Yet, even as sales stalled amid elevated mortgage rates and home prices, one silver lining emerged—more resale inventory entered the market, which has begun to put some downward pressure on the pace of home price growth.

Other good news for home shoppers is the decline in the median price for a new home—now below the median resale home price—even as builders continue offering incentives to lure buyers.

Nonetheless, experts say the housing market will only see renewed momentum once mortgage rates drop enough to ease buyer affordability obstacles and incentivize homeowners locked in at low rates to move.

Housing Market Forecast for 2024

Experts insist the housing market will improve despite high mortgage rates, out-of-reach home prices and sluggish sales transactions amid dampening demand.

Unfortunately, hopeful buyers continue to see a delay in this yearned-for transformation, thanks to several ongoing headwinds. One is inflation taking its sweet time cooling off, further delaying the Federal Reserve from cutting the federal funds rate.

Mortgage rates indirectly track this benchmark interest rate banks use as a guide for overnight lending. Consequently, with the federal funds rate at its highest level in over two decades, mortgage rates—and borrowers—are feeling the added impact on their ability to afford a home.

Meanwhile, U.S. home prices remain unaffected by persistently high mortgage rates, posting an annual 6.3% gain in April, according to the latest S&P CoreLogic Case-Shiller Home Price Index. Even as this annual gain marked a slowdown from the 6.5% gain in March, the index still broke the previous month’s record high.

Many experts expect a Fed rate cut will help stimulate the housing market, but it remains unclear when—and if—even a single cut will occur in 2024.

Will the Housing Market Finally Recover in 2024?

For a housing recovery to occur, several conditions must unfold.

“For the best possible outcome, we’d first need to see inventories of homes for sale turn considerably higher,” says Keith Gumbinger, vice president at online mortgage company HSH.com. “This additional inventory, in turn, would ease the upward pressure on home prices, leveling them off or perhaps helping them to settle back somewhat from peak or near-peak levels.”

Of course, mortgage rates would need to cool off, which seems promising given the recent declines. The average 30-year fixed mortgage rate remained consistent in July, coming in at 6.78% for the week ending July 25, a minor increase from 6.77% the previous week.

However, when mortgage rates finally go on the descent, Gumbinger says don’t hope they cool too quickly. Rapidly falling rates could create a surge of demand that wipes away any inventory gains, causing home prices to rebound.

“Better that rate reductions happen at a metered pace, incrementally improving buyer opportunities over a stretch of time, rather than all at once,” Gumbinger says.

He adds that mortgage rates returning to a more “normal” upper 4% to lower 5% range would also help the housing market, over time, return to 2014-2019 levels. Yet, Gumbinger predicts it could be a while before we return to those rates.

NAR To Implement Settlement Agreement Changes in August

Following years of litigation, the NAR has agreed to pay $418 million to settle a series of high-profile antitrust lawsuits filed in 2019 on behalf of home sellers. The settlement received preliminary court approval in April. A judge is expected to grant final approval in November. Meanwhile, NAR announced that the new required practices will go into effect on August 17.

The required new rules prohibit broker compensation offers on multiple listing services (MLS), the private databases that allow local real estate brokers to publish and share information about residential property listings.

Moreover, sellers will no longer be responsible for paying buyer broker commissions—upending an accepted practice that has been in place for years—and real estate agents participating in the MLS must establish written representation agreements with buyers.

If you sold a home in the past ten years, you may be eligible for a small piece of this settlement pie. Visit realestatecommissionlitigation.com for more information about filing a claim.

Housing Inventory Forecast: When Will There Be Sufficient Supply To Reduce Prices?

Despite more resale homes entering the market, the inventory shortage remains severe and likely will for some time, thanks to multiple headwinds.

For one, many homeowners remain “locked in” at ultra-low mortgage rates, unwilling to exchange for a higher rate in a high-priced housing market. Consequently, demand continues to outpace housing supply—and likely will for a while.

“I don’t expect to see a meaningful increase in the supply of existing homes for sale until mortgage rates are back down in the low 5% range, so probably not in 2024,” says Rick Sharga, founder and CEO of CJ Patrick Company, a market intelligence and business advisory firm.

New home construction has provided some relief, but not enough to fill the inventory gap meaningfully.

The U.S. remains 4.5 million homes short, up from 4.3 million a year ago, according to Zillow analysis.

Entry-level home supply is particularly dire, contributing to an ongoing cycle of propped-up demand and inflated prices.

Here’s what the latest home values look like around the country.

