– April 2020

MARKET IN MINUTES Residential Sales Savills Research

Savills team

Please contact us for further information

REALTY INVESTMENT KEITH CHANG Senior Director +852 2842 4434 [email protected]

RESIDENTIAL DEVELOPMENT & INVESTMENT Patrick Chau Senior Director Residential volumes testing new lows +852 2840 4728 [email protected] The COVID-19 outbreak is currently hitting the luxury segment harder than the mass market, aff ecting those with multiple mortgages and / or deals involving RESEARCH Mainland vendors. Simon Smith Senior Director Asia Pacifi c • The COVID-19 outbreak has dampened residential sentiment residential demand. Low interest rates, a lower-than- +852 2842 4573 in general, with super luxury transactions hitting another low expected level of new completions as well as a possible [email protected] in January and February before rebounding in March due to loosening of some restrictive measures could all help support an improvement in sentiment as the outbreak was temporarily home prices in the near term, however, with volumes likely to Jack Tong contained until the infl ux of overseas Hong Kongers in mid- remain low. Director March caused another wave of infections. +852 2842 4213 [email protected]

• The luxury apartment market saw shrinking volumes and Savills plc “ We expect volumes to Savills is a leading global real lower prices as buyers looked for deep discounts. Some estate service provider listed on Mainland vendors whose businesses faced cashfl ow issues the London Stock Exchange. The continue to bear the brunt with company established in 1855, has and landlords of properties with multiple mortgages were a rich heritage with unrivalled growth. It is a company that leads prepared to consider such off ers on a selective basis. prices enjoying a certain level rather than follows, and now has over 600 offi ces and associates throughout the Americas, Europe, • While developers turned cautious and slowed primary of support from low interest Asia Pacifi c, Africa and the Middle East. This report is for general launches in the mass market, the projects launched still informative purposes only. It may rates and low levels of new not be published, reproduced or received a generally positive response with more incentive quoted in part or in whole, nor may completions. Some selective it be used as a basis for any packages and preferential payment methods embedded contract, prospectus, agreement without signifi cant price adjustments. or other document without prior distressed selling has been in consent. Whilst every eff ort has been made to ensure its accuracy, Savills accepts no liability • The economic eff ects of the COVID-19 pandemic look likely evidence.” whatsoever for any direct or consequential loss arising from its to outlast SARS and the prolonged impact of the virus will use. The content is strictly continue to undermine the local economy and therefore SIMON SMITH, SAVILLS RESEARCH copyright and reproduction of the whole or part of it in any form is prohibited without written permission from Savills Research. savills.com.hk/research 1 Residential Sales

COVID-19 HITTING LUXURY OP issued in April 2018). Many developers GRAPH 1: Luxury Transaction Volumes On Hong Kong VOLUMES HARD are currently more focused on clearing Island, January 2016 to March 2020 The COVID-19 outbreak has dampened any backlog of luxury units rather than Southside Pokfulam residential sentiment in general, with super marketing new stock. Luxury apartment The Peak Mid-Levels Happy Valley / Jardine's Lookout luxury transactions hitting another low in prices on declined by 3.0% 120 January and February before rebounding in in Q1/2020. March due to a temporary uplift in sentiment Luxury transaction volumes in Kowloon 100 as the outbreak was temporarily contained / New Territories also declined sharply until an infl ux of overseas Hong Kongers in 80 by 50.5% in the fi rst quarter with buyers mid-March brought about another wave of absent from the market given the prevailing 60 infections. uncertainty. Again, the lack of new launches A few signifi cant deals were done in March; drove volumes down, but there were also 40 some were primary projects offl oaded by more cases of troubled landlords keen to developers, others were prestige houses offl oad their assets at discounted prices, NO. OF TRANSACTIONS OF NO. 20 changing hands between HNWIs, many with luxury prices declining by 4.5% in of them at a discount of 5% to 10% to the Q1. Areas which have traditionally seen a 0 previous peak in mid-2019. Townhouse prices higher proportion of Mainland buyers, such on the Peak and Southside registered a 2.5%

