Midland says Hong Kong’s property doldrums will remain through the first half as Covid-19 weighs on buying sentiment for real estate
- New property launches shrank 83.3 per cent in the first two months of the year to 457 units, Midland said
- Total property transactions shrank to 13,415 deals valued at HK$122.6 billion from January to March 29, 41 per cent lower than the first quarter of 2021
Midland Holdings said Hong Kong’s social distancing policies would weigh on property market sentiment through the first six months, after the city’s sole publicly traded real estate agency posted its third annual profits slump in four years.
Net income fell 24 per cent to HK$100 million (US$12.8 million) last year, without the one-off employment support scheme that had helped it swing to profit in 2020. Revenue, 99 per cent contributed by agency fees, rose 20.5 per cent to HK$6 billion, the company said in a statement to the stock exchange.
Hong Kong is going through the city’s worst Covid-19 outbreak, with 26.6 deaths per million residents as of March 24, placing the city among the world’s highest mortality rate. Social distancing rules to contain the disease had paralysed most business activities, deterring developers from launching their weekend sales campaigns.
“Developers have not been active, postponing the launch of new projects while placing their focus on clearing their inventories,” Midland’s deputy chairman Angela Wong Ching-yi said in a statement, adding that transactions are likely to stay low in the first quarter. “As for the secondary market, some buyers prefer to stand on the sidelines and many sellers have chosen not to allow property inspections to minimise the risks of [Covid-19] infection.”
New launches shrank 83.3 per cent in the first two months of the year to 457 units, Midland said.
Total property transactions, including homes, shops, industrial units and car parking space, shrank to 13,415 deals valued at HK$122.6 billion from January to March 29, 41 per cent lower than the first quarter of 2021, according to Midland’s data.
Buyers also delayed their purchase decisions in fear of a further fall in home prices amid the city’s worsening Covid-19 situation.
Goldman Sachs said on Monday that Hong Kong homes are likely to fall by a fifth over a four-year period, as borrowing costs increase and rising unemployment weighs on demand.
The bank now expects home prices to decline by 5 per cent every year through 2025, a more pessimistic forecast than its earlier forecast of the market recovering in 2025 after a two-year slump.
Transactions for commercial property also fell, as economic backlash from the pandemic deterred businesses from expanding or upgrading. In February, there were only 50 transactions of commercial properties in Hong Kong, down 24 per cent from January, according to data from Ricacorp Properties.
Midland said the mainland property market fared even worse.
“As the central government was determined to contain the mounting debt of China’s property developers and limit their gearing, the property market turned sour,” it said.
The transaction volume of the secondary residential market in Shenzhen, being the group’s main operation in mainland, tumbled by about 57.3 per cent in 2021 from a year earlier.
