Competition in new home market to heat up in the coming four months

HONG KONG, 3 September 2019 – Developers have slowed down the pace of new launches over the last two months due to weakening market sentiment, according to JLL’s latest Residential Sales Report released today. Still, JLL expects up to 16,000 new flats will come to market in the second half of 2019. Rising inventories will raise competition in the primary market over the coming four months and force developers to continue to adopt conservative pricing strategies.

Only four new residential projects, including MARINI launched in late August, were put up for sale in July and August, compared to six new projects in the previous two months. The fewer launches are largely in response to weakening market sentiment amid on-going uncertainties in the global macroeconomic environment and social tension in the city.

Still, one of the new projects launched in August, “The Aurora” in Tsuen Wan, was able to sell out all 354 units launched within a single day; albeit at prices roughly around 10% lower than in the secondary market in the surrounding area.

Henry Mok, senior director of Capital Markets at JLL in Hong Kong, said: “This suggests that there remains a deep pool of pent-up demand in the market that is largely resilient to faltering market sentiment so long as projects are fairly priced. Given the gloomy market outlook, we believe developers will have to continue to adopt conservative pricing strategies in order to maintain sell-through rates ahead of the implementation of vacancy tax.”

He believes the softening prices in the primary market will ultimately translate into the secondary market. With the city’s economic outlook being downgraded and unemployment rising for the first time in two years, deeper price cuts may be warranted.

Denis Ma, head of research at JLL in Hong Kong, said: “We maintain our view that the housing market will remain under pressure over the foreseeable future and expect prices to correct by up to 5% by the end of this year after growing by 3.7% through the first eight months of the year. Accounting for around 60% of upcoming new launches, prices in the New Territories are likely to underperform the broader market.”