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According to global property consultant JLL, Hong Kong's residential market turned more sluggish in the second half of 2023 as buyers are cautious amid rising interest rates and the challenging external environment. Mass residential saw a decline of 3.1% in capital values as of November 2023, bringing them back to the price level of March 2017.

Prices of luxury residential fell 4.1% during the same period. However, luxury residential rents rebounded by 4.9%, as there was sustained demand from potential buyers switching to the leasing market and the inflow of talents and non-local families.

Total residential sales remained low, with the average monthly transaction volume in the first 10 months of the year being 25% below the previous four-year average.

Joseph Tsang, Chairman of JLL in Hong Kong said, "The policy relaxation had no impact on the housing market. Developers started offering double-digit price discounts to clear inventory more aggressively than before. The underperformance of the stock market has had a lagged effect on the housing market. Although consensus anticipates rate cuts starting in mid-2024, local banks may not immediately align due to tight liquidity and currently higher deposit rates compared to mortgage rates. Furthermore, even with potential decreases in mortgage rates next year, it is mistaken to presume that this will automatically lead to a rebound in prices. We believe the housing prices will continue to fall, with mass residential prices expected to decline by a further of about 10% in 2024, reaching levels last seen in 2016."

Tsang believes home prices are unlikely to experience a significant rebound due to the government plans to build 39,100 subsidized sale flats in the next five years, which will dampen demand in the private housing market. Buying demand from mainland Chinese will be limited and primarily focused on the luxury market.

Without support for the downward momentum, negative equities are expected to increase to about 30,000 cases if home prices drop 10% further next year.

"The weakening property market will negatively impact the city's economic growth and consumer spending. It will also depress the government's land revenue, which is a major source of income," Tsang added. "The government should revise the housing policies to support the residential market."

Tsang suggested the followings:

1. Remove all cooling measures.

2. Provide interest-free loans to assist the young generation of first-time buyers in getting on the property ladder.

3. Prioritize public rental housing and set a clear distinction between private and public housing markets.

4. Speed up infrastructure developments in existing residential clusters, especially in Kai Tak.

Dubai Top Global Market For Ultra Luxury Home Sales In 2023

Based on new data from international property consultant Knight Frank, global super-prime ($10m+) residential sales rose 11% in Q4 2023 on a year-on-year basis. There were 411 sales across the 12 markets covered in the three months to December compared to 370 in the same period in 2022.

The uptick in super-prime sales activity reverses the slowdown in the previous quarter and reflects a more confident global economic outlook at the end of 2023, as expectations for interest rate cuts in 2024 grew stronger.

The largest market in Q4 was Dubai (108 sales), followed by London and New York (with 52 each). Hong Kong volumes dipped to 15 sales, pushing it out of the top five markets for the first time. Sydney and Geneva ranked fourth and fifth, respectively, with strong activity throughout the quarter.

Although super-prime sales rose in the fourth quarter, pushing 2023's total sales ahead of 2022, they were still 22% lower than the levels reached in 2021. However, the total was still significantly higher than the pre-pandemic level seen in 2019.

The recently released Wealth Report 2024 noted that global wealth creation turned positive in 2023, with a 4.2% increase in the world's Ultra-High-NetWorth-Individual (UHNWI) population. This growth was driven by changing expectations around interest rates and supported by the US economy and a strong recovery in equity markets. Annualized $10m+ sales have risen over recent quarters despite the impact of soaring interest rates on global housing markets.

The 1,782 sales in the 12 months to the end of December 2023 represented an increase of 1% compared to full-year 2022, but a 22% decrease from the peak of 2,291 sales in full-year 2021. The total value of super-prime sales reached $31.9 billion in the year ending December 2023. While this was a 22% decrease from the $40.7 billion peak during the 2021 pandemic property boom, it was still substantially higher than the pre-pandemic level in 2019.

Liam Bailey, Knight Frank's Global Head of Research says, "2023 was a pivotal year for global super-prime markets, while rates continued to climb in the first half of the year, wealth creation rebounded as asset prices surged on the back of the AI -fuelled equity boom, which was then supported in the final quarter by expectations of lower rates. 2024 is likely to be defined by the eventual pivot to lower debt costs which will boost activity in key global super-prime markets."