Home Builder Sentiment Dips

Builder sentiment continues to wilt with the summer heat.

High mortgage rates and sticky inflation are largely to blame for the dampened outlook for new construction, with builder confidence sliding from 45 to 43 in May, according to the most recent National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). This is the second consecutive month of downward movement and negative sentiment.

A reading of 50 or above means more builders see good conditions ahead for new construction.

Meanwhile, the construction of new homes, which had been on a tear, helping to fill the hole left by scant resale inventory, has slowed.

Permits for new single-family homes fell to their lowest seasonally adjusted annual rate since June 2023 amid builder blahs, dipping 2.9% month-over-month in May, according to the latest data from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development (HUD). Housing starts were down 5.2%, and completions slid 8.5% from April.

However, there’s a silver lining for hopeful buyers—25% of builders slashed prices in May to boost sales, and more were open to offering incentives.

Residential Real Estate Stats: Existing, New and Pending Home Sales

Current and anticipated home sales transactions fizzled across the board in May thanks to scorching-high mortgage rates. Here’s what the latest home sales data has to say.

Existing-Home Sales

Existing-home sales dipped 0.7% in May, according to the latest report from NAR, marking the third straight month of declines as ascending mortgage rates and home prices deterred potential buyers. In May 2023, home buyers could get a mortgage rate well over half a percent lower at a time when homes were also more affordable.

Sales also fell 2.8% compared to May last year.

Experts believe home sales activity will perk up once inflation eases and the Fed finally starts to cut interest rates. Nonetheless, many prospective buyers—particularly first-time and lower-income home shoppers—will likely be left out in the cold, with the median price for an existing home in May soaring 5.8% from a year ago to a new record high of $419,300.

“Home prices reaching new highs are creating a wider divide between those owning properties and those who wish to be first-time buyers,” said Lawrence Yun, chief economist at NAR, in the report. “The mortgage payment for a typical home today is more than double that of homes purchased before 2020.”

One upside to fewer sales is that resale inventory has been loosening since December. The latest NAR data shows inventory growing 6.7% month-over-month, logging 1.28 million unsold homes at the end of March. Still, only 3.7 months of inventory remain at the current monthly sales pace. Most experts consider a balanced market between four and six months.

New Home Sales

Meanwhile, new homes are also not invulnerable to high mortgage rates despite their shiny appeal.

Amid mortgage rates hovering close to or above 7%, May sales of newly constructed single-family houses plunged 11.7% 4.7% compared to April and 16.5% from a year ago, according to the latest U.S. Census Bureau and HUD data.

The good news for prospective buyers is that the slow pace of new home sales puts new home inventory at a level not seen since early 2008, according to Lisa Sturtevant, chief economist at Bright MLS.

“Buyers that remain in the market are starting to have more leverage, and sellers of existing homes are increasingly offering concessions, including help with closing costs and money toward repairs,” said Sturtevant.

Moreover, those shopping for new construction will be happy to hear that the median price for a new home in May fell $500 to $417,400—nearly two thousand dollars below the median existing-home price.

The post Housing Market Predictions For 2024: When Will Home Prices Be Affordable Again? appeared first on Amora Escapes.

Ocean views, sought-after schools and hardly a property for sale in sight. Some of Sydney’s most tightly held suburbs had only a handful of sales within the past year.

The number of Sydney properties for sale plummeted amid the market downturn and economic uncertainty caused by rising interest rates, further reducing supply in areas with already low turnover – such as prime locations and smaller suburbs.

Waterfront Watsons Bay, Kirribilli and Whale Beach, where houses are in limited supply to begin with, were among more than 80 Sydney suburbs where five or fewer houses traded over the year to March, Domain data shows.

House sales were also limited in similarly small prestige suburbs like Point Piper, Darling Point and Tamarama, which each had between six and 12 transactions.

However, even areas with more housing, such as Bondi Beach, North Manly, Narrabeen and Brighton-le-sands, were among more than 370 Sydney suburbs where house sales slumped below 50, the benchmark used by Domain research to calculate a suburb’s median price.

As were middle ring suburbs like Summer Hill and North Epping, and outer suburbs like Mount Kuring-Gai and Camden.

For apartments, South Coogee, Clovelly, Millers Point, Enmore and Willoughby, were among the suburbs with limited sales.

It comes amid a drop in homes for sale, as sellers hesitate amid falling prices and rising interest rates. While prices have now been rebounding for several months, the number of homes listed for sale in May, was still down 20.7 per cent annually.

