Hong Kong Agency Midland Warns of Loss as Home Sales Near 27-Year Low

Hong Kong property agency Midland Holdings expects to report a full-year loss after recording an estimated net loss attributable to shareholders of HK$480 million ($61.6 million) for the first 11 months of 2022.

The anticipated result would reverse the company’s HK$100 million net profit in 2021, Midland said in a filing with the Hong Kong stock exchange. The latest guidance is based on a preliminary review of Midland’s unaudited consolidated management accounts.

The broker attributed the likely loss to a roughly 40 percent decline in transaction volume for Hong Kong residential property sales, which it said may reach a 27-year low in 2023.

Other negative factors cited by Midland include limited rental concessions granted by landlords, as well as poor market conditions in mainland China, which has suffered COVID-related lockdowns and a loss of buyer confidence in presales of uncompleted properties, the company said.

Double-Digit Price Declines

Midland’s profit warning comes as CBRE forecasts transaction volume in Hong Kong’s residential market to remain sluggish, with higher interest rates continuing to weigh on sentiment and buyers taking a wait-and-see approach.

Overall residential prices in October were down 10.5 percent in the year to date and 11.5 percent from their all-time high in September 2021, the property consultancy said in its Hong Kong Residential Market report. The negative trend is seen continuing at least until Chinese New Year.

In terms of the rental residential market, homeowners at newly completed projects may face pressure to lease out their properties amid the worsening economic environment, CBRE said.

Overall average rent in Hong Kong fell 1.8 percent in the year to October and was 10.3 percent lower than the all-time high in August 2019 — a stark contrast with rival Singapore, where private home rents surged 20.8 percent in the first nine months of the year.

Job Cuts on the Cards

With the housing market still looking for the bottom, the South China Morning Post reported in November that more than 3,000 employees at Hong Kong property agencies would lose their jobs.

Midland and the other Big Four local property agencies — Centaline, Centaline-owned Ricacorp and Midland-owned Hong Kong Property Services — have been reducing headcount and expect to let go of at least 3,100 people through early 2023, the newspaper said.

According to its annual report for 2021, Midland employed 5,701 full-time workers and 393 part-timers during that year.