Home sales in Hong Kong fell 40 percent year-on-year to the lowest level since the 2008 global financial crisis, data from the local land registry and forecasts from real estate agencies showed.
Analysts said the downturn in one of the world’s most expensive real estate markets is expected to ease by mid-2023 and home prices could drop by as much as another 10 percent this year.
Last year was “the worst year since 2008 for Hong Kong residential buildings,” said Praveen Choudhury, an equity analyst at Morgan Stanley who specializes in real estate and conglomerates in the city.
Sales of homes sealed by the real estate development arm of Hong Kong’s richest man Li Ka-shing have halved from 2021 as the city struggles to revive its economy after years of harsh Covid-19 restrictions. New home transactions at CK Asset Holdings, Li’s real estate unit, fell from 900 in 2021 to about 450 in 2022 as the region grappled with the first major outbreak of the Covid virus, which peaked in March.
The total transaction value of its sales doubled to around HK$26 billion (US$3.3 billion) due to the sale of luxury apartments. But sales at 21 Borrett Road, a flagship development in the heart of the city, have come under scrutiny after 152 units were sold totaling HK$21 billion, with an average price per square foot less than the average of other previously sold units. .
“Total transaction value this year is better than expected,” William Kwok, director of sales at CK Asset, told the Financial Times. “A bundle deal is just like selling units one at a time when it comes to sales volume from a company perspective.”
Under Beijing’s no-covid policy, Hong Kong has only recently reopened its borders With the rest of the world, non-quarantine travel to mainland China is expected to resume from mid-January.
New home sale agreements fell to 10,068 between January and November 2022, from 16,136 during the same period in 2021, according to the local land registry, while transaction value halved from HK$214 billion to HK$107 billion.
Annual home sales agreements in 2022 are expected to be lower than those in 2008 at 11,046 units based on preliminary data for December, according to real estate agents from local real estate agency Midland Realty and Centaline Property Agency.
Developers “may have to wait until mid-2023 to see the light at the end of the tunnel,” said Stewart Leung, vice president of Hong Kong-based Wheelock Real Estate Group. Wheelock sold nearly 600 new homes in 2022 with a total value of around HK$9.5 billion, compared with 2,100 units and HK$33.1 billion in the previous year.
Real estate services groups JLL and Knight Frank expect home prices to fall by up to 10 percent overall in 2023, while JPMorgan expects an 8 percent decline in 2023.
The downward pressure on house prices has also been exacerbated by an exodus of residents following the introduction of new security laws in the city and strict Covid restrictions.
But Paul Chan, Hong Kong’s financial secretary, said in his weekly blog on Sunday that he was optimistic about the outlook, with the city’s reopening of its border with mainland China boosting sentiment in the property market, despite the continuing cycle of US rate hikes. Cast a shadow over the sector.
Some property developers “will be keen to launch more residential projects in 2023 with more discounts” to recapture last year’s lagging sales, according to Eddie Kwok of Hong Kong real estate group CBRE.
Poor performance in the real estate market has affected revenue from government land sales, with an estimated HK$35 billion generated in 2022 – a 68 per cent year-on-year drop – according to Martin Wong of Knight Frank.
A plot of land in Kowloon that could accommodate 1,750 units was awarded last month to CK Asset with a bid of HK$8.7 billion, which put the average price per square foot of gross floor area well below expected at HK$6,138, It is the lowest level since 2014.