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Real Estate Situation

The free fall of the property price is an inevitable trend

 

Damon Ho

9th February 2024

At the beginning of this year of Dragon, everything is evolving. In general, the property market trend is always to draw the public attention during the new year holiday. In the past few years, the Chinese New Year holiday has become a peak season for the sale of new property projects. This period is a good start for property developers to make an appropriate arrangement for the year-round property sales. However, the business outlook is deteriorating in this lunar new year holiday, and developers are all avoiding to sell the new property projects in this period. Because they worried that their projects will become the worst-selling project in the beginning of Dragon year. 

If the property market does not have new developments to act as a booster, the second-hand property market will become increasingly inactive. Under this circumstance, the property prices will decrease significantly. Therefore, it is unwise to imagine that the property market will have short-term rebound after the public holiday of Dragon year. 

Last month, the property markets have experienced widespread sliding in different districts. The areas where property prices have fallen significantly are not limited to the third-tier housing estates in the New Territories West. During this period, high-quality properties have been sold at reduced prices in various districts. These transactions had numerous emigrants' property listings, but also including premises were owned by old landlords for 20 to 30 years. The only reason for them to sell their self-use properties was lack of confidence to the property market.

If landlords sell their self-use properties at low prices, it implies that the public confidence to the property market has hit rock bottom. This phenomenon indicates that the decline market has entered the second stage. During this phase, property prices will drop further in a quicker pace, but the transaction volumes are still scarce, and it is expected that this stage may last until the end of this year. 

At the end of February, the government will announce a new fiscal budget, and the public keeps on asking for a full-fledged withdrawal of spicy measures against the property market. However, due to the current situation, the immediate withdrawal of these measures will not be beneficial for the market. The reason is that the public confidence has passed the pivotal point where it will not be able to rebound easily. The immediate removal of the two years lock-up period for new landlord will only encourage more property owners to sell properties at lower prices. Finally, the property price will fall to the lowest level.

According to the current market situation and with reference to the six years correction during the financial crisis from 1997 to 2003, this market decline may last two years more. It is difficult to predict how much it will drop in this adjustment. However, it is certain that the ultimate outcome is not welcomed by all landlords.

 
 
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1. Foreign investments down to 18 year low 2024-02-09 18:47:11

Foreign investments in China have hit an 18-year low in late 2022, with nuances of language and communication in China being one of the primary challenges.

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He also pointed out the legal restrictions for foreign businesses, known as the ‘negative list,’ which impacts the type of structure businesses can set up in China.

2. Prices to bottom whilst interest rates high 2024-02-10 09:34:14

CBRE released its comments regarding the government land sale program.

For residential, CBRE expects prices to bottom whilst interest rates remain at high levels due to high inventories accumulated by developers.

CBRE found that developers appear to be less aggressive when bidding on government land. Meanwhile, amongst the outstanding land tenders, the real estate services firm expects the sites in Kai Tak Area 4B5 and Castle Peak Road - So Kwun Wat, Area 48, Tuen Mun to be likely awarded if the government is willing to lower the reserve price.

For industrial sites, CBRE said that the development of the Northern Metropolis will involve the large-scale relocation of economic activity from brownfield land to purpose-built industrial premises.

3. Long term owners take profits 2024-02-11 13:19:10

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The improved sentiment stems from expectations that interest rate cuts are in the offing and the government will do away with the "spicy measures" that it is using to discourage speculators at a time when prices were skyrocketing.

Vendors in estates such as City One Shatin, Tung Chung Crescent, Taikoo Shing in Quarry Bay and Banyan Garden in Cheung Sha Wan saw gains on paper ranging from 49 percent to over double what they paid, according to information from property agents.

According to data from Centaline Property, a two-bedroom unit measuring 327 square feet in City One Shatin brought a paper gain of HK$2.87 million to the owner, who had held on to the place for 17 years.

4. Talent shortage will be a dilemma in 2024. 2024-02-14 18:04:05

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