The sudden tinge of fear among sellers in Hong Kong’s property market
A recent wave of price discounting for both residential and commercial properties indicates a softening in sentiment
Signs of a deepening slowdown are beginning to emerge in Hong Kong’s property market, with anecdotal evidence showing more homeowners and office space owners are slashing prices in a bid to exit the market, even as there are few signs of a broad-based downtrend.
A 282 sq ft flat at Tak Bo Garden in Kowloon Bay sold on Tuesday for HK$4.33 million (US$552,496), or HK$15,355 per sq ft, 8.8 per cent cheaper than an equivalent sized flat in the same area that sold a week earlier. In comparison to a similar unit sold in May, the price was more than 16 per cent lower.
Another homeowner lost more than HK$2.6 million after holding a 1,725 sq ft unit at The Legend in Jardine's Lookout for 11 years. The unit was bought in 2007 for HK$48.6 million and sold on October 9 for HK$46 million, nearly 12 per cent lower than the owner’s original asking price.
“It is the early stage of a bear market already as we see that more homeowners are cutting prices,” said professor Eddie Hui Chi-man from Polytechnic University's department of building and real estate. “If the trade war and interest rate tightening continues, we may see a worse market in the first quarter of 2019.”
Profit-making transactions in the third quarter were at 98.8 per cent, reflecting the lowest reading since the third quarter in 2017, according to data from Ricacorp Properties. The property agent said that 78 home sale transactions in the third quarter were either losing money or just breaking even.
“Buyers who are worried about a further plunge of the market rushed to sell their units and continue to lower their asking prices,” said Derek Chan, head of research at Ricacorp Properties. “The gloomy economic outlook will put more pressure on transactions as well as prices in the fourth quarter.”
The property agency expects profit-making transactions will ease to 97.8 per cent, while overall home prices will retreat by 3 per cent to 5 per cent through December compared to the prior quarter.
That chimes with the outlook of major banks such as Citibank, UBS and Nomura, which have issued warnings that the long uptrend in home prices could grind to a halt and head the other way.
Yet Chan said most buyers and sellers are still adopting a wait-and-see approach.
“When a bear market comes, everyone would abandon their properties at a much lower price. For now, we have not seen that happen,” Chan said.
In a release filed with the Hong Kong stock exchange on Thursday, mainland property group Hopson Development disclosed for the first time that it agreed to purchase the 49th floor of The Center, an office tower in the city’s main business district. The transaction was completed at HK$1.118 billion, or HK$43,510 per sq ft, over 20 per cent lower than the asking prices on a list circulated in May.
In early May, a consortium led by the founder of Shimao Property Holdings, Hui Wing Mau, and billionaire Pollyanna Chu, closed the takeover of Li Ka-shing’s building in Central, in the world’s biggest real estate transaction for HK$40.2 billion.
The city’s Rating and Valuation Index, which tracks prices of used homes, dropped to 393.9 in September, down 0.3 points from a month earlier.
Prices of private housing estates in New Territories West dropped by 2.55 per cent on average in the past 12 weeks, with those on Hong Kong Island and New Territories East down 2 per cent and 0.56 per cent, respectively, according to data released by Centaline Property Agency on Monday. Prices of Kingswood Villas in New Territories West, a development featuring 58 residential blocks and 15,808 units that was completed in 1999, plunged by 15 per cent.
Meanwhile, developers are rushing to launch flat sales.
Chinachem Group will put the first batch of 144 units of its Sol City project in Yuen Long on its price list on October 16. In a similar move, Kowloon Development will kick-off sales on Friday for 162 units at One East Coast residential project in Yau Tong. The cheapest unit is priced at HK$3.9 million after discounts.