According to JLL's latest Residential Market Monitor Report, Hong Kong's luxury residential properties face a double whammy from weakening rental and buying demand. This has led to the capital values of luxury residential properties falling by 8.6% from the peak in Q2 2019. Likewise, luxury rentals have fallen by 5.8%, the sharpest fall recorded within the same 12 month period since 2017.

Hong Kong's social tensions and the COVID-19 outbreak have taken their toll on the city's economic outlook. As market sentiment continues to weaken, more homeowners are offering discounts to offload properties with a view to lock in profits or to reallocate capital.

On the other hand, the slowing rental market is largely as a result of the falling number of expatriates. They are the key source of leasing demand notably for high-end properties. The decline in expat numbers can be explained by the relocations of expats back to home countries and the decreasing expat arrivals amid social tension in the second half of 2019 and the more recent global outbreak of COVID-19. 

Henry Mok, senior director of capital markets at JLL in Hong Kong, said: “The luxury residential market has always been more volatile. Buying and selling decisions generally depend on market sentiment. On the other hand, the mass market is driven by the supply and demand dynamics in Hong Kong. In light of this, it can be expected that the luxury market will be subject to more price and rental pressure than the mass market, particularly during this period of economic uncertainty.”