• Primary launch prices fall below 2015 level

    3 July 2024

    (2 July 2024, Hong Kong) Rating and Valuation Department’s private domestic price index showed that overall secondary home prices have already returned to their 2016 levels. However, with the prices of newly launched residential projects more than 10% below those of similar projects back in 2015, it has put further pressure on secondary home prices, according to JLL’s latest Residential Market Monitor released today.

    The overall secondary home price index has reverted to its 2016 figures, registering at 305.9 in May 2024, closely mirroring the November 2016 level of 306.7. The prices of new residential properties appear to have reverted to levels seen even earlier. As of May 2024, the average primary transaction unit price of Class A (less than 431 sq ft, SA) units in Yau Ma Tei is 10.6% below that in 2015, dropping from HKD 22,768 to HKD 20,346 per sq ft. Concurrently, in Kennedy Town, the average primary unit price has seen a 6.0% reduction over the same period, descending from HKD 23,424 to HKD 22,022 per sq ft.

    However, market activity in the residential market has moderated after the initial release in pent-up demand are absorbed. Some new projects are struggling to boost sell-through rates despite efforts to lower prices. ‘THE HADDON’ in Hung Hom offloaded 13 out of 63 units (20.6%) on the first day of the project launch, and ‘Amber Place’ in Cheung Sha Wan failed to offload any of its 30 units launched.

    Cathie Chung, Senior Director of Research at JLL in Hong Kong,said: “In May, the primary residential transaction volume dropped to nearly half of April’s level, and pricing of recent project launches continue to surprise the market by reaching new lows. Such will put further pressure on the prices of secondary homes as many people prefer to buy flats at new projects. The flat owners in the secondary market may need to reduce the asking prices to compete with the new projects and attract buyers.”

    The market needs more supportive demand-side policies to restore the demand-supply balance and cushion the downward spiral of the home prices, when the postponement of purchases in anticipation of price reductions leads to further price decline, said Norry Lee, Senior Director of Projects Strategy and Consultancy Department at JLL in Hong Kong.

    In June, the HKMA broadened the applicability of the mortgage policies to include mortgage applications for residential properties under construction for self-occupation where the provisional sale and purchase agreements were signed before 28 February 2024. This adjustment could allow buyers to secure mortgage loans at a maximum loan-to-value ratio of 70% and mitigate the risk of insufficient mortgage approval due to declining property values under the Stage Payment Plan.

    Lee said: “It is a positive initiative by the government. However, the banks remain cautious on mortgage approvals. It hampered the property transactions as a result, even if there is still unfilled demand from end-users.” 

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