Hong Kong’s residential property prices fell 35.4% in 2008, according to CB Richard Ellis’ Q4 market report and are continuing the decline in 2009. The number of transactions in the luxury property segment – measured as sales above $HK 10 million ($US 1.29 million) – fell to 575 compared to 2,807 transactions in the last quarter of 2007. This was a slight improvement over 2008 Q3. Total sales volume in January across all sectors fell 67% to 4,875 from January 2008.
The few sales that did take place in the luxury property segment were largely due to cash buyers taking advantage of significant price drops, and Joseph Lau, the city’s fifth richest man, is rumoured to have bought a 5,657 duplex for $HK 170 million ($US 21.9 million) which was approximately HK$ 32 million (US$ 4.1 million) less than the previous owner had paid for the property.
Prices on “The Peak” have fallen the most, seeing a drop of over 40%, and luxury rentals are also falling in price. The average rental price fell around 20% in 2008 as unsold inventory began to pile up and sellers switched to renters, similar to what is happening in New York’s luxury property sector and that trend is continuing. Despite the large reductions, rentals are still nowhere near the lows experienced during the SARS or 1997 financial crisis, suggesting prices will continue falling as the global economic crisis deepens.
The Hong Kong banks take a different approach to mortgage lending than the US government-owned banking system and many of the major lenders raised rates at the end of 2008 to maintain margins.
CBRE Q4 Hong Kong Luxury residential report (PDF download)