Ray White’s head of research Vanessa Rader said properties in prime locations, whether that was a waterfront or beach side position or a family-friendly suburb with good schools, were traditionally tightly held.

“These are typically pockets that have some kind of geographic advantage. You can’t just go recreate that too easily,” she said.

“If someone is selling an asset in these locations, where are they going to move to,” she said, adding this had become a greater concern amid low supply levels.

Rader said would-be sellers held back as prices declined. That then reduced the options for buyers, further deterring homeowners from selling, as they feared they would not find a suitable home to move to.

“It’s hard to find somewhere to buy, and if you have to go into the rental market, the vacancy rate is at a longtime low,” she said.

Uncertainty about the property market and broader economic outlook was also deterring sellers, as was the increasing difficulty of refinancing.

Eastern suburbs agent Ric Serrao, principal of Raine & Horne Double Bay, said traditionally tightly held suburbs had become even more so.

“There’s a percentage of clients who are opportunistic and when they feel the market prices are not on their side they just don’t list,” he said.

Limited supply increased competition for available properties, putting a floor under price declines, and supporting the recent rebound.

“How can something go down, when every time you’ve got a property you’ve got 10 to 15 people turning up,” Serrao said.

It was a similar story in the northern suburbs, where Pello Northern Suburbs principal Michael Dowling has seen listings become even fewer in low turnover suburbs like Denistone and East Ryde, which recorded 40 and 38 house sales, respectively.

“[East Ryde] is a very family orientated area, one of the areas in the Ryde district where all the neighbours seem to know each other … and there’s a lot of older people who have been there since the dress circle estate was built,” he said.

The area was popular with upgrading families from the north shore and inner west, seeking a comparatively more affordable house, in a family-friendly area and a central location.

Deciding to leave such a suburb behind is not easy, as East Ryde sellers Mark Khoo and Andrea Wong know, having recently listed their five-bedroom house to relocate closer to family.

They purchased one of the suburb’s original estate homes 18 years ago, from the property’s first owner, and later rebuilt on the block.

“East Ryde has been perfect for us raising a young family, it’s a very central location, close to schools, shopping centres and amenities, we’ve got lots of lovely neighbours, a strong sense of community and there’s lots of surrounding greenery,” he said.

“It was a difficult decision to decide to sell, but the market seems to be in a healthy state,” he said, adding there had been a strong level of interest so far.

“I think this reflects that it’s a sought after area with not much turnover.”

Dowling added that several months of price growth had given buyers and sellers more confidence to transact.

While listing volumes were still low, there had been a recent uptick in home appraisals across the northern suburbs, which could lead to an increase in homes for sale in three to four months time.

Source : TheSydneyMorningHerald

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CHINESE property developer Yanlord Land Group recorded 26.1 billion yuan (S$4.8 billion) in total contracted presales from residential units, commercial units and car parks for the first nine months of the year.

The presales were for a contracted gross floor area of about 1.02 million square metres (sq m) and were 51.7 per cent lower than presales for the year ago period, the group said in a bourse filing on Tuesday (Oct 10).

Presales include those by the group, its joint ventures and associates.

Yanlord Land’s total contracted presales for September was down by 83.2 per cent to 1.6 billion yuan for a contracted gross floor area of 67,835 sq m.

In its unaudited key operating figures for the nine months ended Sep 30, Yanlord Land said it has approximately 2.6 billion yuan of subscription sales, which are expected to be turned into contracted presales in the coming months.

Five cities in China – Nanjing, Suzhou, Shenzhen, Jinan and Tianjin – accounted for about 59.5 per cent of total contracted presales for the first nine months of the year.

For the first six months of 2023, Yanlord Land posted a net profit of approximately one billion yuan for the half year ended June 2023, down 20 per cent from the 1.4 billion yuan a year ago.

Property prices in China have slumped amid worsening business sentiment as property giants Country Garden face potential debt default and Evergrande Group aims to restructure US$22.7 billion of offshore debt.

Source : TheBusinessTimes

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Perth is the most competitive housing market in the country right now and whether you’re buying or renting there’s a shortage of stock on the market. 

With home prices up 10.90% over the past year, Perth is Australia’s top performing capital city market when it comes to price growth.

That’s more than five times the the historic average pace of annual growth experienced in Perth, bringing prices to a record high.

If growth continues at the same pace as over the past quarter, prices in Perth would be set to end the year up 12%.

