Hong Kong Property Prices Set to Plummet Further

Asia property sales are booming in general, but nowhere more prominantly than the Hong Kong market. 2018 was the second-best year for property sales ever recorded during the smoking hot first half, where transactions worth HK$403.7 billion (US$51.5 billion) were reported. The bad news is, the market has slumped since August, which led to a 58 per cent year-on-year drop in all property sales by the end of the year according to Midland Realty.

In all, a total of 79,185 deals worth some HK$729.56 billion were completed in Hong Kong in 2018. However, according to local real estate company Midland Realty, the downturn from November brought the lowest figure for December in 28 years. The news is even worse than 2012's instability. Derek Chan, head of research at Ricacrop Properties, was cited by Yahoo News saying:

“Although we saw the market cooling down in the second half, prices are still at a very high level. This has contributed to the record high value."

These December numbers indicate the lowest monthly transaction volume since March last year, and are a foreboding of even worse news accoring to experts. Chan went on to describe how buyer confidence is now sagging too. Ricacrop’s Chan continued his analysis:

“Given the macro uncertainties from the US-China trade war, and possibly more US rate hikes during the first half, they won’t move [in the property market] in a hurry.”

Ricacorp says it expects more than 50,000 residential units selling by the end of 2019, a figure which will end up as a decline of about 10 per cent from last year. The company did shine light on a bright spot, a projected increase in ready-to-sell homes in New Territories. But this positive will only put more pressure on sales prices. Meanwhile, other reports project even greater falls in the outlook. The China-America trade war has created a lot of volatility in the stock market and interest rates, and experts expect home prices to rise by as much as 25% accordingly. Stephanie Lau, vice-president and senior analyst at Moody’s was also cited by Yahoo saying:

“The primary market’s price correction will be gradual. In 2019, what we see first will be a drop in transaction volumes."

To further exacerbate the already shaky Hong Kong property situation, nose-diving profits are now causing massive tension between sales firms and the developers who vested tens of millions in real estate deals. Sandi Li reporting for the South China Morning Post highlights this aspect. In Li's report, Sino Land dropped its commission rates to just 1.7 percent for the Grand Central project in Kwun Tong. Clearly, a domino effect is taking place in the wake of the disastrous last quarter mess.

Every segment is going to be affected in my view. This can be seen in the plummeting prices for ultra-high-end properties like the Mount Nicholson development  7,978-square-foot “House No. 16” that sold for 7.4% less than its nearest neighbor. The sale price of HK$92 million was way down from “House No. 17,” which sold for HK$780 million back in April. This fall reflects the across the board drops shown by the Hong Kong Rating and Valuation department figures. Nearly all the experts say the price catastrophe is set to continue.