New project launches by Hong Kong developers achieved their lowest initial sales rate in five years during the first half of 2023, with only 55 percent of the 7,600 homes completed during the period having found buyers on their first day of sales, according to JLL.
With interest rates rising, that sell-through rate for new project launches was down from the 76 to 86 percent level achieved from 2018 through 2021 and even underperformed the 67 percent rate notched last year, when the city was still under lockdown. With sales slowing, JLL pointed out that developers may have to adopt strategies “sometimes below the prevailing market price” to move their inventories.
“The overall price index fell by 1.4 percent in May and June, 12.3 percent lower than the market peak in 2021. But the transaction volume dropped by over 30 percent year on year,” JLL Hong Kong senior director of projects, strategy, and consultancy Norry Lee said in a statement.
“The slowdown in property sales in primary and secondary markets reflects most buyers have adopted a wait-and-see attitude and are reluctant to buy flats as they anticipate housing prices will drop,” he added.
New Launches, Low Interest
Among the five major launches during June and July, JLL noted that half logged “lukewarm performances” on their first day of sales. With 38 residential projects scheduled to hit the market this year, developers may need to rethink marketing and pricing to find a way to attract buyers in the second half, the property consultancy indicated.
The “La Montagne” project, which is a joint venture between Kerry Properties, Sino Land, Swire Properties, and the MTR Corp in the Wong Chuk Hang area of Hong Kong’s Southern District found buyers for only 48 out of its 108 units to achieve 44 percent first-day sell-through rate. Meanwhile, Henderson Land’s High Park in Yuen Long sold 63 out of 188 homes on its launch day for a 33 percent sell-through rate.
More than 38,000 buyers registered interest in CK Asset’s Coastline II project in Yau Tong after the developer priced the project at 15 percent below other homes in the area. That project won over reticent buyers as CK Asset sold out all 626 units made available on the first day of sales this month, with JLL pointing to the strategy as a way to accelerate cash-flow.
“The new mass residential projects have to offer a bigger discount to lure buyers. ‘Coastline II’ in Yau Tong is one of the examples where the prices are attractive to buyers, marking the start of a price war,” Lee said. Coastline II has a total of 658 units, priced mostly at around HK$3 to 9 million. The remaining available units are on the market for HK$10 to HK$15 million.
“We expect some developers will follow the price cuts later this year while the others may slow down project launches,” Lee said.
As new homes sales slide, JLL said that Hong Kong’s leasing market is “facing an imminent shortage problem” with the lack of investors putting in money in the residential market.
The city’s overall rental index surged by 3.2 percent in the first half of the year as students and expats returned to Hong Kong following the city’s reopening. “We expect the rents will edge higher due to the influx of non-local students and talents into the city,” JLL Hong Kong director of research Cathie Chung said.