Hong Kong property prices to decline further in second half of 2024, JLL reports

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10th July 2024 – (Hong Kong) Terrence Zhou, Chairman of Jones Lang LaSalle (JLL) Hong Kong, pointed out that despite the abolition of stringent market cooling measures, Hong Kong’s residential property prices are expected to decline further in the latter half of 2024. This anticipated downturn follows a temporary market rally that failed to sustain momentum, with transaction volumes and prices quickly reverting to a declining trend.

From the peak in September 2021, property prices have already decreased by 23.1%, with a 1.7% drop recorded in the first five months of this year alone. Developers, burdened with ample inventories and facing high-interest rates, have been aggressively cutting prices to accelerate sales. This strategy has significantly undercut the secondary market, which is struggling to compete.

Zhou predicts a 10% drop in prices for small to medium-sized residential units by year-end, with luxury properties expected to see a reduction of between 5% and 10%. The high-interest rate environment has also led to tighter mortgage loan approvals by banks, making it increasingly difficult for local buyers to secure financing. This tightening of credit is likely to exacerbate the situation where more buyers are required to pay larger upfront sums.

The issue of negative equity is also of concern. According to government reports, the number of negative equity cases rose to 32,000 in the 12 months leading up to March this year. Zhou estimates that if property prices fall by 10% this year, the number of negative equity cases could surge past 100,000.

In response to these challenges, Zhou recommends that the government establish a dedicated task force to assess and mitigate risks in the property market. He also suggests that measures should be considered to assist first-time homebuyers through low-interest loans and to implement incentives for eligible talent to invest in residential properties.

On a related note, the commercial real estate sector is also experiencing shifts. Yan Wei Cheng, Executive Director of JLL’s commercial department, reported a 4.3% decline in prime office rents in the first half of the year, with Central Hong Kong witnessing a significant 7.1% drop due to new market entries.

Despite this, the commercial market saw a net absorption of 502,300 square feet, mainly due to pre-leased floors in newly completed buildings. However, the overall vacancy rate for Grade A offices has increased to a historic high of 13.6% as of June, with rent expected to fall by up to 5% in the second half of the year.

Furthermore, the retail space market showed some resilience, with core area street shop rents increasing by 3% and premium shopping centres by 0.9% in the first half of the year. The number of new brands entering Hong Kong has increased by 91% over the past six months, with approximately 33% originating from mainland China, overtaking Japanese retailers as the most active new entrants. Rent in these sectors is expected to grow by around 5% in the coming months, according to Tang Wei Le, head of JLL’s Hong Kong retail department.

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