Since the Hong Kong government announced the withdrawal of cooling measures at the end of February in the policy address, the property market has briefly rebounded but then continued to decline, indicating that it has returned to the level before the withdrawal of the measures. To address macro factors such as interest rates, economic outlook, and demographic structure, developers have significantly reduced prices of new properties after the withdrawal. First-hand property prices have been slashed, while second-hand properties have lost bargaining power, putting additional pressure on property prices.
According to a report by 【Epoch Times】, data analysis shows that since 2020, Hong Kong residents have shown a trend of shifting from buying to renting, breaking the traditional pattern of property prices and rental rates moving in sync. Stephen Roach, former Chairman of Morgan Stanley Asia, pointed out after visiting Beijing and Hong Kong that the younger generations in both regions are overwhelmed by a sense of powerlessness. The Hong Kong property market is gradually following China’s trend of “lying flat,” with residents preferring to rent rather than buy.
The Centaline City Leading Index (CCL), which reflects the trend of second-hand property prices in Hong Kong, recently reported a value of 144.52, an increase of 0.54% weekly, ending a six-week downward trend and slightly higher than the 144.19 level at the time of withdrawing the price control measures in late February. However, the expectations of a property market rebound following the withdrawal have now been dashed.
Property owners selling at a loss are emerging across the market, from luxury homes to properties targeting first-time buyers. The Hong Kong Monetary Authority’s data shows that the number of properties with negative equity in the first quarter of this year has risen to over 32,000, a significant increase compared to the low three-digit figures in 2022. Some units are incurring losses exceeding a million Hong Kong dollars in a short period, making potential buyers wait for substantial price reductions before entering the market.
Luxury homes are not immune to the downturn either. For example, former Henderson Land Vice Chairman and CEO Shao Haijun recently sold a duplex unit in the upscale Bay Crest Hill in North Point for 82 million Hong Kong dollars, nearly half the purchase price in 2019, resulting in a loss of 74 million Hong Kong dollars.
In contrast to the initial optimism following the withdrawal of the price control measures, the industry is becoming more conservative as loss-making transactions and price cuts become more common. Property agency Lajiake now predicts an 8% to 10% decline in property prices for the whole year, a stark difference from the original forecast of a 5% to 8% increase. The market’s momentum has weakened since the withdrawal of the measures.
Bloomberg reported that the Hong Kong real estate market is currently experiencing its most severe downturn in five years. Since 2019, residential and commercial property values have decreased by approximately 2.1 trillion Hong Kong dollars (about 270 billion US dollars).
Continued price cuts in second-hand luxury homes are mainly attributed to aggressive pricing in new developments. Sun Hung Kai Properties’ new luxury project at 21 Borrett Road in Mid-Levels recently saw a unit on the 3rd floor sold for 115 million Hong Kong dollars, setting a new low for the property. This sale reflects a 14.5% decrease in square footage price compared to the pricing in 2022.