Residential transaction volume to drop 49% YoY in Q1 2022

The expected volume will be the lowest recorded since early 2020.

The total residential sales and purchase agreements (S&Ps) is expected to drop 49% YoY in the first quarter of 2022 with 9,187 deals, data from Cushman and Wakefield’s (C&W) Hong Kong Residential Market Review and Outlook showed.

If such happens, it will be the lowest activity recorded since early 2020.

Based on the report, overall average residential prices will also likely decline, falling 5% quarter-on-quarter.

C&W attributed the drop in volume and prices to the fifth wave of the pandemic which has been hitting the city.

“Given the continued tightening of social distancing measures, together with intensified geopolitical uncertainties, most buyers are adopting a wait and see attitude. With the aforementioned factors, coupled with developers' likely intentions to delay project completion timelines, we expect transaction volumes will fall further from the 4,275 agreements recorded in January to around 2,000 in March,” Keith Chan, director of Cushman and Wakefield Hong Kong, said.

The fifth wave, however, has not impacted the end-user demand yet, C&W said.

Going forward, C&W said market rebound will likely happen on the back of declining COVID-19 cases, the proposed revision of the mortgage insurance programme, and a potential reopening of the border.

"Control of the pandemic in the next three months will be crucial to the domestic property market. If the pandemic is brought under control before mid-year, and the social distancing measures and border controls are gradually relaxed, the Financial Secretary's recently announced relaxation measures in the mortgage insurance program policy will likely help the market recover and will stimulate demand that was previously excluded from the program. With the aforementioned assumptions, the property market is expected to recover in the second half of the year,” Chan said.

“We expect it will be driven by first-hand properties, with gradual momentum growing into the second-hand market. Given the high base in 2021, the total transaction volume in 2022 is expected to drop by 15% to 18%. Overall average home prices will likely reach the bottom by 1H and start to recover by 2H, and we hold growth expectations at between 0% and 3% for 2022." he added.