higher-end properties. These trends underscore the interconnectedness of global real estate markets and the influence of macroeconomic factors such as mortgage rates and supply-demand dynamics on property values and sales activity.

Street Views

• Derek Chan, Ricacorp Properties Ltd. (Neutral on Hong Kong's new home sales):

  "The peak of buyers entering the market has ended for now... The many new projects have absorbed the demand of those who were in a rush in the past couple of months."