Investments in Hong Kong’s offices, shops and homes slowed to a standstill as Covid-19 outbreak adds to market’s woes
Investments in Hong Kong’s real estate are almost at a standstill, as the global coronavirus outbreak exacerbated the slumping sentiment from half a year of anti-government protests and the ongoing US-China trade war.
February’s transactions declined 13 per cent from last year to 3,572 deals, the lowest monthly tally in four years, comprising both newly launched property and lived-in homes, according to estimates by a real estate agency firm. On the high end of the property market involving offices, shops or homes exceeding HK$100 million (US$12.87 million) in value, only 17 deals changed hands last month, the lowest since 2009 while the average deal size shrank 44.1 per cent to a decade low of HK$235.3 million.
“There is a lack of incentives for transactions,” an agent. “Landlords want to wait until the coronavirus situation eases before selling their property and have stronger holding power due to low interest rates.”
The data underscores the market’s gloomy outlook, as the bull run in the world’s most expensive real estate market stumbled after many months of anti-government protests sapped appetite. Now, as the coronavirus outbreak shows no signs of letting up, few buyers dare to venture into sales rooms or commit to big-ticket purchases.
The last weekend offered the latest sign of gloom: China Evergrande sold 49 of the 141 flats on offer at its Emerald Bay project in Tuen Mun, even after the developer increased its average discount to 14 per cent. The sales slump was the city’s first major launch in two months, further weighing down on home prices, which have fallen 7.6 per cent this month from a record last May.
“We are just starting to enter a down cycle, unlike the severe acute respiratory syndrome [outbreak in 2003] when we were coming to the end of the down cycle since 1997,” another agent said, adding that the agent expects prices in the mass-market and mid-market segments to drop by 10 to 15 per cent this year. That could generate interest in buyers, the agent said.
Hong Kong’s home prices slipped 6.5 per cent in February from its August 2018 peak before the city was engulfed by anti-government protests, according to a property price index compiled by a real estate agency. In comparison, home prices plunged by as much as 70 per cent during the 2003 Sars outbreak from their 1997 peak.
An agent said that Hong Kong’s current shortage of land and homes, combined with the backdrop of declining interest rate and easier mortgage rules, could provide a strong support for home prices.
Declining home prices may find a floor if the current Covid-19 outbreak stabilises by June or July, according to a forecast by an international agency firm, adding that first-half transactions may drop 10 per cent to 22,720 from the second half of 2019.
In the luxury segment, local and mainland Chinese high net worth individuals have “virtually stopped all dealings” and opted to diversify in overseas markets, the agent said in February. These potential buyers are likely to turn cautious on investment as business prospects and economic conditions weaken in Hong Kong, which would pull luxury prices down by another 5 to 10 per cent for the year.
“Investors want to hunt for bargains before buying, because factors such as the trade war, last year’s social unrest and the current coronavirus situation have pushed home prices down,” the agent said.
(South China Morning Post)
More Ocean Marini flats go on the market
Wheelock and Company (0020) released 60 flats in the third price list for Ocean Marini at Lohas Park yesterday, offered at an average of HK$15,698 per square foot after discounts. The developer had received 1,500 checks as of Monday for the 202 flats released in the first two price lists, 6.4 times oversubscribed.
The project will provide a total of 503 units, with most of them being two-bedroom and three-bedroom flats.
Meanwhile, CK Asset (1113) will raise the prices of 30 flats at Seaside Sonata in Sham Shui Po by 2 percent, and the first five buyers who purchased designated residential properties will be entitled to receive one gold ingot in the value of HK$98,000 for each residential property purchased.
In the commercial property market, a street shop with a gross floor area of 800 square feet on Yiu Wa Street in Causeway Bay changed hands for HK$34 million, or HK$42,500 per sq ft, after HK$86 million was slashed from the initial asking price.
In the secondary market, a 522-sq-ft flat at Sky Tower in To Kwa Wan fetched HK$8.7 million, or HK$16,667 per sq ft, after HK$2.1 million was cut from the original asking price.
A 705-sq-ft flat at Lohas Park Phase 1 The Capitol sold for HK$8.9 million or HK$12,624 per sq ft, after HK$800,000 was reduced from the first asking price.
In Pak Sha Wan, a 645-sq-ft flat at Heng Fa Chuen changed hands for HK$9.9 million, or HK$15,349 per sq ft, after HK$2.38 million was rubbed off from the initial asking price.
In other news, overall stamp duty raised from home purchases in February dropped 4 percent month-on-month to HK$785.8 million, hitting a six-year low, according to data from the Inland Revenue Department.
The amount of buyer's stamp duty collected surged 18 percent month-on-month to HK$235 million and the amount of double stamp duty applied to residential property transactions plummeted by 10 percent month-on-month to HK$334.4 million.
In the rental market, the average rent of private residential properties dropped 2 percent month-on-month to HK$34.7 per sq ft in February due to the spread of the coronavirus.