Local Luxury Property Market Activity in 2023

Dubai's market continues to deliver strong sales volumes in the super-prime market. Significant price growth over the past two years has seen luxury prices increase by well over 100%, shifting many properties from the prime to the super-prime segment. Demand now extends beyond waterfront properties to inland villas confirming a widening of the market.

Despite a challenging economic backdrop London has for the second quarter retained the second spot in our list, albeit sharing the position with New York. Super-prime sales in the city stumbled at the beginning of 2023 - following the infamous "mini-budget" fiscal event that spooked lending markets and led to a more challenging sales environment.

Geneva's positive performance reflects an uptick in Switzerland's wealth landscape. According to Knight Frank's Wealth Report 2024, Switzerland's UHNWI population grew by 5.2% in 2023, the fifth strongest globally and the highest in Europe.

In Australia, the luxury real estate market is gaining momentum due to a combination of strengthening buyer sentiment and shift in outlook around interest rates. Wealth creation in Australia is also supporting the market - with a notable rise in cash transactions, which now represent over half of all prime property sales in Sydney.

New York saw an increase in sales volumes in Q4 in part due to the launch of new luxury developments, pointing to confidence in the market. Conversely, Miami is facing a shortage of super-prime properties, limiting sales despite high demand. Los Angeles, however, continues to see relatively healthy sales volumes, despite some uncertainty for buyers from the state's mansion tax.

Singapore's super-prime market continues to grapple with more stringent purchase taxes, escalating to 60% for foreign buyers. Hong Kong's weak Q4 in the super-prime market was reflected in the wider residential sales market - prompting the authorities to make substantial changes to property taxes in February this year.

According to global property consultant Knight Frank, the first quarter of 2024 witnessed an average annual growth rate of 4.1% across the 44 markets covered by the Knight Frank Prime Global Cities Index, marking the strongest rate of growth since Q3 2022 - a period when interest rates were surging and nearly 70% of central banks were tightening monetary policy.

On a quarterly basis, price growth also showed signs of strengthening, with a 1.1% increase in Q1 2024, up from a 0.3% increase in the last quarter of 2023.

While the current annual growth of 4.1% marks a notable recovery from zero growth seen at the end of 2022, it remains below the long-term average annual growth rate of 5.4%.

However, quarterly growth at 1.3% is now aligning with the long-term quarterly average.

Looking across the 44 cities that make up the index, 78% are experiencing annual price growth, while 19% are seeing declines. The rate of price declines has slowed: a year ago, in Q1 2023, nine markets were experiencing annual price falls of more than 5%. In Q1 this year, only one market - Frankfurt - was seeing prices fall at this rate.

Liam Bailey, Knight Frank's global head of research commented, "The rebound in global housing markets is continuing, as evidenced by our Prime Global Cities Index reaching 4.1% annual growth. Rather than heralding a return to boom conditions, the index indicates that upwards price pressures are stemming from relatively healthy demand, set against continued low supply volumes. The pivot in rates - when it comes - will encourage more vendors into the market, leading to a welcome return to liquidity in key global markets."

Global Cities Focus

At the top of the list was Manila with 26.2% annual growth, followed by Tokyo at 12.5%. Indian cities are experiencing strong growth, with Mumbai at 11.5% and Delhi at 10.5%. In fourth place, Perth, at 11.1%, confirms the resilience of key Australian markets. Manila's strong growth can be attributed to two particular factors: strong economic performance, which has boosted consumer confidence and spending power, and significant infrastructure investment in and around the city, which has also boosted demand.

In Tokyo, the robust growth in house prices early in 2024 can be attributed to two key factors: exceptionally favorable mortgage terms offered by Japanese banks and a weaker yen, which has increased foreign investment in Tokyo's real estate. Despite Japan's overall population decline, Tokyo continues to see a net increase in population due to migration from other parts of Japan.

With annual GDP growth running at over 8%, strong economic growth across India has boosted house prices in the main cities, particularly in Delhi and Mumbai, as our results confirm.

While the Australian market has remained healthy in recent months, there has been a slowing in price growth in most cities. However, Perth has been positively impacted by the rebound in commodity prices, particularly in the mining sector, which is a significant part of Western Australia's economy.

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