Surge of urban living leads to heightened demand in key cities
December 9, 2014, Hong Kong – CBRE today launches—Global Living Survey: Global Cities Compared—highlighting residential comparisons of the world’s key global cities favored by high net worth individuals, including; Hong Kong; London; New York; Paris; Sydney and Singapore.The report reveals that London leads the way in average prime residential new-build prices, which have now reached US$3,380 per sq. ft., closely followed by Hong Kong and then New York where the average prices are US$3,290 and US$3,040, respectively.
Depending on respective market trends, Hong Kong and London regularly oscillate between first and second place in the residential rankings. However, following the introduction of sales taxes in Hong Kong, transactions fell to a 17 year low last year, and as a result, prime property prices fell by 5-10% over the year.
In spite of this, there are signs that the Hong Kong market could be picking up. Marcos Chan, Head of Research, CBRE Hong Kong, Macau and Taiwan says, “There have been price rises in the mainstream markets, reflecting strong pent-up demand buoyed by speculation of further easing from the government—including favorable stamp duty tax for first time buyers and low lending rates. Improved sentiment related to recent capital market activity has also boosted the market.”
“The residential sector in Hong Kong remains under the influence of market cooling measures. This has stripped out many would-be speculative buyers, and also acted as a mild deterrent for overseas buyers, thus the mass market is now mostly led by local buyers who are upgrading,” Mr Chan added.
Global Prime New-Build Residential Rank 2014
Source: CBRE Research, October 2014
The Imbalance of Supply and Demand in Hong Kong
Private housing supply in Hong Kong for 2014 is projected to increase by around 17% year-on-year, which equates to an additional 2,270 units, compared with 2013 estimates. This would bring the total housing supply for the year to 15,820; however, this figure is still well below the government’s target of 20,000 new units per year.
Even though this additional supply may have limited impact on the overall mass market prices this year, its geographic concentration is likely to have a noticeable impact at a sub-market level, with a focus on the New Territories—in particular Yuen Long, Tsuen Wan? and Sha Tin—which combined will assume 40% of all new supply. Slight price movements could be reflected in these specific areas.
Whilst various stamp duty measures introduced last year were aimed to dissuade overseas buyers from the market, there is still continual interest in Hong Kong from the global elite. Jennet Siebrits, Head of Residential Research, CBRE says, “UK buyers are increasingly active in overseas markets. Those most popular locations with wealthy ex-pats include Hong Kong and Dubai.”
Looking forward, CBRE expects the divergence between different segments of the Hong Kong market to continue, both in terms of sentiment and underlying dynamics. The luxury market is likely to be relatively resilient, given the limitations on existing stock and future supply, whilst in the primary market, activity levels are anticipated to increase, reflecting a pick-up in supply, as well as the fact developers are still offering discounts.
Disclaimer:
Neither CBRE nor its affiliated companies make any warranties or claims on the implied accuracy of the information contained herein.
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