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One Innovale Cabanna in Fanling. Photo: Handout

Hong Kong homebuyers show tepid demand for new units with prices expected to fall in the fourth quarter

  • Out of 118 units available at One Innovale-Cabana in Fanling, 66 changed hands on Saturday, and none sold at Tuen Mun and Kowloon City communities
  • Property sales are expected to recover slightly in the fourth quarter as housing prices drop by 1 to 2 per cent, says Midland Realty executive

Hong Kong new home sales turned out to be tepid on Saturday, as rising interest rates and weaker economic growth dampened consumer demand despite lower prices offered by developers.

Out of 118 offerings at One Innovale-Cabana in the Northern Metropolis, Fanling, 66 were sold on Saturday – just 56 per cent.

Although it was the cheapest new property launch since September 2021 in the city, buyers are seen cautious amid a prolonged down cycle in the local real estate market, which is forecast to plummet to a 27-year low this year according to Centaline Property Agency.

Meanwhile, not a single unit was sold at two other projects – Grand Jete in Tuen Mun on the western fringe of Hong Kong’s New Territories and Allegro in Kowloon City – on Saturday.

Henderson Land offers cheapest new flat seen in Hong Kong for over a year

Rising interest rates and slower economic growth are weighing on buyers’ confidence, said Sammy Po, CEO of Midland Realty’s residential division for Hong Kong and Macau.

“Some buyers are trying to observe the interest rate hikes in the US in November and whether Hong Kong will follow [with its own increases],” he said. “The fluctuation of the stock market and the overall economic trend also make people wait on the sidelines.”

Hong Kong’s property market was hit hard by the coronavirus pandemic in the first half of the year and is expected to further bear the brunt of rising interest rate hikes. The Hong Kong Monetary Authority has raised its base interest rate five times this year to 3.5 per cent, a 14-year high. Commercial banks such as HSBC and Bank of China (Hong Kong) raised their prime rates last month to a four-year high, making it costlier to fund big-ticket purchases such as housing.

The city’s economy is also under pressure amid a worsening external trade environment, as the government downgraded its full-year economic growth to between 0.5 per cent growth and 0.5 per cent contraction from the previous 1 to 2 per cent expansion.

Henderson Land Development offers 113 flats for sale at One Innovale-Cabanna in Fanling on October 29, 2022. Photo: SCMP/ Jonathan Wong

The units at Grand Jete and Allegro were leftovers after previous rounds of sales, which were less attractive compared with the new launches amid the current sluggish market, Po said.

One Innovale-Cabanna, developed by Henderson Land Development, has recorded the cheapest offering price of a new property since September 2021 at just HK$2.76 million (US$351,600) for 186 sq ft of space. It was the lowest entry price after Artique in Sheung Shui in September last year at HK$2.43 million.

The project was 11.3 times oversubscribed, receiving 1,387 bids as of Friday. The units ranged from studios to three-bedroom units, between 186 sq ft to 683 sq ft. After discounts of up to 7 per cent, they were priced at between HK$2.76 million and HK$9.42 million, with an average price of HK$13,428 to HK$15,400 per square foot.

The offerings of 80 units at Grand Jete, from CK Asset Holdings and Sun Hung Kai Properties (SHKP), comprised five units with gardens. The rest were studios and standard units with up to three bedrooms.

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After a 17 per cent discount, the selling prices ranged from HK$3.93 million to HK$10.12 million, with average prices per square foot between HK$12,888 and HK$17,098.

Country Garden’s Allegro put 50 units on sale priced from HK$5.68 million to HK$10.97 million, or HK$22,678 to HK$22,080 per square foot.

Sales are likely to recover slightly in Hong Kong in the fourth quarter with an expected 1,000 transactions, Po predicted. Housing prices are expected to dip 1 to 2 per cent, compared with the 5 per cent drop from August to September, he said.