Luxury prices continued to rise while sales volumes declined over the third quarter in a market characterized by buoyant sentiment and aggressive asking prices. Primary launches continued to dominate headlines with both townhouses and apartments fetching record high average prices. 

As in the commercial sector, Savills are still seeing plenty of Mainland buyers in the luxury segment with more share transfers involved. With the current scarcity of vacant luxury land plots more luxury buyers with development capabilities are opting to buy houses for redevelopment.

Price and volume trends

Luxury prices continued to rise while sales volumes declined over the third quarter with sentiment buoyant and landlord’s asking prices aggressive. 

Hong Kong Island

• Luxury apartment prices rose by a further 2.4% in Q3/2017
• YTD growth to 9.6% 
• Townhouses on the Peak and Southside had growth of 2.0% over the quarter
• Transaction volumes fell heavily (-69% y-o-y) 

Kowloon and the New Territories 

• Luxury prices grew more moderately by 0.6% Kowloon 
• 0.8% growth rate in New Territories over the quarter. 
• Transaction volumes fell heavily in Kowloon / New Territories (-82% y-o-y) 

Market outlook
Looking ahead, negative real interest rates, low levels of luxury supply and Mainland buying as well as a strong local economy and a rising stock market all look set to continue to support the luxury segment. 

Developers are taking an optimistic view on pricing when it comes to prestigious projects and many have decided to launch their primary luxury projects for tender only to try and attract buyers to match their asking prices, even though this may result in a more protracted sales programme. 

Nevertheless, any reversal of one or more of these positive factors could halt the current rally, with the most realistic ‘threat’ being an eventual increase in local interest rates. The liquidity of the local banking system has made it possible for local banks to keep interest rates low over the past two years in the face of five interest rate increases in the US, but with HIBOR (a key measure of bank funding costs) suddenly surging since September, coupled with the fact that the US Fed may raise rates in the near future, higher local interest rates now look inevitable.  

Click here to download the Savills Hong Kong Residential sales Briefing

For more information about the report or to discuss the market contact Simon Smith Savills Senior Director Asia Pacific via the contact details below

Source: Savills Hong Kong

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