Official data on property sales for June is expected to be released this week.
With interest rates expected to remain high into the third quarter of the year, there will be little relief for the struggling market in the coming months, said Derek Chan, head of research at LikaCorp Properties Ltd. He predicted transaction volume in the second half of the year would be about one-fifth lower than in the first half.
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The June figures marked a second consecutive month of decline in property transactions following a surge in transactions after the government fully lifted real estate restrictions in February.
In March, sales rose 57% to 5,013, the first month without restrictions on the real estate market, before nearly doubling in April to 9,880, the highest level in nearly three years.
But the recovery quickly lost momentum: Real estate transactions in May were down 25.5% compared to April.
“Purchasing power is being gradually digested and the current high interest rate environment has dampened enthusiasm to enter the market,” Chan said.
“Furthermore, the economic recovery is sluggish and stock market performance is not ideal, which will result in insufficient incentives to enter the market and further reduce trading volumes.”
Funds raised through Hong Kong's initial public offerings fell to $1.5 billion in the first half of this year, the lowest level in two decades, while interest rates in the city remained at a 23-year high, according to data from the London Stock Exchange Group.
Looking ahead, Chan said interest rate cuts are likely to only come in the fourth quarter of this year.
“Home transaction volume in the second half of the year may be about 20 percent lower than in the first half,” Chan said.
The number of private home sales in June was 4,165, down 36% from the previous month.
In its latest report, Knight Frank said the fall in transaction numbers “suggests that the initial enthusiasm following the lifting of property investment cooling restrictions is starting to wane”.
So far this year, there have been 34,783 property transactions totalling HK$278 billion, according to Midland data – well over half of the 58,035 properties traded for HK$478 billion in all of 2023.