Q1 home prices record fastest recovery of 20% growth in two months as trade tensions ease

• Home
  transaction volume in January already double that of December
  2018 and the total volume in Q1 looked set to grow by 58% q-o-q
• Home prices
  of selected popular estates saw the fastest recovery since 2012 with 20-28% of
  growth from trough level in last December, lagging behind the last peak by about
  5-6%
• Property
  investment market impacted by weakened sources of capital and remained subdued
  in performance.

HONG KONG, CHINA -�Media
OutReach - 19 March 2019 - Cushman & Wakefield, a global leader in commercial real estate
services, noted that the residential market in Q1 2019 rebounded with home
sales growing by an estimated 58% q-o-q, and by up to 20-28% in price growth
from the last trough level for some popular estates, amid a truce between China
and the U.S. on trade talks that avoided further escalation in tensions for the
time being. The property investment market, on the other hand, remained subdued
as the transaction volume dropped by 42% q-o-q in Q1, as the curbs on capital
flows in mainland China combined with local investors remaining on the
side-lines have led to the dwindled investment volume in the Hong Kong market.

Thanks to the release of pent-up demand, the
number of Agreements of Sale and Purchase (Residential Building Units) recorded
in the Land Registry in January 2019 was 4,543, which was 2.2 times the December
2018 figure of 2,060. Given home sales in February of 4,089 units and continuing
momentum in March expected to lead to an estimated 5,500 S&Ps in the month, the total home sales volume in Q1 will reach an estimated 14,132, or
up 58% q-o-q. Furthermore, secondary sales accounted for more than half the
total home sales in both January and February, a sign of improved confidence
on the part of buyers.

Mr
Alva To, Cushman & Wakefield’s Vice President, Greater China & Head of
Consulting, Greater China commented,
“We mentioned the China-U.S. trade tensions were the biggest uncertainty
affecting the global economy and the Hong Kong residential market during the
last quarter, but home purchases will resume if the uncertainties start to
clear up. During Q1, with both countries seeking to resolve the bilateral trade
issues to avoid further deterioration of the situation, market confidence gradually
returned, leading to a relatively quick recovery.”

Home prices fell to a trough from mid-December
2018 to mid-January 2019 but have since picked up increasingly strongly. As of
March, the current prices of some popular estates have come up from their trough
level by 20% to close to 30%. In other words, the past two months have witnessed the fastest
recovery in home prices in these respective estates ever. The most significant growth was in City One Shatin, which recorded
growth of 28% from the trough level, while Taikoo Shing recorded growth of 20% from
the trough. Luxury homes such as Bel-Air Residence (up 8.8%) and The
Harbourside (up 10.6%) recorded smaller but still remarkable rebounds in their
home prices. It is worth noting that the prices of both the mass residential and
luxury estates above are about 5-6% from their respective peak levels in last
August.

Mr
To said, “Apart from eased tensions in
the China-U.S. trade talks, a slower-than-expected pace of rate hikes this year
has also helped improve the market sentiment. In a context of low unemployment
rate, reduced supply in residential land sites and increased supply of public
housing, we can expect strong interest in home purchases. If there is no
further impact from external factors, say if the trade talks continue to move
in a favorable direction, the upbeat momentum will continue into Q2 and bring
about further increases in both mass and luxury home prices, which will return
to their peak levels of last August by end of Q2 this year.”

In contrast, sentiment in the property
investment market remained weak. The number of major deals (each with a
consideration of over HK$100 million) continued to dwindle to 32 in Q1 thus
far, which was down by 42% from the last quarter, with a total consideration of
HK$7.4 billion that was close to a drop of 77% q-o-q.

There was a decline in almost all sectors in
terms of both transaction volume and consideration, apart from one en-bloc
office transaction in Q1 which had a bigger consideration than its counterpart
in Q4 2018. Similar to last quarter though, most buyers’ interests remained
focused on the luxury residential sector.

Mr
Tom Ko, Cushman & Wakefield’s Executive Director, Capital Markets in Hong
Kong, said, “Tightened capital from the
Mainland and local buyers showing no urgency to make purchases have left only
funds actively on the prowl. The weakened sources of capital in the market
explained the decline in both transaction volume and consideration in Q1. However, over the past two years there
is gradual increase in institution funds’ activity in terms of transaction
volumes and considerations. We expect when
there is meaningful progress in the China-U.S. trade talks, the uncertainties
affecting the market will clear up further and give a boost to the performance
of the property investment market.”

About Cushman & Wakefield

Cushman & Wakefield (NYSE: CWK) is
a leading global real estate services firm that delivers exceptional value for
real estate occupiers and owners. Cushman & Wakefield is among the largest
real estate services firms with 51,000 employees in approximately 400 offices
and 70 countries. Across Greater China, there are 20 offices servicing the
local market. The company won four of the top awards in the Euromoney Survey
2017 & 2018 in the categories of Overall, Agency Letting/Sales, Valuation
and Research in China. In 2018, the firm had revenue of $8.2 billion across
core services of property, facilities and project management, leasing, capital
markets, advisory and other services. To learn more, visit www.cushmanwakefield.com.hk or follow us on LinkedIn (https://www.linkedin.com/company/cushman-&-wakefield-greater-china)