HONG KONG SAR –
Media OutReach – 22 December 2022 – Amid the city-wide COVID-19 outbreak peak in H1 along with the impact of the global economic recession, the luxury residential market has not been immune to the consequences of the macroeconomic environment, with a notable drop in sales transactions in 2022, with 49% fewer HK$10M+ sales in 2022 (pro-forma as of November 2022(1)). However, Hong Kong’s leading specialist in luxury property and Founding Member of Forbes Global Properties, OKAY.com, remains confident about weathering the market downturn and affirms the resilience of the luxury market.
The combination of COVID-19 restrictions, rising interest rates, and a wave of emigration has created an uncertain macroeconomic environment and tepid demand for real estate in Hong Kong. In addition to low luxury sales volumes in 2022, many market players, including banks and big property agencies, anticipate a 25% drop in real estate prices. The weak general sentiment around the market has presented a real challenge for real estate agents across the city, with some agencies indicating plans to significantly reduce the number of agents and retail stores to reduce operating costs.
While many real estate agencies in Hong Kong are struggling, tech-focused luxury property agency
OKAY.com has continued to hire new agents and expand its footprint despite market headwinds. This is in large part due to their online-focused business model which has replaced physical stores with proprietary mobile technology and unique incentive structures for agents. In an interview with TVB, CEO of OKAY.com Joshua Miller explained, “If there is a significant downturn like we are seeing, storefront agencies are more significantly impacted due to their high fixed costs.” He further explains, “In contrast, we are able to better weather downturns and maintain or grow in scale, helping more clients either find or market their property for sale or lease. We understand that real estate moves in cycles and have built this into our business model. It means we can have stability for our agents which, in turn, means that they can continue to think longer-term when helping each client instead of hard-selling.”
“Furthermore, because our agents are highly compensated for success, they are motivated to provide exceptional service to our clients.” In step with the expansion of the company, OKAY.com has recently revamped and launched its new website and further market data tools will be released soon.
Moreover, the OKAY.com team affirms the resilience of the luxury market, believing that the luxury market will quickly rebound once the macro environment changes. Jordan Miller, Managing Director expresses, “Having seen market cycles numerous times in the last 20+ years, we are confident that long term investors will return to the market once prices reach a certain point. Historically, this has typically been after a decline of 10-15% from the last peak, which is not far from where we are now. Underpinning this view is the fact that supply is limited in Hong Kong, with demand coming from both Hong Kong residents and increasingly from mainland China where investors either look to diversify their portfolio or own a prized luxury asset in ‘Asia’s world city.'”
Looking ahead, an uptick in buyer interest in luxury homes is expected in the year to come. Joshua Miller, CEO remarks, “Luxury home prices have already fallen 11% in the last 12 months and are down 14% from their peak in 2021(1). If inflation and interest rates plateau in 2023, we anticipate a return of long-term investors to the market seeking attractive properties that have experienced price corrections.” He further explained: “Looking at the history and growth of Hong Kong’s real estate market, this has proven a highly effective strategy over time. On the upside, we anticipate that the free flow of travel/movement between Hong Kong and China will resume. This will create a strong catalyst for buyer interest from China as was seen pre-COVID. We’re also starting to see expatriate professionals relocating to Hong Kong for career opportunities. Both of these would support higher sales interest, demand, sales volume, and price appreciation.”
According to the OKAY.com team: “Luxury properties in districts such as the Peak, Mid-Levels Central and the Southside will continue to be prized. In addition, districts such as Clearwater Bay, Sai Kung and Discovery Bay have seen new interest during Covid as “city escapes”, which we expect will continue even as Covid concerns decline.”
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