Perth’s rental market is also challenged. Although the greatest increases in advertised rents over the past year have been seen in Sydney (+18.2% year-on-year), closely followed by regional WA (+16.7% year-on-year) and Perth (+14.9% year-on-year).

The critical lack of available rentals is causing rental prices to increase at a rapid pace.

Buyers and renters competing for fewer homes

Total for-sale listings are currently at historic lows in Perth (on records back to 2004) and total rental listings are also at historic lows.

At the same time, the pipeline of new supply remains constrain

As a result, growth in the supply of new housing is limited at a time when there is already a shortage.

The number of enquiries per rental listing are the highest in Perth (50.3) of any market, illustrating the severe imbalance between rental demand with rental properties in short supply.

To put this into perspective, nationally, the number of enquiries per for sale listing increased 14.1% year-on-year in September but remains below the record high levels seen in late 2021.

In contrast, enquiries per for sale listing in Perth have jumped by 93.9% year-on-year and are sitting at a record high level.

Fewer new listings and faster selling times have driven total for sale listings lower, and there were 25.7% fewer homes listed for sale in Perth in September of this year compared to last.

This strong competition is likely one reason why Perth has overtaken Adelaide as the strongest performing capital city market for price growth over the past year, as buyers compete for limited options.

Limited supply amid strong buyer demand has resulted in a sellers’ market, with prices in Perth outpacing all the other capitals.

Prices in Perth were unaffected by last year’s rate rises, and while prices fell in most markets, Perth avoided the downturn. That stronger growth has continued into this year.

The attraction of Perth

One reason Perth is one of the hottest markets in the country is its relative affordability.

Despite recent gains, Perth housing values remain affordable compared to other capital cities after a decade of underperformance relative to east coast capitals. Darwin is the only capital with a lower median dwelling value.

The PropTrack Housing Affordability Index shows that housing affordability is highest in Western Australia, a factor likely to attract both local, international, and interstate buyers.

Strong population growth is also adding to housing demand, predominantly in the rental market given recent arrivals are most likely to rent. In the 12 months to March 2023, Western Australia’s population grew by 2.8% – the fastest growth of all the states and territories.

Population growth is also driving demand in the market to buy, particularly given the challenging conditions in the rental market that may incentivise some to purchase sooner than they otherwise would have.

The Western Australia government is actively promoting the state as a destination for skilled work regional migrants (491 visas) and has successfully lobbied to have the entire state declared a designated regional area. This means that skilled migrants on regional 491 visas can arrive, live and work in Perth, making it the only capital city which has achieved this distinction.

The outlook for Perth remains challenging with net migration and population growth set to remain strong, with vacancies already historically low.

The comeback state

Western Australia has historically been the most volatile state in terms of economic performance.

Following a period of rapid expansion during the mining boom, Western Australia’s economic growth lay largely in the doldrums until 2019.

But the state is now making a comeback. Buoyed by strong export demand, Western Australia’s economy has grown more rapidly than any other state’s over the past year, with state final demand up 2.8% the 12 months to March.

The city of Perth is booming. Picture: Getty

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Western Australia has one of the lowest rates of unemployment at 3.4%, and one of the highest participation rates.

The strengthening economy, strong demand for labour and prior decade of underperformance relative to the east coast capitals are all likely to be ongoing drivers of Perth’s housing market.

It seems unlikely that these conditions will change any time soon given resurgent population growth, the lack of new home completions and the overall strong demand for housing.

The comparative affordability of homes, population growth, a shortage of housing and very tight rental markets are likely to continue to buoy both home price growth and rental price growth in Perth.

Source : RealEstate.com.au

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Housing affordability improved in three-quarters (75%) of local authorities across England and Wales in 2023, compared with the previous year, according to the Office for National Statistics (ONS).

Affordability worsened in just under a quarter (24%) of local authorities and remained the same in 1%, the ONS said.

Average house prices increased in just over two-thirds (69%) of areas compared with 2022 – but average earnings increased in a bigger proportion of areas, at 88%.

Kensington and Chelsea in London was the least affordable area last year, with an average house price-to-earnings ratio of 34.3.

The most affordable was Burnley in Lancashire, with an average house price-to-earnings ratio of 3.7.

In 2023, 7% of areas typically had homes selling for less than five times the average earnings of workers. This was an improvement compared with 2022; however, in 1997, 88% of areas had this ratio.

The report said: “Therefore, affordability remains considerably worse than at the start of the series.”

Looking at England, in the 12 months to September 2023, the average home sold for £290,000, while average full-time earnings were £35,100.

