Midland Holding Huang Jianye: The performance of the property market in the first quarter exceeded expectations, and it is expected that transactions will slightly soften in the second quarter while prices continue to rise

The chairman of Midland Holdings, Huang Jianye, stated that in the first quarter, Hong Kong's property market saw a rise in both price and volume against the trend, performing better than expected. However, he emphasized that the current data does not reflect the impact of the war, and caution should be exercised regarding oil prices and interest rate trends. Due to a significant increase in transactions in the first quarter, the property market may experience "price increases and slight volume declines" in the second quarter. He believes that the Hong Kong property market is resilient, and if the war subsides, the market will "turn onto a straight path" in the second half of the year, with a chance to stabilize and rise again starting in the third quarter, maintaining the forecast of "price and volume increases" for the entire year, with property prices expected to rise by about 10% for the year.

Huang Jianye pointed out that geopolitical issues have become the biggest variable in the global market. With the outbreak of war, the prices of investment products such as stocks, gold, and cryptocurrencies have fallen by 10% to nearly 30% from their highs this year. Hong Kong property is one of the few assets that remain unaffected, with both price and volume performance exceeding expectations, reflecting a continuous recovery in confidence among homebuyers and users.

Huang Jianye believes that the price and volume performance of the property market in the first quarter exceeded expectations, not only due to the strong performance in the second half of last year but also possibly due to rising risk aversion. Investors are deliberately avoiding highly volatile stock markets and cryptocurrencies, with funds flowing into tangible assets like Hong Kong property, reviving the "brick culture" as a safe-haven value. With the outbreak of war, oil prices have risen, increasing inflation and the uncertainty of interest rate cuts. However, Hong Kong remains a safe haven for funds as always. During the war, the one-month Hibor once fell to about 1.95%. Although it later rebounded, the decline in Hibor reflects ample liquidity in the market, stable mortgage burdens, and some funds may have flowed into the property market. There may even be international and regional funds that have already made medium to long-term allocations through Hong Kong property, coupled with the government's optimization of property market policies, which is beneficial for releasing demand from local and new Hong Kong residents.

The overall market trend in the first quarter was strong, with investors accelerating their entry into the market. According to data from the Midland Property Research Center, based on information from the Land Registry, there were 262 known transactions by large buyers in the first quarter of this year (as of March 20), a year-on-year increase of over 1.2 times; the units involved reached 700, a year-on-year increase of about 1.37 times, with a total amount of HKD 7.02 billion, an increase of over 1.4 times. If we categorize large buyers into local buyers, mainland buyers, and corporate buyers, the number of entries from all three types of buyers increased in the first quarter. When comparing local buyers with mainland buyers, local buyers were significantly more active in entering the market. Huang Jianye pointed out that local large buyers are more active than mainland buyers, which is a rare situation. Since many large buyers are investors, the enthusiasm of large buyers in the first quarter for long-term investment deployment reflects strong confidence in the market's future.

At the same time, there are signs of a restart in the property chain. Last year, lower-priced properties benefited from reduced stamp duty, leading transactions to outpace the overall market. This year, the situation has changed, with an expected year-on-year increase of about 90% in residential transaction volumes over HKD 10 million to HKD 20 million in the first quarter, and those over HKD 20 million expected to more than double; in contrast, properties priced at HKD 6 million or below are expected to rise by about 15% year-on-year. The restart of the property chain, along with the continued popularity of lower-priced properties, adds significant purchasing power to the property market.

Huang Jianye emphasized that he remains cautiously optimistic about the property market outlook. However, the impact of the war on the global economy has not fully manifested, and attention must be paid to interest rate and oil price trends. If the situation in the Middle East continues to escalate and evolves into a long-term event, it will increase imported inflationary pressures, forcing major central banks to delay interest rate cuts, and in the worst-case scenario, even restart rate hikes, which would put pressure on global asset prices The current market tone still expects global interest rates to remain high but slightly soft this year. Once inflation rises again and triggers "unexpected interest rate hikes," the liquidity of funds in Hong Kong will inevitably be impacted. If the economic outlook becomes unclear, it may reduce the willingness to change properties, which will affect property transactions.

Huang Jianye believes that after a sharp rise in price and volume in the first quarter, the property market transactions may slow down in the second quarter. The main reasons, besides the war, are that the price increase in the first quarter was too strong, leading to a high base, and purchasing power needs to recover. It is expected that property prices in the second quarter will still record an increase, but the rate of increase may slow down. Huang Jianye also believes that the fundamental factors of Hong Kong properties remain unchanged, and they are likely to continue being a "safe haven" for funds. A slight cooling in transactions in the second quarter could create healthier conditions for future development. He believes that the property market will "turn a corner" in the second half of the year, and after a brief pause, if the war subsides, it will begin to regain upward momentum in the third quarter. The overall upward trend of the property market remains unaffected, maintaining the annual forecast of "price and volume rising together," but it is still necessary to closely monitor global political and economic changes and interest rate trends, and be prepared for both scenarios