Prominent real estate advisor Savills pointed out that the COVID-19 outbreak has dampened residential sentiment in general, with super luxury transactions hitting another low in January and February before rebounding in March due to an improvement in sentiment as the outbreak was temporarily contained until the influx of overseas Hong Kongers in mid-March caused another wave of infections.
• The COVID-19 outbreak is currently hitting the luxury segment harder than the mass market, affecting those with multiple mortgages and / or deals involving Mainland vendors
• A few significant deals were done in March, some of them were primary projects launched by developers and some were prestige houses exchanged between UHNWs at 5% to 10% discounts to peak 2019 levels
• After a turbulent 2H/2019 and the arrival earlier this year of COVID-19 some launches were inevitably delayed as landlords focused on disposing backlog units
• Mass market launches have offered enhanced incentives and have met with a generally positive response. Housing demand has proved to be surprisingly resilient even at a time when the economy and business prospects in general face a tough few months ahead and unemployment has begun to rise
Hong Kong – 14 Apr 2020 Prominent real estate advisor Savills pointed out that the COVID-19 outbreak has dampened residential sentiment in general, with super luxury transactions hitting another low in January and February before rebounding in March due to an improvement in sentiment as the outbreak was temporarily contained until the influx of overseas Hong Kongers in mid-March caused another wave of infections.
The luxury apartment market saw shrinking volumes and lower prices as buyers looked for deep discounts. Some Mainland vendors whose businesses faced cashflow issues and landlords of properties with multiple mortgages were prepared to consider such offers on a selective basis.
While developers turned cautious and slowed primary launches in the mass market, the projects launched still received a generally positive response with more incentive packages and preferential payment methods embedded without significant price adjustments.
The economic effects of the COVID-19 pandemic look likely to outlast SARS and the prolonged impact of the virus will continue to undermine the local economy and therefore residential demand. Low interest rates, a lower-than-expected level of new completions as well as a possible loosening of some restrictive measures could all help support home prices in the near term, however, with volumes likely to remain low.
Mr. Simon Smith, Senior Director, Research & Consultancy commented: “We expect volumes to continue to bear the brunt with prices enjoying a certain level of support from low interest rates and low levels of new completions. Some selective distressed selling has been in evidence.”
Mr. Patrick Chau, Senior Director, Residential Development and Investment said: “We have seen some distressed selling but cases are rare at this stage. Areas traditionally popular among mainlanders have seen prices fall most but elsewhere values are holding up remarkably well.”
Mr. Keith Chang, Senior Director, Realty Investment said: “It is still very difficult to predict how the epidemic will unfold but for now negative real interest rates, limited new luxury supply and the possibility that government could relax previous measures is giving landlords reason to hope.”