Home Prices in Hong Kong are predicted to decrease by 10% in 2022.

After the social segregation measures were relaxed in April 2022, home sales in Hong Kong reportedly increased significantly in Q2.

In the second quarter of 2022, the average monthly transaction volume increased by 48.4% quarter over quarter to 4,975 real estate transactions, providing support to the housing market that was otherwise facing escalating interest rate headwinds. In fact, the recovery of the housing market brought on by policy relaxation has been less robust than that observed in the first half of 2021, which saw a 3% increase in mass residential prices.

In the luxury housing market, buyer confidence slightly increased in the second quarter, and several luxury residential price records were set. The second quarter saw a 1.2% q-o-q increase in the capital values of luxury residential properties, and local demand helped luxury residential rents increase by 1.0% q-o-q during the same period.

Construction costs in the land market increased by 10.8% in 2021, according to the Civil Engineering Works Index from the Civil Engineering and Development Department, and by another 3.2% in the first quarter of 2022. JLL anticipates that developers will become more cautious in their land bidding in order to maintain the overall development cost and current profit margins as a result of the rises in interest rates and construction costs.

Chairman of JLL in Hong Kong, Joseph Tsang, said, “As housing prices are anticipated to remain stable over the next few years, the mood in the land sale market will likely remain subdued. There will be fewer aggressive players in the market as a result of the rise in construction costs and interest rate increases, as mainland developers have already become more cautious in Hong Kong’s land market due to the slowing of mainland China’s economy. As a result, land prices will stay at a more reasonable level.”

According to Tsang, the average mortgage rate will continue to rise throughout the rest of the year, causing a 5%–10% decline in the capital values of mass residential properties in 2022 while a 0%–5% decline will occur in the capital values of luxury residential properties. Due to the continued mediocre buying climate, the second half’s home sales activities will probably concentrate on developments near significant infrastructure nodes.