Rising interest rates, weakening economy dampen residential property demand

Residential sales were down 18.8% MoM in October, according to the Land Registry.

Hong Kong’s residential market was sluggish in October due to continued increases in interest rates, a weakening local economy, and unstable stock market, according to Knight Frank.

In a report, Knight Frank said residential sales in October were down 18.8% month-on-month (MoM), with primary sales declining by 53.2% MoM to 672 homes, citing data from the Land Registry.

“Potential buyers were hesitant to enter the property market, leading to poor performance in both transaction volume and prices,” the report read.

Overall residential prices were down by 2.1% MoM in September based on the Rating and Valuation Department, it said.

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Meanwhile, the luxury market was stable. One of the transactions during the month was the sale of the 7,171 square feet house at Mont Rouge in Beacon Hill for $508m.

Local moves also drive the leasing during the month, with the overall home rental index in September increasing for the fifth consecutive month.

Knight Frank expects the potential further hikes in interest rates along with the weak economic growth to affect the overall home prices in the near term, dimming the market sentiment, particularly the mass market.

“We forecast a 10% drop in home prices for the mass residential market and flat performance for luxury home prices for full-year 2022,” it said.