Hong Kong property market is tumbling

HONG KONG: On a recent Saturday, more than 100 salespeople swarmed the floors of a luxury shopping mall in Hong Kong, haranguing shoppers to check out deals at one of the city’s latest residential projects.

One Innovale - Bellevue, built by Henderson Land Development Co, priced its first batch of apartments 9% lower than the nearby second-hand homes in New Territories, about 25 miles from the Central financial district.

But the response has been below par since its launch last month: about a third remained unsold as of the first week of October.

It’s even worse for others. At the end of the first day on sale, a 139-unit development failed to move a single unit – rare for a city where projects get snapped up within hours in a robust market.

Another widely-advertised project only found buyers for two units throughout the day, according to sales records.

“We are fighting for fewer customers due to concerns about interest rates,” said realtor Sam Wong. “Everyone is competing to be cheaper.”

The sliding demand shows how a city at the forefront of a global property downturn is bracing for an even deeper slump in coming months as interest rates rise.

Higher borrowing costs are weighing on an economy already battered by population outflow, Covid curbs and political turmoil caused by Beijing’s tightening control.

Goldman Sachs Group Inc sees home prices plummeting 30% through 2023 from last year’s levels, while Jefferies Group LLC predicts further declines after an 8% drop this year. The secondary-market is approaching a five-year-low.

Real estate has remained at the centre of Hong Kong’s US$368bil (RM1.7 trillion) economy, mainly through wealth created by high valuations – a result of the territory’s scarce land resources.

Seven of the city’s 10 richest homegrown tycoons had their fortunes built on property. Home ownership is an important indicator of success for Hong Kong’s residents, who have considered it a safe bet after a two-decade bull run.

A declining market is threatening to dent that sense of well-being, which could indirectly weigh on spending.

The latest data from the Hong Kong Monetary Authority (HKMA) – which has raised benchmark rates five times this year – show mortgage loans approved in July dropped 22.1% from June, and declined 3.9% in August month-on-month.

Those financing secondary-market transactions, in particular, plummeted 30.3% in July and 11.1% more in August.

Hawkish signals from US Federal Reserve (Fed) officials mean more interest-rate hikes are likely in Hong Kong as well. The HKMA moves in lockstep with the Fed as the local currency is pegged to the greenback.

Last month, banks in the city including HSBC Holdings Plc and Standard Chartered Plc raised their main lending rates for the first time since 2018.

They have also increased the mortgage price caps for Hibor-linked loans, to which 97% of Hong Kong’s home buyers are tied. — Bloomberg