Scrapping of cooling measures fails to lift housing market

The volume of residential transactions over $50m in February fell 28.6%, MOM.

Home sales have been sluggish in the past months despite the removal of cooling measures in the housing market in February, according to JLL. 

“Whilst market participants had projected a robust increase in transaction volume and price, recent data suggests the market is losing dynamic,” JLL said in its Hong Kong Residential Sales Market Monitor. 

Its data showed that the volume of residential transactions over $50m fell 28.6% in February compared to the previous month. Value also declined 16.5%, month-on-month (MOM). 

JLL said several new projects launched after the removal of cooling measures are being offered at a higher discount compared to nearby comparable projects launched when the measures were still in place

“Such reflects that the stimulating impact of the removal of cooling measures on the property market is diminishing. In the short term, second-hand home prices are expected to continue declining due to the prevailing high mortgage rates and the price war in the primary market,” it noted.

In the primary market, projects also launched after the removal of the cooling measures, such as Onmantin and Yoho Hub, were offered at discounts exceeding 20% compared to nearby comparable projects launched when cooling measures were still in place, JLL added.

Meanwhile, property sales showed significant recovery, JLL said. It even recorded in April its highest number of Agreements for Sale and Purchase (ASP) of residential buildings since 2012.

JLL, however, sees this surge as a release of pent-up demand and anticipates moderating ASPs in the coming months. 

It noted that the number of provisional primary ASPs, a leading indicator of future ASP, reached about 4,200 in March but declined to about 1,700 in April.

"Although a rising proportion of the ASPs in April were contributed by mainland Chinese buyers, their buoyed buying sentiment may not promptly reflect in the market. Their ability to invest offshore funds will take time to replenish due to stringent foreign exchange controls,” said Norry Lee, senior director of projects strategy and consultancy department at JLL in Hong Kong.

In the secondary market, prices rebounded by 1.1% MOM in March 2024 but logged a drop of 13.2% from the previous year.

Cathie Chung, senior director of research at JLL in Hong Kong, expects secondary home prices to continue declining in the short term, influenced by the prevailing high mortgage rates and the price war in the primary market.

"However, in a broader view, anticipated rate cuts, improving rental yield, economic growth in mainland China, and the potential relaxation of cross-border foreign exchange control for home purchases, all point to a brighter outlook for a more sustainable recovery,” she added.