5 June 2014 - The Hong Kong property market is not all “doom and gloom”. Recent sales of smaller units have shown only marginal price decreases, and in some cases price increases to new highs. These have surprised many property analysts particularly those that have been forecasting sales price declines of 15-30% over the last year across all market segments.
A recent SCMP article discussed some recent transactions and how smaller units are not seeing dramatic price declines as many predicted, and in some cases even are seeing new highs. This is causing property analysts to change their views on the outlook for that market segment (click here to see the full article).
I’ve mentioned in previous posts that the negative outlook has been, in my opinion, too strong. The cooling measures have taken years to have an impact on prices – and many people have been standing on the sidelines, waiting to invest.
During these last 2 years, the global economic outlook has also improved, and other markets are recovering. Interest rates remain low from a historic perspective, and the outlook is that rates will rise gradually – so it will be a long time before they are at levels that would stifle borrowing and real estate investments.
Smaller investments (where there is broader demand and thus price support) are worth considering if you plan to hold for the longer term.
In the mid-to-luxury sector, I expect we’ll see prices gradually continue to inch downward, but a major (i.e.20%+) price drop is unlikely. Asking prices remain high and “sticky” but sellers’ willingness to negotiate on price is increasing. As more transactions occur, asking prices will also fall. And even though the broad market has only started to decline (in terms of price), select units can be found where the seller is motivated (perhaps to realize some of their gain before the market drops further).
Achieving a 10-15% price concession (or more) vs. asking is possible if you happen to find the right seller, and already incorporates part of a broader fall in the market over time. I’m not suggesting that property buyers should rush to purchase now. But if you’re seeking a home for self-use, that you’ll live in and enjoy for many years, it’s not a waste of time to be identifying potential units of interest, and seeing how flexible the seller is on price. You may be pleasantly surprised.