This means that, in England, full-time employees could expect to spend 8.3 times their earnings on purchasing a home in their local authority area.

This represents an overall improvement in affordability compared with 2022, when the average home in England cost around 8.5 times the average wage.

In Wales, the average home sold for £196,500 in the 12 months to September, while the average workplace-based full-time wage was £32,400.

This gave an affordability ratio of 6.1, down from 6.4 in 2022.

House sales prices have become more affordable since 2021, but remain in line with pre-coronavirus pandemic trends, the ONS said.

The affordability ratio doubled in England from the start of the records in 1997 to 2007.

In 1997, a home in England was worth around three-and-a-half times the average wage, but by 2007 buyers faced paying just over seven times their salary typically to buy a home.

In Wales, affordability ratios doubled from 1997 to 2005 and peaked at 6.6 in 2007. Since then, they have remained between 5.5 and 6.5, with a less pronounced increase and decrease in the past three years than in England, the ONS said.

Mortgage rates have jumped amid increases in the Bank of England base rate, meaning that some existing homeowners could have a payment shock when their deal expires.

Recent signs that inflation is cooling have raised expectations around the potential for the Bank of England to start cutting the base rate in the months ahead.

Source: LBC

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Clearance rates at 60 per cent or above usually mean prices are rising, while anything below indicates falls.

The lowest clearance rates across greater Melbourne included the inner suburbs (57.3 per cent), inner south (56 per cent), south-east (55.5 per cent), west (49.8 per cent) and Mornington Peninsula (52.2 per cent).

Christopher said these price falls showed vendors were compromising on price to get a sale over the line.

“It is slowly swinging towards a buyers’ market and our forecast for Melbourne is a modest to moderate decline in house prices to continue [in 2024],” he said.

While the market has changed, it’s not all smooth sailing for buyers. Higher interest rates and cuts to borrowing power make it tough for some to make an offer.

CoreLogic’s head of residential research Eliza Owen said conditions were still tough for buyers, who wanted to borrow enough to get into a market where house prices were still high.

However, they, and home sellers could be in a much better position next year if interest rates fall.

“Depending on whether interest rates fall and how much they fall, we may see a flurry of transaction activity when that reduction in the cash rate begins,” Owen said.

Jellis Craig Stonnington partner Michael Armstrong believed Melbourne’s market had shifted in favour of buyers, but only for certain types of properties.

Renovated or new homes are still selling quickly, Armstrong said. There were fewer of these properties on the market, so listings attracted more competition from buyers.

 

Apartments or homes in need of work were offering buyers more time to negotiate and less competition, he said.

“The sale of unrenovated stock is more in favour of buyers because they take a little longer to sell, and buyers can get a better deal – same with land value properties [tear down and rebuilds],” he said.

The changing market has been both a blessing and a nervous time for Danielle North and husband Nick Stebbing, who benefited from the conditions and managed to buy a family home in Brunswick last weekend.

But the couple, both 47, plan to sell the Kingsville house they have owned since 2008, and plan to update it first, to make it more attractive to potential buyers.

 

“I am really nervous about selling,” North said.

“It’s not in a fit state to sell,” Stebbing said. “We’ll have to get a bridging loan to get things moving, and fix it up over the holidays.”

While they were happy with their Brunswick buy, closer to their children’s school, rate rises cut their budget and meant they had to adjust their expectations.

“We had to lower our standards,” Stebbing said. “Mostly places in our price range were not in a good state,” North added.

Wheatley Finance’s Andrew Wheatley, who helped North and Stebbing buy their Brunswick home, said some buyers had to rethink their approach to the market because of higher interest rates.

Some were being forced out of the market, as they couldn’t qualify for a mortgage, meaning there is less competition for more affordable properties.

“In the desirable suburbs of Melbourne, it feels like nothing’s changed,” Wheatley said. “But if you move to what first homebuyers are looking at, properties with a price range of $400,000 to $750,000 like a two-bedroom apartment or a townhouse, or a new build in the outer suburbs, there’s no rush or pressure to buy. I’d say it’s more of a buyers’ market.”

Source : TheAge

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SEOUL, Dec. 7 (Xinhua) — South Korea’s household assets fell for the first time in over a decade on the back of the property market slump, government data showed Thursday.

The average asset per household amounted to 527.27 million won (398,420 U.S. dollars) at the end of March, down 3.7 percent from a year earlier, according to joint data from Statistics Korea, the Bank of Korea, the Financial Supervisory Service.

