Residential sales surge 31% in 3Q16

Buyers shook off economic jitters.

The improvement in market sentiment driven by greater incentives offered by developers and prolonged negative real interest rates stirred up renewed buying interest in residential properties in Q3 2016.

According to a research note from Colliers International, home prices regained momentum with luxury residential prices increasing by 2.2% QOQ. Meanwhile, mass residential prices saw higher growth of 4.3% QOQ.

Colliers expects home prices may now not fall this year, but rather remain more or less flat for luxury properties and rise in the midsingle digit range for mass market housing. However, affordability remains very stretched and eventual increases in interest rates are a risk.

Here's more from Colliers International:

Over Q3 2016, Hong Kong developers offered new home projects at attractive prices and with greater incentives, such as proposing aggressive financing schemes in an effort to speed up sales. The consequence was renewed interest in residential properties.

The total sales of homes increased 31% quarter-on-quarter (QOQ) to 17,890 in Q3 2016, while transactions increased 32% from one year previously.

The delay in the pace of US interest rate increases has prolonged the period of negative real interest rates in Hong Kong. This factor helped the market to rebound during Q3 2016, with overall mass residential prices up 4.3% QOQ (based on preliminary figures).

Meanwhile, luxury prices rose by 2.2% QOQ. As a result, the overall rate of decline in prices in both mass and luxury segments has tapered off to about 6% since their September 2015 peak. This compares with a decline of 11% between September 2015 and March 2016.

The improved market sentiment has helped to stabilise the local residential market. We predict luxury home prices will remain more or less flat over 2016, with mass residential prices showing low single-digit growth.