Residential prices to drop 5% to 10% due to high mortgage rates

Capital values of luxury residential will decline by 0% to 5%.

With the expected increase in average mortgage rates, JLL sees mass residential value in Hong Kong to drop 5% to 10% in 2022. 

In its report, JLL said the price of mass residential was down 3.9% in the first half (H1) of 2022 as the housing market faces challenges with the interest rate.

Meanwhile, the average monthly transaction volume for residential properties rebounded by 48.4% quarter-on-quarter (QoQ) to 4,975 sales in the second quarter (Q2) of 2022.

For the prices of luxury residential capital values, it went down by 1.3% in H1 2022. But in Q2 2022, sales of luxury residential rebounded by 1.2% QoQ in Q2 2022.

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As per the land market, the Civil Engineering Works Index by the Civil Engineering and Development Department indicated that construction costs went up 10.8% in 202 1 and further grew by 3.2% in the first quarter of 2022. 

Reacting to this, JLL Chairman Joseph Tsang said developers may become more conservative in land bidding to retain development costs and existing profit margins.

“The surge in construction costs and interest rate hikes will add to developers' required risk premium and there will be fewer aggressive players in the market as the mainland developers have already turned conservative in the land market of Hong Kong with mainland China’s economy slowing. As a result, land prices will stay at a more reasonable level,” he said.