Hong Kong property

Ad spending on Hong Kong residential properties fell 22 per cent in 2015 as buying sentiment soured

Advertising spending on residential properties last year fell to lowest level since 2013, with agents planning to cut promotional budgets for 2016

PUBLISHED : Tuesday, 16 February, 2016, 10:01am
UPDATED : Thursday, 13 July, 2017, 8:25am

Advertising spending by developers on residential properties plunged 22 per cent last year, the lowest level since 2013, as the market suddenly shifted from boom to bust in the last quarter as buying sentiment turned sour.

However, real estate agents, which collectively increased their promotional spending by 44 per cent last year, said they would cut the budget this year in the wake of the tougher operating environment as the government’s property cooling measures and growing bearishness continue to bite.

“In a bear market we will tighten our purse strings,” said Sammy Po, chief executive of the residential department at Midland Realty. “We will cut our spending and advertising expenses will be one of them.”

Midland’s advertising expenditure to promote second-hand projects and corporate image increased 56 per cent year on year in 2015, while Centaline Property Agency’s ad spend was up 37 per cent and Ricacorp Properties’ budget increased 43 per cent, according to a study by research house AdmanGo.

Boosted by the big increase in ad spending by estate agents, property and real estate companies recorded a 4 per cent increase in year-on-year spending to a combined HK$1.75 billion last year, ranking the sector No 9 in terms of advertising spenders in Hong Kong, up from No 12 in 2014.

David Chan, a director at Ricacorp Properties, said the firm would also reduce its promotional budget.

“This year is going to be difficult. The secondary market will continue to be frozenas the government is unlikely to remove the special stamp duty and buyers’ stamp duty,” he said.

Chan said the significant increase in promotional expenses last year was due to the fact the market remained buoyant until the fourth quarter.

It translates into about 3,000 plus deals per month which was very difficult for us to survive
David Chan, Ricacorp Properties

“For the first seven months, both sales volume and prices in the primary residential market were on the boil. Market sentiment only started to turn sour after the stock market crash in July last year,” he said, referring to the Hong Kong and mainland stock market slump that worsened after the central government unexpectedly devalued the yuan currency in August.

Hong Kong’s falling stock market and currency market volatility has had a chilling effect on new project launches, with Harbour Park in Cheung Sha Wan developed by Hong Kong Ferry managing only eight sales on its first sale day last month.

Home prices have fallen 10.82 per cent from their peak in September last year, prompting some developers to offer more incentives to drum up sales.

Chan said the number of secondary transactions plunged to 40,872 deals last year, the lowest since 2013. “It translates into about 3,000 plus deals per month which was very difficult for us to survive,” he said.

Besides cutting its promotional spending, Ricacorp would also consider closing some shops, Chan said. This would include those outlets that failed to receive a rent reduction from landlords when their lease was due for renewal, as well as outlets that overlap with other branches in the same area.

Victor Tin, associate director of the sales department at Sino Land, said the firm has no plan to adjust its promotional budget.

“We will allocate more budget to the internet and phone apps, reducing ad spending in television as we found social media will produce more effective results,” he said.