Hong Kong recorded its second-best year for property sales in 2018 on the back of a red hot first half, in which transactions worth HK$403.7 billion (US$51.5 billion) were reported. However, the market has cooled since August, when a 28-month bull run came to an end, with December recording a 58 per cent year-on-year drop in all property sales.
A total of 79,185 deals worth HK$729.56 billion were completed in the city in 2018. The record for the special administrative region’s property market stands at HK$868 billion, reported in 1997.
“Although we saw the market cooling down in the second half, prices are still at a very high level. This has contributed to the record high value,” said Derek Chan, head of research at Ricacrop Properties.
According to local real estate company Midland Realty, all property transactions last month, including those for apartments, offices and car parks, stood at 3,024 – 23.5 per cent down from November and the lowest figure for December in 28 years.
The numbers for December also represent the lowest monthly transaction volume since March last year, but the bad news does not end here. “Buyers are pondering and trying to figure out where the market is going,” said Ricacrop’s Chan. “Given the macro uncertainties from the US-China trade war, and possibly more US rate hikes during the first half, they won’t move [in the property market] in a hurry.”
Ricacorp said it expected that 50,000 residential units will be sold in 2019, a decline of about 10 per cent from last year, while only 15,800 new flats are expected to be snapped up, which represents a decline of 5 per cent.
At the same time, however, the number of ready-to-sell homes is set to increase in the primary market. About 17,000 units will be ready for sale in the New Territories, adding pressure on sales prices.
Mainland China developer China Overseas Land and Investment is expected to be the first mover. It unveiled a sales brochure for its 1,620-unit The Regent property on Friday, and is expected to release the prices for a first batch of apartments this week.
“Ahead of the proposed vacancy tax, and amid a gloomy market, developers have sped up sales, particularly of properties that are complete,” said Jeffrey Mak, property analyst at CGS-CIMB Securities. “Prices will be slashed further when more units are offered, particularly in areas where a flood of units is expected.”
Buyers are pondering and trying to figure out where the market is going
Derek Chan, head of research, Ricacrop Properties
Tai Po, for instance, could be the next battleground for developers looking to attract buyers. The Central Horizon development by Billion Development and Project Management has been granted a presale permit and will offer 1,408 units in the area. Great Eagle Holdings and Sino Land will offer 723 units at Ontolo and 528 units at Mayfair by the Sea 8, respectively, once they receive their presale permits.
CGS-CIMB Securities’ Mak said he expected the units to be priced at about HK$15,000 per square foot. “In good times, they could fetch HK$18,000,” he added, which translates into a 16.7 per cent price cut.
A number of reports have forecast further falls – up to 25 per cent- in home prices as the US-China trade war, a volatile stock market and rising interest rates keep buyers away.
“The primary market’s price correction will be gradual. In 2019, what we see first will be a drop in transaction volumes,” said Stephanie Lau, vice-president and senior analyst at Moody’s.
Hong Kong’s property bull run came to an end in August. Home prices have since dropped by 7.2 per cent after peaking in July, following a 28-month surge that started in April 2016.
Last month, properties of all kinds recorded steep drops. At 397, new private unit sales in December amounted to just more than half of the 729 sales recorded in November. The sales of industrial units also recorded a 31 per cent month-on-month decline in December, while retail shop transactions dropped by 34.7 per cent.
December was also the first month on record with no transactions at 47 prime office buildings, including Shun Tak Centre in Sheung Wan, Far East Financial Centre in Admiralty and King's Wing Plaza in Sha Tin. These properties recorded the most number of transactions last year, according to Midland.
This article 2018, Hong Kong’s second-best year for property sales at US$93 billion, ended with a whimper in December first appeared on South China Morning Post
More from South China Morning Post:
- Call for action on Hong Kong property developers’ opaque sales and stockpiling tactics
- Cooling measures could lead to Hong Kong property market ‘free fall’ after a downturn, consultants JLL warn
- Falling land values indicate developers are pessimistic about Hong Kong property sector’s outlook
- Fear of interest rate rise and high prices hit latest Hong Kong property sale