(by Lai Chi-tin)
The economic downturn in Hong Kong and the amendment crisis have caused a strong wait-and-see atmosphere, and buyers who had purchased the properties at the peak of the property market will lose even if they have held them for years. Among them, Sea Crest Villa in Sham Tseng, which is known as the "Speculators’ Grave ", recorded a case with loss. A three-bedroom owner bought it at a high price level in 1997, and still kept it even the property prices have plummeted sometime in the period, while finally sold it for HKD9.38 million with parking space as the transaction prices have plummeted under the pullback of the property market, with a book loss of HKD164,000 after holding it for 22 years.
Wo Coek-fai from Earnest property expresses, middle-low-rise room C in block C of Sea Crest Villa phase five which is Royal Sea Crest, Sham Tseng was sold with loss, and it is in usable area of 1,056 sq ft viewing seascape, besides it was recently sold for HKD9.38 million with parking space, with the usable area sq ft price at HKD8,883. Deducting the parking space market value of about HKD1 million, the property price is only about HKD8.38 million, sharply down nearly 20% over a half-year compared with the transaction price of the similar low-rise unit of this type of block 1 HKD10.1 million without parking space in April this year. It is reported that the original owner bought it in May 1997 for HKD9.544 million with parking space as the first-hand, while the book loss is about HKD164,000 after 22 years. The new buyer is a customer who wanted to change houses in the same district, buying the unit for own use.
Many transactions of properties bought at the peak market suffer losses.
Recently, there also have properties bought at the peak market being sold with losses in other regions. According to the Land Registry, a low-rise room B which is one-bedroom in usable area of 370 sq ft in block 1, Homantin Hillside, Hung Hom was sold at HKD8.7 million last month, with the usable area sq ft price at HKD23,514. The original owner bought it in October 2016 for about HKD8.73 million, and the book loss was about HKD30,000 or less than 1% after holding it for 3 years when the SSD restraints period expired, while the actual loss estimated to be more than HKD400,000 or 4.6% including taxes and other miscellaneous expenses.
In addition, all major foreign investment enterprises are pessimistic of the property market next year. Jones Lang LaSalle pointed out when releasing its property market outlook yesterday that Hong Kong's longest rising property market has ended in the second half of this year due to local social disputes and economic uncertainties. The Chairman of Hong Kong Region and Head of Capital Markets Department of the company, Tsang Woon-ping expresses the residential property market had been ideal at the beginning of this year, and the small-medium residential property market had recorded an increase of 4% to 6% at the beginning of the year, but it fell back about 2.5% after June due to the effect from trade wars and political event, leading it to narrow the rising in the whole year until now to 1.3%, while it is estimated there will be finally no rising in the whole year.
Property prices expected to fall by more than 10% next year.
Tsang Woon-ping points out that the prices of small-medium-sized houses will fall less than that of luxury properties because many people will purchase houses if there is price cuts of 15-20% since a large amount of demand was released after the government introducing the relaxation measure on mortgage insurance and Hong Kong low-interest-rate environment continues, but the major purchasing power of luxury homes comes from the Mainland, which has disappeared under the Mainland capital control, so the falling of luxury property will be higher than that of small-medium-sized residential property.
He also expresses that the pricing of the first-hand property will face pressure and will affect the second-hand property owners’ pricing due to developers’ intention to sell faster as the launch of vacancy tax and the increasing on residential property supply, plus political events, China's economic slowdown and trade war have caused the global economic adjustment, so it is predicted the small-medium-sized houses (ie, properties under 10 million yuan) prices will fall by 10% to 15% year-on-year while luxury homes prices will decline by 20% next year.
The rents of class A commercial buildings and shops are also expected to fall.
As for other properties, the Senior Director of the Retail Department, Chen Yiu-fung expresses the business of traditional shopping areas and some shopping malls has been seriously affected, and it is expected that the rents of street shops and large shopping malls in core areas will fall by 18.4% and 5.6% year-on-year respectively. Chen Yiu-fung expects that leasing demand will continue to be under pressure next year, and it is expected that street shop rents in core areas will fall by 15% to 20% next year. However, he emphasizes that many international retailers are now entering Hong Kong and are inclined to rent malls in the core area, so it is expected that mall rents will only fall by about 5% next year, also the market is paying attention to investment opportunities for investment properties.
In addition, the Commercial Department Director, Bau Ah-lik Yali expresses the office rents in Central will fall by 6.3% yearly in the second half of this year due to weakening demand from Chinese companies, and most companies focus on cost control, so the office rents will continue to be suppressed next year, thus the movement of enterprises out of the core area has also become a major trend, besides it is expected that the rents of class A commercial buildings will fall by about 15% to 20%.
