New Territories home prices that surged most in Hong Kong’s property boom are falling faster in the downturn

19

As Hong Kong’s property market turns south, homeowners of New Territories properties are feeling the pinch more than others, as flat prices in the area have fallen faster and as much as 16 per cent since August.

Among the area’s top five residential estates by price decline based on government data, City One Shatin is leading the pack and recorded the largest drop in the past two months. The average price for 10 transactions completed in October was HK$15,191 per square foot, 9.3 per cent down from September and 15.4 per cent from August, according to data from Ricacorp Properties.

Hong Kong properties find no buyers, not even foreclosed ones

Prices at the four other estates – Yoho Town in Yuen Long, Tsuen Wan Centre and Belvedere Garden in Tsuen Wan, and Serenity Park in Tai Po – have fallen more than 10 per cent since August.

Ricacorp’s head of research Derek Chan said small-sized flats in the area, seen as hot choices for first-time homebuyers, were hit hardest because prices of these units had increased too fast in the past two years. These micro flats have been more affordable to young people as their sizes translated to a relatively lower total price.

“When the market suddenly saw a U-turn [change in sentiments], they dropped the fastest,” said Chan.

In a transaction for a 284 sq ft flat at City One Shatin brokered by agent Centaline Property, the unit was sold for HK$5 million only after three rounds of price cuts that shaved off a total of HK$800,000, or 14 per cent, of what the seller had originally asked for.

Homeowners face negative equity – and agencies say it will get worse

“In every case, the seller had to slash the asking price, without any exception,” said Man Lai, manager at Centaline’s City One Shatin branch. “Some have to cut 10 per cent to 15 per cent [in prices] to complete the deal.”

In every case, the seller had to slash the asking price, without any exception

Man Lai, Centaline Property

Prices of New Territories lived-in flats under 430 sq ft jumped 53.7 per cent from February 2016 to June 2018. By comparison, units between 753 sq ft and 1,065 sq ft on Hong Kong Island only rose 26.2 per cent in the same period, according to the Rating and Valuation Department.

In September, the average price of a 430 sq ft flat on Hong Kong Island was HK$7.2 million, while a similar unit in the New Territories cost HK$5.6 million.

Buying sentiments in Hong Kong have been dampened by the US-China trade war and the global stock market slump. Homeowners and investors of small units in inferior locations with weaker holding power than owners of larger flats on Hong Kong Island are more pressured to sell, which in turn drive prices down faster.

“Unlike the deep-pocket homeowners, they are more vulnerable in a slowing economy, which eats into their wealth,” said Sammy Po Siu-ming, chief executive of Midland Realty’s residential division. “They are afraid that their assets will evaporate.”

Taikoo Shing on Hong Kong Island saw only nine transactions completed in September and October, with the average price increasing 2.7 per cent, while Laguna City in Kowloon recorded eight cases and an 11 per cent price rise in the same period.

At Kingswood Villas in Yuen Long however, a total of 42 transactions were completed in the past two months, and the average price fell 4.9 per cent between August and October.

Yuen Long flats meet tepid demand as Hong Kong market cools

Property agents said the price decline in New Territories properties would continue as new supplies come on stream in the area.

“Buyers are being drawn by the new flats,” said Richmond Wong, an agent with Ricacorp Property’s Yuen Long branch. “Developers are offering mortgage plans of as high as 85 per cent of the total value to attract buyers with limited budget.”

Source