Hong Kong real estate transactions drop 29% to HK$22.55b

That is in the first five months of 2024.

With a high-interest rate environment and the accumulation of unsold inventories across sectors, Knight Frank said Hong Kong’s overall real estate capital market has been slow in the first half of 2024.

Russell Lam, Knight Frank’s Executive Director of Capital Markets, revealed that from January to May 2024, a total of HK$22.55 billion of transactions (property value of HK$100 million or above) were recorded, representing a 29% decline compared to the previous year. The number of capital market transactions also dropped 27% in the same period, with 71 transactions recorded.

Here’s more from Knight Frank:

In terms of property types, the residential sector accounted for 51% of market activity and is expected to continue to perform well, driven by demand for first-hand luxury residential and distressed properties. The retail sector followed at 25% as retail pricing adjusted in terms of yield and unit price, with sellers cognizant of the cross-border consumption habits of local residents continuing to put pressure on Hong Kong retail rents. 

Development sites followed at 10%, comprising only one purchase of a site by compulsory auction sale - Champagne Court in Tsim Sha Tsui. If we exclude that transaction, there have been no development site transactions over $100 million so far this year, as most developers and investors are cautious about adding extra land to their land bank, concerned with the large existing inventories.

Despite the high office vacancy rate, office transactions have been relatively resilient, comprising 9% of the transactions, with HK$3 billion concluded in the first five months of this year, on par with the same period in 2023. The industrial sector has been relatively quiet this year, accounting for only 3% of transactions, with the sale and purchase of large-scale logistics facilities troubled by the decline in sea-freight logistics and local cold storage demand, while the investment demand for modern industrial workshops is also somehow cannibalised by the relaxation of all punitive residential stamp duties, including NRSD, SSD and BSD.

Looking ahead to the second half of 2024, we expect the market to be dominated by end-users and private investors, as most private equity real estate funds and insurance capital still adopt a wait-and-see approach.