JLL’s Residential Market Monitor released this week revealed that following the elimination of cooling measures announced in the budget speech at the end of February 2024, mainland Chinese buyers have comprised around 70% of recent primary sales of luxury residential properties worth at least HKD 30 million; up from less than 50% previously. They are anticipated to remain active buyers.
As soon as all cooling measures were removed, the primary market had already seen 1,275 transactions within nine days, reflecting that buyers are eager to enter the market again, in contrast to their former wait-and-see approach. Non-local buyers stand to gain most from these policy relaxations; recent sales of new projects have witnessed an increase in mainland Chinese buyers; these comprised the highest proportion of buyers for luxury residential projects.
Norry Lee, Senior Director of Projects Strategy and Consultancy Department at JLL in Hong Kong stated: “We anticipate primary market transactions to remain robust as demand strengthens. Mainland Chinese buyers have seen particular success due to the removal of cooling measures. With the introduction of the Top Talent Pass Scheme, there has been a noticeable surge in mainland Chinese buyers on the primary market who are expected to remain active participants for some time. Non-local buyers have yet to return in force due to heightened foreign exchange regulations, mortgage applications, and property viewing processes. We believe the overall transaction volume will benefit significantly when these restrictions are lifted and Chinese economy improves.”
Current surge in primary property sales can largely be attributed to two main drivers. First, market prices have seen significant corrections – some projects’ prices being 30-35% lower than their 2021 levels – making these properties much more accessible and cash-rich buyers.
Release of pent-up demand due to household addition is another key element. On average between 2012 and 2021, every 1,000 additional domestic households saw 542 primary transactions recorded; this figure has since fallen significantly; should it return to its long-term average, liberating pent-up demand could equal 3,500 new primary transactions per annum.
Cathie Chung, Senior Director of Research for JLL in Hong Kong stated: “It is too soon to tell whether removing cooling measures could provide long-term support to the housing market.” Though most economists agree that relaxing cooling measures will eventually result in higher home prices, homeowners still face rising mortgage rates in the immediate future. The housing market remains mired with issues: economic growth fell below expectation, external challenges remain and negative equity persists as an obstacle for property investors. Relaxations measures have provided only limited direct benefits for typical local end-users – who drive demand – except for one benefit, the suspension of mortgage stress tests which reduce income requirements by approximately 4.3%. We maintain a cautious outlook for the market outlook.”