It marked the first reduction since relevant data began to be compiled in 2012.

Per-household real asset, such as land and housing, retreated 5.9 percent in the cited period, but the financial asset expanded 3.8 percent.

The average value of residing homes per household tumbled 10.0 percent for the past year amid higher borrowing costs.

The Bank of Korea had left its key rate unchanged at 3.50 percent since January after hiking it by 3.0 percentage points for the past one and a half years.

Of the total household assets, the real asset accounted for 76.1 percent at the end of March, down 1.7 percentage points from a year earlier.

The average asset among households in the top 20-percent income bracket stood at 1,174.58 million won (887,550 dollars), about 6.8 times larger than 172.87 million won (130,630 dollars) in the bottom 20-percent income group.

Asset for those in their 60s or older added 0.9 percent in the cited period, but assets in all other age groups shrank in single digits for the past year.

The average debt per household inched up 0.2 percent from a year earlier to 91.86 million won (69,410 dollars) at the end of March.

Per-household financial debt reduced 1.6 percent, but security deposit for homes advanced 5.3 percent.

Of the total households, the proportion of households with debt came in at 62.1 percent at the end of March, down 1.3 percentage points from a year earlier.

The average debt among households in the bottom 20-percent income bracket surged 22.7 percent to 20.04 million won (15,140 dollars), while debt in the top 20-percent income group rose 0.4 percent to 206.34 million won (155,920 dollars).

Meanwhile, the per-household average income grew 4.5 percent over the year to 67.62 million won (51,100 dollars) in 2022.

Earned income increased 6.4 percent to 43.90 million won (33,170 dollars), and business income climbed 4.0 percent to 12.06 million won (9,110 dollars).

Public transfer income declined 4.8 percent to 6.25 million won (4,720 dollars) last year on lower government grants for small merchants and micro businesses suffering from the COVID-19 pandemic.

The average non-consumption expenditure per household, including tax, social insurance fee and interest payment, expanded 8.1 percent to 12.80 million won (9,670 dollars) in 2022 compared to the previous year.

Interest payment surged 18.3 percent last year, while expenditure for tax and social insurance fee gained 4.1 percent and 8.2 percent respectively.

Source : Xinhua

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According to Knight Frank’s Global Prime Residential Forecast, the projections for prime prices in 2023 and 2024 have been revised upwards. The 2023 forecast was initially 1.7%, revised to 2.4%, while 2024 was initially 2.1%, now 2.5%.

The factors set to shape 2024

The tumultuous 2023 has been characterised by global conflict, soaring inflation and interest rates, and general uncertainty.

But among the expectations for 2024, the report found headwinds may be easing, the proportion of cash buyers rising, and elections are the biggest risk to prime markets for next year.

The report found that cash sales rose from 46% to 52% in the last six months.

Politics and regulations are both a major hurdle and potential boon. On the one hand, tighter controls around energy, sustainability, and holiday letting may be concerns going into 2024, but on the other hand, relaxation of property and tax regulations may be an opportunity.

Upcoming elections include the Indian General Election (before the end of May 2024), US Presidential Election (November 2024), UK General Election (before January 2025), Canadian General Election (Before October 2025), and Singaporean General Election (before November 2025).

The report also found that the increase in demand is expected to be small, likewise the increase in supply, sales, and foreign buyer activity.

Melbourne and Sydney in top ten for price growth forecast

The Sydney luxury property prices are forecasted to rise five per cent next year, fifth behind Auckland, Mumbai, Dubai, and Madrid.

Melbourne came in at eighth in the world, with prime residential property prices predicted to increase by three per cent.

Perth and the Gold Coast are also forecast to see luxury homes rise in value, up four per cent each.

Source: Knight Frank Research.

Knight Frank head of residential research in Australia, Michelle Ciesielski, said cautious optimism was emerging in the luxury residential property market globally, with prime buyers appearing confident that economic headwinds were easing.

“In Australia, buyer appetite is strengthening, while supply of prime properties is constrained,” she said.

“The limited number of exceptional and most desirable prime residential property listings continues to create a price floor under many luxury Australian properties.

“This undersupply of luxury homes is one of the key factors set to shape the performance of the Australian prime residential market in 2024, with inflation and interest rates also set to play a big role.”

Michelle Ciesielski, Knight Frank

“In saying that, in this upper echelon of the market, we are seeing an increasing number of cash buyers, with the proportion being 60% of all prime residential property sales in Sydney and 65% in Melbourne.

