Hong Kong’s property market saw a rebound after the repeal of the previous price suppression policies in February, but over the past four weeks, the Centaline City Leading Index (CCL), which reflects the transactions of major second-hand properties, has dropped for four consecutive weeks, falling below the pre-suppression policy level and erasing most of the gains made after the repeal. Starting from the end of April, prices of second-hand real estate properties in Hong Kong began to decline, coinciding with the release of market rescue measures in mainland China, along with significant price cuts by Hong Kong developers, high interest rates, and a resurgence in emigration, leaving the Hong Kong property market in a state of hopelessness and continued decline.
According to the latest data released on the 24th by the Centaline City Leading Index (CCL), the index stood at 144 points as of May 19th, dropping by 1.43% weekly and 1.97% monthly for four consecutive weeks, falling below the pre-suppression policy level of 144.19 points and hitting a new low. The real estate industry had high hopes for attracting Chinese buyers after the repeal of the suppression policy, with Henderson Land Development’s Vice Chairman and Executive Director, Martin Wong Kwong-yiu, citing figures from their new project, SEASONS PLACE, stating that 40% of buyers were from the mainland and investors, while the remaining 60% were local “rigid demand.” Furthermore, Eugene Chan, Business Manager of Cheung Kong Holdings, stated on April 22nd that mainland buyers were expected to increase to 20-30%.
Looking into Centaline’s data, the Hong Kong property market started to rebound from its low before the repeal of the suppression policy at the end of February, with a significant increase in transactions of both first-hand and second-hand properties in March, but second-hand prices began to decline at the end of April.
In mid-April, mainland media reported that Beijing would acquire unfinished properties. Prior to the May Day holiday, Chengdu announced the cancellation of property purchase restrictions, sparking expectations for other major cities, including Shenzhen, to implement market rescue measures. In May, several cities including Shenzhen, Guangzhou, and Shanghai successively relaxed their purchase restrictions, with the official policy on acquiring unfinished properties introduced in mid-May, described by The Wall Street Journal as the “boldest real estate market rescue measure to date.” On the 17th, the People’s Bank of China also announced three measures, including lowering the personal housing provident fund loan interest rate by 0.25 percentage points; removing the lower limit on interest rates for commercial individual housing loans for first-time buyers and second homes at a national level; and setting the minimum down payment ratio for first homes at no less than 15% and for second homes at no less than 25%. Coincidentally, as China began to rescue its market, property prices in Hong Kong started to decline.
Corresponding to the drop in property prices is the serious inventory of new properties in Hong Kong. According to quarterly data from the Hong Kong Housing Authority as of the end of March this year, there were 21,100 unsold new units completed, and including under-construction properties, the number reached 72,000 unsold units. From 2019 to 2023, the average annual sales of new properties in Hong Kong were 14,959 units, even if the trend remains, it would take approximately 4.8 years for the housing supply to be absorbed.
Developers are resorting to price cuts as a direct way to reduce inventory. Cheung Kong slashed prices first in March, with a 20% discount on Blue Coast in Wong Chuk Hang compared to other new developments in the area. Another project in Nine Peaks, Sha Tin, reduced prices by over 30% in updated price lists in April. The #LYOS project in Hung Hom had 15 cancellations and was relaunched with reductions of up to 32%. Wheelock also reduced prices for their project in Ap Lei Chau, with a 29% reduction in the price of small units from HK$5.358 million to HK$3.8274 million, making it challenging for sellers of second-hand properties to negotiate prices.
While the number of local residents in Hong Kong continues to decline, the UK Home Office released the latest figures on BNO visa applications on May 23rd, with close to 202,000 applications processed and over 144,000 individuals having arrived in the UK by the end of March this year. With the passing of Hong Kong’s National Security Law in March, the number of BNO visa applications in the first quarter reached 10,737, nearly doubling from the fourth quarter of the previous year.
A survey conducted by the UK-based group “Welcome Hongkongers Committee” in November last year showed that 99% of respondents were interested in applying for residency in the UK, reflecting a continuous trend of emigration without signs of return. The survey also indicated that 38% of Hong Kongers immigrating to the UK opt for outright property purchases. By the end of last year, Hongkongers owned a total of 24,759 properties in England and Wales, valued at approximately £10.8 billion (around HK$107.6 billion), according to data from the real estate agency Benham and Reeves. Property transactions by BNO holders in 2023 amounted to HK$477.9 billion, accounting for 22.5% of the total annual property transactions in Hong Kong.
Even for those staying in Hong Kong, mortgage interest rates and other expenses pose obstacles to property ownership. Several major banks, including HSBC, have discontinued most cashback offers for mortgages this year, effectively increasing actual interest payments.
Mrs. Lam, a resident of Mong Kok, mentioned in a recent interview with this news outlet that in order to take care of her elderly parents, she and her husband purchased a two-bedroom private apartment in Tai Kok Tsui at the end of 2022. The recent interest rate hike has increased their monthly mortgage expenses by HK$4,000, while management fees have risen to HK$4,400 per month. A Consumer Council survey indicated that management fees account for an average of approximately 7.4% of monthly household income.
The US Federal Reserve has yet to cut interest rates, with the latest meeting minutes showing that some policymakers stress the necessity of tightening policies to curb inflation. In contrast, there seems to be no end in sight for significant interest rate cuts in Hong Kong, where the maximum interest rate for mortgage loans based on the Hong Kong Interbank Offered Rate (HIBOR) is 4.125%; however, following a series of market rescue measures in Shenzhen, the mortgage interest rates for first-time homebuyers have been reduced to 3.5% and to 3.9% for second homes, both lower than the capped rate in Hong Kong.
Over the past year, many industries in Hong Kong have faced competition from Chinese cities, such as rising consumer spending in the north, challenges in shipping and logistics from ports in Shenzhen and Guangzhou, and positions being filled by mainland Chinese workers and talents. Now, with the repeal of price suppression policies, mortgage interest rates, and the scramble for Chinese real estate investors, Hong Kong may face a similar fate.