Prestigious apartments in Hong Kong lie empty as property market crashes
Not a single new apartment was sold last week in a landmark 800-apartment project in Hong Kong, a sign of the slump in the property market that is forcing some of the city’s tycoons to fire property sales.
Private house prices have fallen to their lowest level since February 2019, according to the latest government data. The value of resale apartments has fallen by more than 10% in one year, according to the Hong Kong real estate agency Centaline.
Analysts and insiders expect house prices to fall 10% or more this year, although the Chinese territory finally scrapped strict mandatory hotel quarantine requirements last month.
“It’s definitely winter for the real estate market,” said Sammy Po, managing director of the residential division of Hong Kong-based Midland Realty. “Potential buyers prefer a wait-and-see attitude.”
Po said in the latest batch of 139 new apartments on offer in the South Land residential project, developed by Hong Kong-listed MTR Corporation and Road King Infrastructure, no apartments have been sold since the latest round of sales began. September 20. The project has a total of 800 apartments.
Even incentives such as coupons worth HK$12,000 at Michelin-starred restaurants for each of the first five buyers failed to generate interest. By contrast, its previous round of sales last year saw strong demand with more than 2,200 people vying for 160 apartments.
At Miami Quay, an ambitious property project in a redeveloped urban area in Kowloon – jointly built by some of Hong Kong’s most powerful family-owned property conglomerates, including Henderson Land Development and New World Development – estate agents said only two over 139 units were sold on the first day of the sale last month.
Pandemic restrictions under the zero Covid strategy have made travel to Hong Kong difficult for mainland Chinese investors, while Beijing’s imposition of a national security law has led to an exodus of residents. Interest rate hikes coupled with a weak economy in the territory further undermined confidence.
Charles Chan, Hong Kong-based managing director of valuation and professional services at real estate agency Savills, predicts a drop of up to 15% in house prices this year, which he says would be the worst performance since the Sars epidemic hit the city in 2003. The downward trend could continue into next year, Chan added.
Citigroup analysts said Singapore’s private residential market is expected to grow another 5% in 2022, for a total gain of 9% this year. The rival city-state and hub of Hong Kong had eased Covid-19 measures much earlier than the Chinese territory.
The developers made fire sales to shore up their revenue. Billionaire Li Ka-shing’s developer CK Asset Holdings has made a rare move by agreeing to bulk sell 152 new residential units in the mid-tier luxury district for HK$21 billion ($2.6 billion) .
The deal values the apartments at around HK$62,000 ($7,900) per square foot, about a quarter less than the average price per square foot of HK$84,000 for which other units in the project were sold at the course of the past year. One unit previously broke a record in Asia with a purchase price of HK$459 million, or HK$136,000 per square foot.
Li’s CK Asset was likely bracing for a “worsening outlook” in the property market by opting to wholesale rather than offload the units to individual buyers, which could take months, said Eric Wong, managing director of the private equity firm Bricks & Mortar Management.
New World Development chief executive Adrian Cheng issued a more positive note.
The group’s revenue from real estate development in Hong Kong fell to HK$5.8 billion in June from HK$7.8 billion the previous year. But Cheng said in a full-year earnings briefing on Friday that demand for residential apartments would return in the longer term.
Additional reporting by Hudson Lockett in Hong Kong