Jul-17 as Kowloon Station and Kowloon Tong, Jul-18 Jul-19 Jul-16 Jan-17 Jan-18 Jan-19 Jan-16 Mar-17 Mar-18 Sep-17 Mar-19 Mar-16 Sep-18 Sep-19 Sep-16 Nov-17 May-17 Nov-18 May-18 Nov-19 Nov-16 May-19 May-16 Jan-20 Mar-20 and 3.3% decline respectively in Q1/2020 as a registered greater falls of 6.9% and 4.9% Source EPRC, Savills Research & Consultancy result, slightly milder than the 4.2% and 3.4% respectively. decline registered in Q4/2019. The luxury apartment market saw MASS MARKET RELATIVELY GRAPH 2: Luxury Transaction Volumes In Kowloon/ shrinking volumes and lower prices as UNAFFECTED New Territories, January 2016 to March 2020 buyers looked for deep discounts. Some While developers turned cautious and Mainland vendors whose businesses faced Tsim Sha Tsui Ho Man Tin Kowloon Tong slowed primary launches in the mass Shatin / Tai Po Sai Kung cashfl ow issues and landlords of properties market, the projects which were launched 300 with multiple mortgages were prepared to met with a positive response with more consider such off ers on a selective basis. incentive packages and preferential payment 250 After a modest rebound in Q4/2019, methods embedded without signifi cant price luxury transaction volumes on Hong Kong adjustments. OCEAN MARINI in LOHAS 200 Island were hit by weaker sentiment and Park, Tseung Kwan O was brought to the a lack of new launches due to the virus market from mid-March in two batches, 150 with a total of 310 units launched and 255 outbreak in Q1, with volumes sliding heavily units sold, making it the best-selling primary by 44% QoQ as a result. With luxury market 100 launch since the COVID-19 outbreak in sentiment fi rst hit by the trade war and then mid-January. Housing demand has proved NO. OF TRANSACTIONS OF NO. 50 the social unrest and fi nally by COVID-19, to be surprisingly resilient even at a time many developers are delaying launches when the economy and business prospects in 0 of luxury projects. Examples include Sun general face a tough few months ahead and Hung Kai’s Stubbs Road project (53 units, unemployment has begun to rise. Mass prices Jul-17 Jul-18 Jul-19 Jul-16 Jan-17 Jan-18 Jan-19 Jan-16 Mar-17 Mar-18 Sep-17 Mar-19 Mar-16 Sep-18 Sep-19 Sep-16 Nov-17 May-17 Nov-18 May-18 Nov-19 Nov-16 May-19 May-16 Jan-20

Mar-20 OP issued in September 2018) and Cheung registered a very modest 0.6% decline over Source EPRC, Savills Research & Consultancy Kong’s Borrett Road project (296 units, the fi rst three months of the year as a result.

TABLE 1: Super Luxury Transactions Volume (over TABLE 2: Major Super Luxury Transactions (over HK$100 million), Q1/2020 HK$100 million), Q3/2018 to Q1/2020

FLOOR AVERAGE 2020 2019 2018 CONSIDERATION DATE PROPERTY AREA PRICE (HK$ MILLION) (SQ FT) (HK$ PSF) Q1 Q4 Q3 Q2 Q1 Q4 Q3 House 8, 39 Repulse Bay Road, Mar 2,939 $170 $57,843 Southside 21 Po Shan Road, Mar 8,135 $350 $43,024 Peak 1 2 4 10 4 15 3 Mid-Levels House 1, 90 Repulse Bay Road, Mar 5,862 $468.96 $80,000 Southside House at 26 Shouson Hill Road, Mar 4,010 $220 $54,863 Southside Southside 5 3 4 15 11 6 8 92 Repulse Bay Road, 9,000 $60,000 Mar $550 Southside (max GFA) (A.V.) Mid-fl oor unit B, The Harbourview, Mar 1,971 $110 $55,800 Mid-Levels Unit B, 22 Mount Austin Road, Mar 2,221 $130 $58,500 Total 6 5 8 25 15 21 11 The Peak Duplex unit B, 39 , Jan 4,664 $295 $63,250 Mid-Levels

Source Land Registry, Savills Research & Consultancy Source EPRC, Newspapers savills.com.hk/research 2 Residential Sales

MARKET OUTLOOK home prices for now, with volumes likely to TABLE 3: Residential Price Growth by Segment, remain low. The Hong Kong Government, in Q1/2020, 2019 And 2018 The eff ects of the COVID-19 pandemic look likely to outlast SARS and the prolonged common with many governments globally, impact of the virus will continue to has stepped in with a wide range of measures SECTOR Q1/2020 2019 2018 undermine the local economy and thus to protect workers and businesses and this is residential demand. We remain wary likely to mitigate some of the worst eff ects of Townhouses -3.0% -4.2% +4.3% of sharply higher unemployment and the abrupt halt in economic activity. Hong Kong Island widespread business failure and the impact -3.0% +1.7% +6.5% Luxury Apartments this would have on prices. On a more Kowloon / positive note, low interest rates are keeping New Territories -4.5% -0.7% +14.8% real interest rates in negative territory, and Luxury Apartments lower-than-expected completion levels and Mass Residential -0.6% +1.3% +4.6% a possible loosening of some restrictive measures are all factors helping to support Source Savills Research & Consultancy

savills.com.hk/research 3