Hongkongers snub new home sales in Yau Tong, another sign of weakening sentiment in the real estate market

The Chill Residence development from Poly Property and L’Avenue International sold just 10 of 128 flats by Sunday afternoon

Home prices are at a five-year low amid a dour economic outlook, as some homebuyers await further interest rate hikes and a loosening of Covid policies

Hongkongers snubbed new property sales on Sunday in the latest indication of weakening sentiment in the real estate market, after home prices fell to their lowest level in nearly five years.

Only 10 out of 128 flats at Chill Residence in Yau Tong, a new development jointly launched by Poly Property and L’Avenue International Holdings, were sold on Sunday, according to real estate agents.

“[Prospective homebuyers] are taking a wait-and-see approach ahead of possible interest rate hikes in December,” a property agent said.

“Everyone still has reservations about the outlook for the local economy, especially before Hong Kong adopts a ‘0+0’ Covid-19 policy” and lifts all curbs for travellers entering the city, the agent said.

Monthly transactions of new homes dropped to 358 worth HK$4.85 billion in November, with both figures falling to the lowest since April, a sign of a weakening market, according to data from another agency.

Prices of lived-in homes in Hong Kong had their worst month in an already bad year in October, slumping to a nearly five-year low as worsening global and local economic conditions continued to weaken market sentiment.

The Rating and Valuation Department’s home price index for November was down 2.4 per cent on a monthly basis to 352.4, the lowest level since November 2017, when it was at 347.2. The index has lost 10.5 per cent this year.

The decline in home prices looks set to deepen. A market index has already lost 16.8 per cent since its peak in August 2021. The agency expects the gauge to decline further to nearly 25 per cent by late January.

Price declines in some estates have already exceeded that level. Telford Gardens in Kowloon Bay has seen a 30 per cent slump from a peak in September 2021.

The average price at Chill Residence was HK$17,938 per square foot after discounts of up to 15 per cent, which was 8.9 per cent cheaper than HK$19,697 per square foot of the lived-in estate One East Coast in Yau Tong.

The units on offer ranged from 261 sq ft to 730 sq ft and were priced between HK$4.14 million and HK$13.38 million, after discounts.

“There has been a slew of unfavourable news in November, such as continued interest rate hikes by the US, the unstable pandemic situation on the mainland and fluctuations in the stock market, which has accelerated the decline of the property market,” another agent said.

“However, the market expects the rate of interest rate hikes in the US to slow in December and the pandemic situation on the mainland to slowly come under control,” the agent said, adding that if there were positive developments, second-hand home prices could bottom out this month.

(South China Morning Post)

Bad news: Hong Kong homeowners looking to sell may have missed window as price decline set to deepen

A market index which has already lost 16.8 per cent since the peak in August 2021, is expected to decline further to nearly 25 per cent by late January

The decline for some estates has exceeded that level, with Telford Gardens in Kowloon Bay witnessing a slump of 30 per cent

Homeowners in Hong Kong looking to sell have missed the window for striking a favourable deal, analysts said, as they expect property prices to continue to slump after touching the lowest level in five years.

The market index fell 1.6 per cent to 159.76 for the week ending November 20 and dipped a further 0.4 per cent to 159.16 for the week ending November 27, the lowest since October 2017. While the index has lost 16.8 per cent since it hit a record high of 191.34 in August 2021, The agency expects a further 9.5 per cent drop to 144 by Lunar New Year in late January. If the gauge hits 144, a level last seen in 2016, the overall decline could touch 24.7 per cent.

Price declines in some estates have already exceeded that level, slumping by as much as 30 per cent since the peak.

“The decline in home prices has not stopped,” agent said. “If there is no good news in the market that can cause fluctuations, the index will test the 144 level around Chinese New Year.”

At Telford Gardens in Kowloon Bay, prices have plummeted 30 per cent from HK$15,151 (US$1,939) in September 2021 to HK$10,602 in the week ending November 20. Greenfield Garden in Tsing Yi has seen prices sink 28.9 per cent from HK$16,470 in mid-August 2021 to HK$11,706.

The agency’s view was echoed by Natixis. Hong Kong’s property prices will eventually decline 25 per cent from the peak in 2021, the French bank said in a report on Wednesday.

Prices will fall 12 per cent in 2023 but the pace will slow down to 2 per cent the following year, Natixis said, citing “the perfect storm of yet another economic recession and sharply rising interest rates” following increases by the US Federal Reserve.

“The question is how deep the dive will be and when it will end, especially given the recently stronger structural headwinds, such as depopulation,” the report said.

Some 113,000 people left the city between mid-2021 and mid-2022, continuing a trend for a second year in a row amid an emigration wave that has seen Hongkongers leave for countries including the UK, Canada and Australia.

Among the 112 large-scale housing estates tracked by the agency, the average prices at 73 estates have fallen by more than 10 per cent this year and by more than 20 per cent in eight estates.

Riviera Gardens in Tsuen Wan witnessed the biggest drop, with prices sinking 23.7 per cent to HK$11,044 per sq ft this year.

Meanwhile, loss-making lived-in housing transactions stood at 186 in October, or 11.6 per cent of overall sales, the highest since October 2009, according to another agency.

One of the biggest losses in absolute terms this year was on a 3,835 sq ft, five-bedroom duplex at 39 Conduit Road in West Mid-Levels. The property sold for HK$378 million, a loss of HK$22 million, in November, according to official records and agents. Including expenses like taxes and commission, the loss adds up to HK$42.78 million.

Many homeowners who are about to emigrate and in a rush to sell are also willing to accept lower prices.

At Heng Fa Chuen, a homeowner about to leave the city sold a 658 sq ft flat for HK$8.93 million in mid-November, HK$1.8 million, or 17 per cent, less than the price paid three years ago, according to the agency.

Agents desperate to attract potential homebuyers’ eyeballs and drum up sales are resorting to creative catchphrases to promote listings in the streets and branches. These usually feature reasons for heavy price cuts, such as emigration and stock market losses.

The outlook for next year looks equally bleak. Goldman Sachs has forecast a 30 per cent decline between 2022 and 2023, while DBS expects a 5 per cent drop in 2023. Morgan Stanley, HSBC and two agencies have also predicted lower prices.

JPMorgan expects buying sentiment to recover after May next year, but it still predicts a fall of 8 per cent in 2023, it said in a report on Wednesday.

Analysts also expect higher interest rates to weigh on sentiment. The Hong Kong Monetary Authority raised its base rate to 4.25 per cent from 3.5 per cent in early November, the sixth increase in eight months to a fresh 14-year high, in lockstep with the US Federal Reserve.

The market believes interest rate rises will last until the first quarter of next year, said Raymond Cheng, managing director at CGS-CIMB Securities.

“Home prices will almost [bottom out] between the first and second quarter,” said Cheng.

With prices having fallen by about 15 per cent so far, they may decline by a further 5 to 8 per cent in the next few months, and with that it would be probably over, he added.