Hong Kong property: more supply, cheaper home prices likely to set market trends in first half of 2024, analysts say

Some 13,400 new units are expected to be launched in the city between now and June, with developers likely to turn more aggressive in cutting prices to clear inventories, they said. Interest rates are not falling fast enough to boost demand, and that situation will continue to weigh on home prices, they added.

Kai Tak, Wong Chuk Hang, Yuen Long and Tseung Kwan O are districts with the most presale projects in the first half of 2024, according to estimates published by Citigroup, UBS and Midland Realty. Four projects in Kai Tak will offer a total of 2,823 units, while four in New Territories will add 6,716 units to the market.

The number of unsold units have accumulated over the past two years as demand slumped after 11 rounds of interest-rate increases since March 2022. The city’s developers sold 49 per cent of their completed units in 2022 and 72 per cent of them last year, Citigroup estimated.

“Developers will remain under pressure on our estimated 20,600 per annum new completions in the next two years,” Ken Yeung, a property analyst at Citigroup said in a research report earlier this month. Given the high holding costs, they will step up price cuts to attract more buyers, he added.

Wheelock Properties plans to launch five to six residential projects involving about 2,200 units this year, deputy chairman Ricky Wong said on Thursday. The firm, controlled by billionaire Peter Woo, sold 1,038 units in 2023 to generate HK$16 billion of receipts.

HKMA, major banks keep rates unchanged in relief to Hong Kong businesses, homeowners

Wheelock aims to price its projects at a discount to market prices to garner more sales in the first half of the year, he added.

An optimist, Wong said the prospect of interest-rate cuts later this year, as well as demand from Hong Kong’s talent promotion scheme, could brighten up the market and lift home prices by “about 5 to 8 per cent this year,” he said.

Citigroup’s Yeung said the primary sales volume may increase slightly to 12,000 units for the full 12 months this year. While that would translate into a 12 per cent increase over 2023, the volume would still be far below “normal” 16,000 to 18,000 units per year.

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Home sales reached 10,752 units in the primary market worth HK$128 billion last year, according to the Land Registry, compared with 10,315 units worth HK$110 billion in 2022.

Hong Kong’s biggest developer Sun Hung Kai Properties topped the city’s homes sales tables in 2023, accounting for almost 30 per cent of the volume, according to Dataelements, which tracks new residential properties in Hong Kong. In terms of value, it collected HK$20.13 billion or 16 per cent of the total.

Transaction in residential units will increase only when interest rates are lowered, according to Eddie Kwok, senior director of valuation and advisory services at CBRE Hong Kong. This could happen after the end of June, he predicts.

“More than 20,000 inventories were accumulated among developers,” Kwok said. “They will make more adjustments on residential prices and offer more incentives, including higher agency rebates [to sales agents],” he said. That will help clear excess stock of unsold homes in the second half this year, he added.

While residential prices are expected to weaken in the first half, CBRE expects the magnitude of decline will be smaller than levels seen in late-2022 and 2023, Kwok said.