Residential volumes tread new lows

COVID-19 hits luxury transactions harder than the mass market.

The COVID-19 outbreak has dampened residential sentiment, according to Savills, hitting the luxury segment harder than the mass market.

The luxury apartment market saw shrinking volumes and lower prices as buyers looked elsewhere for deep discounts. Transactions hit another low in January and February before rebounding in the first half of March until another wave of infections hit the country.

Primary projects launched by developers and prestige houses at 5% to 10% discounts were exchanged between ultra-high-net-worth individuals (UHNW). Incentive packages and flexible payment terms without significant price adjustments led to a positive response in deals.

However, some launches were inevitably delayed as landlords focused on disposing backlog units after a turbulent H2 2019 and COVID-19.

“Negative real interest rates, limited new luxury supply and the possibility that [the] government could relax previous measures is giving landlords reason to hope,” said Keith Chang, senior director, realty investment at Savills.

Volumes are likely to remain low despite low interest rates, lower level of new completions, and possible loosening of restrictive measures.The economic effects of the COVID-19 pandemic are expected to outlast SARS, undermining the local economy and residential demand.