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Real Estate Situation

Property prices will cascade down in the second half of this year

 

Damon Ho

6th July 2024

In the first half of this year, the property market has had its ups and downs. Earlier of this year, the weaken property market had been deteriorating as it did in the past year. At the end of February, the government reacted to the public request and cancelled all the cooling measures of the property market. As a result, the market rebounded quickly. Until May, the effects of the removal of the cooling measures had been subsided, property prices slid from the small peak, resulting in the property prices falling by 3% in the first half year.

The short-term bounce lasted less than two months, which was much shorter than most experts anticipated. In the second half of this year, the retail and catering industry is still facing the unfriendly business environment, restaurants have been closing down on a large scale, which will cause the shops' vacancy rate to increase. The long-term vacant shops will cause negative cash flows to landlord due to the cost of management fees, government rate and rents etc.

The sales of first-hand residential properties market rebounded rapidly in the first two months of withdrawal of the cooling measures. During this period, first-hand properties could be sold more than 500 units per week. Until recently, the sales volume of first-hand properties fell by 90% to dozen units per week. “The Haddon” in Hung Hom  only sold 13 units, accounting for 20% of the 63 units that could be sold, and “Amber Place” in Cheung Sha Wan recorded zero transactions on the first date of public opening sales. 

The significant decline in sales volume of first-hand properties has caused pressure on the money-oriented property developers. Since the third quarter, it is expected that the developers will decrease the sales prices significantly to reduce the inventories and the indebtedness. In a chain reaction, the second-hand properties have been forced to reduce the sales prices as the first-hand properties it does. 

This spill-over effect of the cutting prices will lead to a sharp rise in the nos. of negative equity. It is estimated that the negative equity cases will increase to 50,000 by the end of this year, surpassing 50% of the 100,000 cases at the peak of the financial tsunami in 2003.

In terms of property price trends, property prices will fell by 3% in the third quarter, 5 to 7% in the fourth quarter. As an end-user, you should consider searching for the self-use properties by the end of this year. If you could wait longer, it should be better to wait until next year as the prices will drop further. Owners who want to sell their properties should speed up their arrangement. It is because the later they sell, the fewer customers there will have, and their bargaining power will be weakened as time goes by.

 
 
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