Hong Kong’s pre-owned home sales dry up, forcing many owners to settle for losses as capital shifts to new abodes
- Five flats changed hands across 10 major housing estates in the city on Saturday, the lowest weekend transaction rate in six months, according to data by Midland Realty
- A separate data set by Ricacorp Properties reported 93 sales across 50 estates last week, for the lowest rate since February
Five flats changed hands across 10 major housing estates in the city on Saturday and Sunday, the lowest weekend transaction rate in six months, according to data by Midland Realty, which operates one of Hong Kong’s biggest network of real estate agents. A separate data set by Ricacorp Properties reported 93 sales across 50 estates last week, for the lowest rate since February.
“The property price index in July will still be under pressure,” said Derek Chan, head of research at Ricacorp Properties. “Although the epidemic improved slightly in late June when the government relaxed the social gathering restrictions, the positive factors were completely offset by the third wave of the epidemic that broke out in early July.”
The shift in focus among property buyers and investors in Hong Kong, the most expensive urban centre for 10 consecutive years, may offer some relief to the developers amid an increasing glut of who still have between 3,000 and 4,0000 apartments in the pipeline to launch this year in a market that is mired in its worst recession on record.
“As the pandemic worsened rapidly in mid-July, quite a few homeowners have softened their tone and offered more discounts,” said Victor Wu, branch manager at Centaline Property Agency, which handled the sale of The Waterfront unit.
More cases of losses are on the rise, with up to 4,000 new apartments remaining in the pipeline for launch over the next four months of the year, on top of the current inventory of 13,000 unsold abodes around the city, according to published data. Developers are launching their flats with discounts, rebates and easy financing plans that require buyers to put down as little as 10 per cent of a flat’s catalogue price.
A flat measuring 508 sq ft at Harbour Pinnacle in Tsim Sha Tsui sold last week for HK$12.3 million, making a loss of HK$3.3 million after taxes and fees were added. Another flat measuring 737 sq ft flat at Parc Oasis in Kowloon Tong sold for HK$15.2 million, for a loss of HK$3.07 million inclusive of taxes and fees because the owner was in a rush to emigrate from Hong Kong.
“As more owners offer more discounts, there will be ... pressure on property prices,” said Sammy Po, chief executive of residential division at Midland Realty.
The spate of new attractive property launches, combined with cheap mortgages at decade-low rates, has generated renewed interest among homebuyers. Citi Hong Kong’s second-quarter home ownership survey found that respondents were split on where they see property prices. The proportion of respondents who considered that property prices will rise in the next 12 months has doubled, compared with the previous quarter, while those expecting prices to fall have decreased significantly, Citi said.
The real estate market’s split – a bull run in newly completed property, against falling prices among second-hand homes – is only going to be more pronounced in the second half of 2020, analysts said.
The current property market is very “distorted”, said Thomas Lam, executive director at Knight Frank.
“Residential property prices are still high, but rents have continued to adjust downward due to the economic downturn,” said Lam, adding that the pent-up demand released when Hong Kong’s Covid-19 outbreaks began to ease in May may not last through the fourth quarter. “The rents and prices of commercial and street shops continue to fall.”
High unemployment rate and underemployment, salary cuts, unpaid leave and diminishing bonuses will dampen the purchasing power in the property market, especially when the effectiveness of the government's relief measures remains uncertain, he said.
“For investors, this means that opportunities are beginning to emerge but at a much slower pace than many had expected, and volumes have slumped as a result,” said Simon Smith, senior director of research and consultancy at Savills. “With governments spending billions to support businesses and livelihoods, a lot will also depend on their resolve over the second half of the year.”
