Falling land values indicate developers are pessimistic about Hong Kong property sector’s outlook
- Market observers say the uncertain economic outlook has made property developers more conservative in their land acquisitions as they look to ride out the downturn
Hong Kong’s property sector is a bit downbeat these days. Buyers certainly aren’t willing to pay high prices and developers have reined in their land acquisitions after shelling out record sums earlier in the year.
And there is good reason for that. There is no end in sight to the US-China trade war, the stock market is behaving erratically, and to cap it all, interest rates are on the rise.
But who’s more pessimistic of the two? It’s clearly the developers, say market observers.
Land values in Kai Tak, the site of the city’s former runway, have fallen 18.4 per cent after peaking in May, far sharper than the 6 per cent drop in Hong Kong’s secondary home prices, according to Centa-City Leading Index.
A plot in Kai Tak sold in May for a record HK$25.16 billion (US$3.2 billion) or HK$17,776 per square feet. Last month, the first site on Kai Tak’s runway was sold to a consortium of four developers for HK$8.33 billion, or HK$14,502 per sq ft, down 18.4 per cent from May. Another site on the runway sold to Goldin Financial fetched HK$8.91 billion. Even though the price was slightly higher, at HK$15,498 per sq ft, it was still 12.8 per cent lower than the peak.