“Climate risk, geopolitical tensions and currency shifts are also expected to impact the Australian luxury property market.

“Amongst these risks there are opportunities, however, with property set to continue to appeal as a means to diversify and spread risk, being seen as a safe haven for capital.”

Knight Frank head of residential in Australia, Erin Van Tuil, noted that the super-prime end of the market, especially A$20 million plus, is doing exceptionally well, with no shortage of buyers and limited homes.

“Most buyers are local Australian buyers, with a notable absence of foreign buyers committing to sales, despite enquiries.

“Relative to other Australian cities, Melbourne has counted more prime luxury product built over the past couple of years, which has made prime prices lag the stronger performance in other Australian cities.

“Melbourne is also still recovering from an extended lockdown in the pandemic, with the city seeing many residents move interstate to Queensland and the slower return of international investors which the city relies heavily on.”

Source : ThePropertyTribune

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Rescue measures intended to coax mainland Chinese to purchase residential property in Hong Kong have failed to woo buyers, as the financial hub’s property market slump deepens.

It comes six weeks after Hong Kong Chief Executive John Lee tweaked official housing policy, lowering purchase duties and weakening disincentives against quick resales.

“My WeChat has been buzzing with inquiries from [Hong Kong-based mainlanders] about the specific [changes], but not a single one is interested in viewing properties,” said a real estate agent surnamed Pan, who has some two decades of experience in Hong Kong.

For the past five years, Pan has focused on so-called Hong Kong drifters, a mostly professional class who plan to be in the city long term and lack permanent residency but may be working toward it. Hong Kong is thought to be home to about 350,000 such people.

On Oct. 25, the chief executive delivered his second policy address, an annual speech that sets the political agenda in the city. Lee adjusted a regime of property controls intended to keep a lid on prices that dates back to the global financial crisis. Two key stamp duties that previously added 30% to a purchase price would be cut in half, he said.

Lee also beefed up talent incentives, announcing certain professionals that move to Hong Kong would not need to pay stamp duty so long as they subsequently obtained Hong Kong permanent residency (HKPR).

For long-term renters from the Chinese mainland, it should all have been good news. But Caixin has found that despite an uptick in the city’s new residential transactions, many still remain hesitant to buy.

“Mortgage rates are too high right now,” said Chen Yuan, a financial services professional who has worked in the city for six years. “There’s no good reason to take out a loan during a property market downturn.” Chen said turbulence in her industry, where her husband also works, was a key factor in their decision to put off buying a house.

Hong Kong’s property market continues to slump as rates rise and capital flees in search of safer investments like fixed deposits. The uncertainty has dented confidence as more potential buyers adopt a wait-and-see posture. A recent UBS report predicts the drop in property prices will reach 5% this year and accelerate to 10% in 2024.

Hong Kong’s property prices remain some of the world’s highest. They rose continuously, with occasional short-term corrections, from the global financial crisis of 2008 up until a historic annual decline in 2022. But the recent shift, and the absence of a sustained post-pandemic bounce, has many investors asking where the market is headed and what a recovery will look like.

Less than expected

Lee’s changes announced in the policy address fell short of market expectations. “This is not even half of what was expected,” said Joseph Tsang, chairman of the Hong Kong branch of global developer giant JLL.

“Over the past year, interest rates have risen significantly, various economies have shown moderated growth and transactions of the local residential property market have declined alongside a downward adjustment of property prices,” Lee said in his address.

He said an expected increase in housing supply in the near term justified easing the measures intended to cool demand. Those measures include three taxes on property sales: the special stamp duty (SSD), the buyer’s stamp duty (BSD) and the new residential stamp duty (NRSD).

Lee said that from Oct. 25 buyers would only need to wait two years before reselling if they wanted to avoid an SSD of 10%. Previously, homeowners were required to wait three years if they wanted to avoid the additional tax.

A continued rise in mortgage rates has discouraged potential buyers from entering Hong Kong’s property market.   © Reuters

Long an attractive place for mainlanders to park their money and hedge against risks closer to home, Hong Kong’s speculative inbound capital had nonetheless come in waves. A key instance was after the 2008 global financial crisis, when quantitative easing made the city’s property market an attractive proposition. The SSD was introduced in 2010 in part to combat that. The BSD followed in 2012 as a tax on purchases by non-HKPRs.

In his October policy speech, Lee also announced that the BSD and NRSD would be cut in half to 7.5%. The change was intended to ease the financial burden of housing purchases on HKPRs and non-HKPRs alike, he said.

