HK Property Market Watch — August

Read less. Know more. August in three minutes:

Key takeaways:

• Property demand still remains strong
• Mortgage rate has increased and will continue to rise
• Declining property market sentiment suggest a decline in the second half of the year
• Property developers are lowering prices of first-hand units in anticipation of poorer market outlook
• Developers are opting for leasing properties instead of initial plans to sell them due to poorer market sentiment and vacancy tax plans

First-hand property developments in the news:

• LP6 — Tseung Kwan O
• Madison Park — Cheung Sha Wan
• One Artlane — Sai Ying Pun
• Monti — Sai Wan Ho
• Park YOHO Milano — Yuen Long
• Cullinan West II — Sham Shui Po

Property demand still remains strong:

• Demand for tiny apartments jumps 52%
• Hang Lung Properties chairman, Ronnie Chan, expects demand to remain strong
• The several measures already implemented, such as restrictive mortgage policies, will likely limit the impact of interest rate increases.
• Hong Kong private homes rose to another record in July

Mortgage rate increases:

• US Federal interest rate hike has put pressure on HK rates. In August, Hong Kong’s top banks increased mortgage rates by 0.1%
• HIBOR has been trending upwards for the last 12 months
• HK banks hike mortgage rates. HK people held HK$1.258 trillion in outstanding mortgage loans with a failure to repay rate at 0.02% as of June

Declining property market sentiment:

• Hong Kong receives 80% of China’s outbound property investment. More financial tightening in the mainland has strong implications on the HK property outlook
• UBS suggests HK home prices may slip by 5-10% over the next 1.5 years
• Three major banks — Citigroup, UBS, CLSA (amongst other groups) have all forecasted a price correction and drop in the market over the next year. CLSA expecting a drop in 15% over the next year.
• Other real estate organizations expect a similar trend. Knight Frank expects deceleration in the growth of home prices. Midland Realty expects price deflation by 5% amongst major housing estates
• Several buyers are starting to pull out of purchases after already putting in deposits.
• Demand for residential property is starting to decline, especially due to the US-China trade war, the weakness of the renminbi, and decline in Chinese equities.

Developers are lowering prices of first-hand units

• SHKP has begun lowering prices for Cullinan West II in light of declining market sentiment
• Nan Fung price new flats below market rate

Developers are opting for leasing properties instead of initial plans to sell them in order to avoid potential vacancy tax:

• To minimize the impact of the new vacancy tax, developers are switching more unsold luxury flats from sales to leasing markets.
• Nan Fung developers have leased out several large luxury units to companies controlled by senior management to avoid vacancy tax. Sun Hung Kai Properties too plan to keep a block of units at Victoria Harbour for leasing instead of for sale.
• Hong Kong developer Swire Properties withdraws luxury apartments from for-sale market in the middle of poor market sentiment

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