HK Property Market Update — October

Read less. Know more. Catch up on all property related news you need to know from October in five minutes.

Key takeaways:

• Market sentiment has significantly declined amongst property buyers, developers and agencies
• Transaction volumes and prices have dropped, primarily in residential, office and retail sectors
• Developers are increasingly offloading their units with 10–20% discounts on their asking prices
• Asking rental prices are also declining, tracking property prices

Decline in market sentiment

There has been a significant drop in market sentiment in the last month. There various indicators of this are:

[Property Buyers] The number of applicants for new first-hand properties at major development projects have fallen. A couple months ago, there were 3 times as many applicants per flat than there is now.

Interest in major first-hand developments over the past 2 years

[Property Developers] Developers are also becoming more cautious. Fewer developers are submitting bids for new development sites:

1. a plot in the New Territories has received the poorest response since 2010
2. total of only 8 bids were received for a plot in Ho Man Tin, even after MTR cut its shares of profit by 10%
3. The sale of a plot at The Peak was cancelled after it drew too few bidders.

Developers are also now flooding the market with new flats due to several factors, including the vacancy tax plans, new ‘Starter Homes’ and ‘Home Ownership’ schemes. Furthermore, market factors such as rising interest rates and the US-China trade war tensions has created a much more uncertain economic climate.

[Property Agencies] Some major property agencies are in process of reducing their staff count of agents over the next few months.

Transaction volumes and prices have dropped significantly

Volume of secondary market residential transactions dropped to a 13-month low in September, dropping by 22.6% from August to September alone. Retail spaces faced the biggest setback, declining 36% from August to September.

There are also several cases of asking prices for homes dropping. Many owners are opting to sell their units at 20–30% below their original asking prices before the market further declines. The drop in home prices have also caused a rise in negative equity (where the purchase price > current valuation), with some older flats’ values dropping over 20%.

Each region is experiencing a different response. According to the Centa-City Leading Index, which tracks the movement of major residential estates, HK Island has been the most affected in terms of residential property prices, with the others following:

1. Hong Kong Island
2. New Territories East
3. Kowloon
4. New Territories West

Rentals declines will soon follow too.

Developers and banks are increasingly offloading flats and providing incentives

Developers have become increasingly desperate to offload their new projects with the market uncertainty. They have been pricing new projects at 10–20% below market expectations and, in some cases, even pricing new units below older buildings in the surrounding areas.

Despite these incentives, they’re only seeing 20–50% of the flats on offer being sold, a complete difference from being over-subscribed to just a few months ago.

Recent incentives provided by developers

Looking to take advantage of some of these benefits? Contact us at ask@mypropty.com

Banks and mortgage providers are also providing incentives too:

• Vanke Property has teamed up with Centaline Mortgage Broker to offer buyers a mortgage 0.1% lower than the standard rate.
• Bank of China and Wing Lung Bank are offering rebates of up to 2% of the loan value on new-home mortgages.
• Citibank has lowered the cap for its HIBOR-linked mortgage rate.

Asking rental prices have declined too

Historically, dropping asset prices have caused rental prices to follow. As asset prices drop, landlords opt for renting out their properties instead of selling, driving up the rental supply in the market and effectively driving down rental prices. For example, one property agent in Sha Tin reported that about 10% of her clients opted to lease instead of sell their properties just in the past two weeks.

Hong Kong Property Corrections

There are several other incidents of landlords dropping their asking rents by up to 30%. One landlord at The Pavilia Bay in Tsuen Wan dropped his asking rent by 27%. With growing uncertainty, it is looking like a better time to negotiate better deals for a renting a property.

Are you a landlord that has a current listing? Are you wondering how to update the price in response to these market changes? Ask us at ask@mypropty.com

Other news:

Owners of industrial buildings will be allowed to convert their properties into temporary social housing. This is a new temporary legal change in an effort to drive up availability of housing in the city. Therefore, the industrial property sector is the only one that has seen improved returns this past month.

‘Starter homes’ scheme set for launch before the end of 2018. For more details regarding your eligibility status, contact us at ask@mypropty.com

MyPropty is a Property Management service, handling residential and commercial property units in Hong Kong. We assist landlords in managing their property portfolio, and provide market data and insights on the Hong Kong real estate market.

For more details, contact us at: hello@mypropty.com.