Hong Kong home sales hit 20-month high, with return of mainland Chinese buyers, property tax cut boosting sentiment

Hong Kong home sales reached 6,690 units in March, a 20-month high, as improved sentiment and a property tax cut boosted transactions, according to property consultancy CBRE.

Homes priced between HK$4 million (US$510,000) and HK$5 million in particular accounted for 16.5 per cent of the total number of transactions in the first quarter, higher than their share of transactions of between 10.5 per cent and 13.9 per cent in the same quarter since 2020, according to the latest report by the consultancy.

“Besides improvement in overall investment sentiment, the government’s move on lowering ad valorem stamp duty rates also fuelled the surge in transaction volume,” said Eddie Kwok, senior director, valuation and advisory services, CBRE Hong Kong.

The reopening of the border with mainland China had boosted hopes that Hong Kong’s battered property market would pick up, with wealthy mainland Chinese buyers able to inspect homes for purchase and companies more willing to expand or set up operations in the city, potentially bolstering the tenant pool as more talent relocates.

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The latest numbers are proving that these hopes were not unfounded.

“The number of cases involving buyer’s stamp duty increased 50.8 per cent month on month in March, indicating more non-permanent residents entered the market,” Kwok said.

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March was also the first full month of the tax cut, which was announced in late February, whereby ad valorem stamp duty will be HK$100 for homes worth up to HK$3 million, instead of homes worth up to HK$2 million previously. The tax cut, which is implemented on a sliding scale, applies to homes worth HK$10 million or below, with savings for properties worth HK$9 million amounting to as much as HK$67,500, according to calculations by StarPro Agency.

The higher number of home sales is fuelling an increase in home prices, although this has remained soft, Kwok added.

“Positive investment sentiment and recovery of buyers’ confidence carried forward,” he said. “A rebound in overall residential prices gained momentum with a 2.2 per cent month-on-month increment in February 2023, after going up by 1 per cent month on month in [January].”

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Developers, however, have been extending various perks and incentives to buyers, effectively limiting price increases. These perks included discounts and cash rebates, among others, CBRE said. “Currently, the residential price is soft mainly due to developers offering more attractive packages, and it is expected that the situation will persist in the second quarter this year,” Kwok said.

As many as 119 new private housing projects with a total of 40,291 units are expected to launch this year, one of the largest stockpiles in about two decades, according to Ricacorp Properties.

Among the market’s segments, luxury property is likely to see the most upside owing to the return of mainland Chinese buyers.

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“The transaction volume for high-end residential properties has gained momentum, where transactions for residential properties worth at least HK$20 million surged by 56.7 per cent month on month to 320 units in March, after surging by 83.8 per cent the previous month,” the CBRE report said.

Not only did the number of transactions improve, a number of sales were also notable for the amounts involved, CBRE added.

For instance, a duplex at Upper Riverbank in Kai Tak sold for HK$125 million, a new high for the project. In the upscale district of Mid-Levels, three transactions were recorded with CK Asset Holdings cashing out a total of HK$461.1 million.

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“This month observed more demand for luxury houses,” the report said. “K Wah International sold another house at K. Summit, Kai Tak for HK$134.4 million after selling its first house the previous month, while First Group Holdings … disposed of a 6,520 sq ft house at 20 Kent Road, Kowloon Tong, for about HK$480 million. On the other hand, [Sun Hung Kai Properties] sold a 4,016 sq ft house at Central Peak, Mid-Level East, at a project record high of HK$409.6 million.”

The high-end market should outperform the mass market, as it is less vulnerable to macroeconomic issues such as US recession fears, a wider banking fallout and interest rates, said Victoria Allan, the founder and managing director of Habitat Property.

“I expect it to pick up in the second half of the year, as wealthy buyers are less concerned about interest rate rises.”