Finally, a refundable upfront payment of the BSD and NRSD would be scrapped for “inbound talent,” meaning incoming professionals who eventually obtained HKPR. Lee said this was an “enhancement” of the refund arrangement, introduced last year, under which the cohort did have to pay the duties up front, but were entitled to a refund after they had lived in Hong Kong for seven years and obtained HKPR.

Rosanna Tang, executive director and Hong Kong head of Research at Cushman & Wakefield, said the new stamp duty exemptions for incoming talent were in line with the government’s broader efforts to remove barriers for individuals interested in developing their careers in Hong Kong.

Market carnage

Last year, Hong Kong’s preowned home price index fell 15.6%, with transaction volumes falling nearly 40%. Then, in the first four months of 2023, the property market experienced a rapid recovery after the border reopening with the mainland. From January to April, its preowned house prices rose for four consecutive months.

It would not last. According to data from Cushman & Wakefield, there were less than 9,200 housing sales in the third quarter of 2023, 25% down on the prior quarter and 21% down on the prior year. Edgar Lai, a senior director of valuation and advisory at Cushman & Wakefield in Hong Kong, told press that the third quarter, usually peak transaction season, was the worst he had seen in more than 20 years in the industry.

The strong stock market rebound at the end of 2022 also petered out. Hong Kong stocks have been hemorrhaging since then, disrupting the traditional investment approach of making money on the stock market and investing it in property.

Meanwhile, the continued rise in mortgage rates has discouraged potential homebuyers from entering the market. The U.S. Federal Reserve began a round of successive interest rate hikes from near zero at the beginning in March 2022 to a range of 5.25% to 5.5% in September this year.

Facing the high cost of funds, several major commercial banks in Hong Kong started to raise their prime lending rates for mortgage loans in September 2022. After the latest hike in July 2023, HSBC, Bank of China and Hang Seng Bank currently have a prime rate of 5.875%, representing a cumulative increase of 0.875 of a percentage point. Smaller banks such as Bank of East Asia and Citibank have raised their prime rate to 6.125%.

Meanwhile, Hong Kong’s tourism and retail sectors recovered less than expected following the city’s reopening. Locals cleared out in favor of tourist destinations abroad. Dampened by the sputtering Chinese economy, few inbound tourists replaced them. In the first eight months of 2023, only 20 million tourists visited Hong Kong, less than half as many as in the comparable period of 2018.

Sellers quick to offload

As U.S. interest rates remain high, the interest on Hong Kong dollar fixed deposits continues to rise steadily. Major banks have all raised their three-month fixed deposit rates to 4.5%, with some smaller banks offering more than 5% interest on large fixed deposits.

Timed deposits, which tend to offer lower returns than stocks and bonds and lack flexibility, have become the de rigueur place to park cash from a housing sale.

Meanwhile developers are struggling with unsold inventory. According to data from Centaline Property Hong Kong, unsold inventory of new private residential properties surged to 20,483 units in the third quarter of 2023, reaching a near 20-year high.

In fact, since the second half of this year, the market has seen a number of residential properties at lower prices. In early August, CK Asset Holdings, the property flagship of Hong Kong billionaire Li Ka-shing, sold its Coast Line II project in Yau Tong at a discounted price, causing a stir in the primary market.

Road to recovery

In the six weeks since the changes, the transaction volume of new residential properties has noticeably rebounded, but the downward trend in property prices continues.

Between Oct. 25 and Nov. 25, the transaction volume of new residential properties was up by around 2.8 times month-on-month, reaching 678 transactions, according to Centaline.

Meanwhile, an index for private flats from the Rating and Valuation Department fell by 2.2% month-on-month in October, marking the sixth consecutive monthly decline.

While the uptick in new housing sales may be related to the policy changes, it could also be down to developers aggressively promoting the sale of new properties at low prices, analysts said.

Derek Chan, head of research at Ricacorp Properties, believes low-cost launches by primary developers will continue to put pressure on preowned home prices.

Chan predicts that with a significant inventory of new residential properties, developers will continue to adopt a “quantity before price” strategy with low-priced launches in December. As a result, homeowners seeking to resell will need to do so at lower prices. He expects Hong Kong property prices to decline by 7% for the full year.

Ken Yeung, head of property research at Citi in Hong Kong, predicted that an improvement in economic conditions and interest rate cuts next year could see Hong Kong property prices bottom out in the first half of 2025.

Source : NikkeiAsia

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