Hong Kong's pre-owned home sales dry up, forcing many owners to settle for losses as capital shifts to new abodes

By Lam Ka Sing kasing.lam@scmp.com

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August 13, 2020 3:49 PM SGT

The prices of pre-owned homes in Hong Kong have come off their 10-month peak in June, as buyers shifted their attention to newly launched projects amid social-distancing measures during the city's coronavirus relapse, forcing some desperate sellers to unload their lived-in property at losses.

Five flats changed hands across 10 major housing estates in the city on Saturday and Sunday, the lowest weekend transaction rate in six months, according to data by Midland Realty, which operates one of Hong Kong's biggest network of real estate agents. A separate data set by Ricacorp Properties reported 93 sales across 50 estates last week, for the lowest rate since February.

"The property price index in July will still be under pressure," said Derek Chan, head of research at Ricacorp Properties. "Although the epidemic improved slightly in late June when the government relaxed the social gathering restrictions, the positive factors were completely offset by the third wave of the epidemic that broke out in early July."

The shift in focus among property buyers and investors in Hong Kong, the most expensive urban centre for 10 consecutive years, may offer some relief to the developers amid an increasing glut of who still have between 3,000 and 4,0000 apartments in the pipeline to launch this year in a market that is mired in its worst recession on record.

Last weekend, Henderson Land Development sold all 185 flats at its Seacoast Royale project in Tuen Mun during its weekend launch, with as many as 46 buyers bidding for every available apartment. In Kowloon, a flat measuring 931 square feet at The Waterfront sold for HK$19.5 million (US$2.52 million), or 5 per cent below market price, after the owner slashed HK$4.3 million off his asking price because of what he considered bad market sentiment.

"As the pandemic worsened rapidly in mid-July, quite a few homeowners have softened their tone and offered more discounts," said Victor Wu, branch manager at Centaline Property Agency, which handled the sale of The Waterfront unit.

General view of the residential properties The Waterfront (centre), and Sorrento (Left) above Kowloon Station in West Kowloon, viewing from the city's tallest building - International Commerce Centre in Jordan on 24 June 2011. Photo: David Wong

More cases of losses are on the rise, with up to 4,000 new apartments remaining in the pipeline for launch over the next four months of the year, on top of the current inventory of 13,000 unsold abodes around the city, according to published data. Developers are launching their flats with discounts, rebates and easy financing plans that require buyers to put down as little as 10 per cent of a flat's catalogue price.

That is pushing owners of lived-in homes to slash prices. Notably, Wong Chik-wing, deputy managing director at Sun Hung Kai Properties, the biggest developer by value, paid HK$62.5 million for the former home of actor and singer Nicholas Tse at Redhill Peninsula, according to Land Registry records. The original owner incurred a loss of over HK$11 million including taxes and commissions.

A flat measuring 508 sq ft at Harbour Pinnacle in Tsim Sha Tsui sold last week for HK$12.3 million, making a loss of HK$3.3 million after taxes and fees were added. Another flat measuring 737 sq ft flat at Parc Oasis in Kowloon Tong sold for HK$15.2 million, for a loss of HK$3.07 million inclusive of taxes and fees because the owner was in a rush to emigrate from Hong Kong.

"As more owners offer more discounts, there will be ... pressure on property prices," said Sammy Po, chief executive of residential division at Midland Realty.

Parc Oasis as of 15 April 2011. Photo: Felix Wong

The spate of new attractive property launches, combined with cheap mortgages at decade-low rates, has generated renewed interest among homebuyers. Citi Hong Kong's second-quarter home ownership survey found that respondents were split on where they see property prices. The proportion of respondents who considered that property prices will rise in the next 12 months has doubled, compared with the previous quarter, while those expecting prices to fall have decreased significantly, Citi said.

The real estate market's split - a bull run in newly completed property, against falling prices among second-hand homes - is only going to be more pronounced in the second half of 2020, analysts said.

The current property market is very "distorted", said Thomas Lam, executive director at Knight Frank.

"Residential property prices are still high, but rents have continued to adjust downward due to the economic downturn," said Lam, adding that the pent-up demand released when Hong Kong's Covid-19 outbreaks began to ease in May may not last through the fourth quarter. "The rents and prices of commercial and street shops continue to fall."

Residential buildings on top of Kowloon Station. (front left to right): The Arch, Waterfront and Sorrento, photographed in West Kowloon on 7 August 2018. Photo: Winson Wong

The recent resurgence of Covid-19 in Hong Kong, where the city has reported 12 consecutive days of triple-digit new infections, has pushed back any prospect of a quick economic recovery. A further deterioration in US-China relations has added another layer of uncertainty to Hong Kong's economic outlook, said Savills.

"For investors, this means that opportunities are beginning to emerge but at a much slower pace than many had expected, and volumes have slumped as a result," said Simon Smith, senior director of research and consultancy at Savills. "With governments spending billions to support businesses and livelihoods, a lot will also depend on their resolve over the second half of the year."

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2020 South China Morning Post Publishers Ltd. All rights reserved.

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