According to JLL's latest Residential Sales Market Monitor, the strike rate of People's Republic of China (PRC) developers in Hong Kong's government land sales market fell significantly in 2018, with the successful bidding rate for residential development sites falling to 27% from 70% the year before.
Only three of the government's thirteen residential sites were won by PRC developers in 2018, with Poly Property getting a residential site in Yau Tong and Goldin Financial and China Overseas Land and Investment securing sites at the former Kai Tak airport. All three sites' Accommodation Values were within market estimates, with two of them being on the lower end. The remaining sites were primarily sold to big-name developers in the area. qatar property finder
Although PRC developers' participation in government land auctions decreased from 90% in 2017 to 73% in 2018, their continued engagement demonstrates their long-term optimism in Hong Kong's residential property market. They were, however, more discriminating about which sites they bid on and more frugal in their pricing.
"The change in attitude might be explained by a slowing mainland economy, which grew at its slowest pace since the Global Financial Crisis in the third quarter," said Henry Mok, Senior Director of Capital Markets at JLL. With a simmering trade war between China and the United States, the mainland government has taken steps to limit capital outflow, making it more difficult for PRC developers to invest abroad, including in the Hong Kong land sales market." "In the short term, we expect PRC developers to remain selective and cautious when bidding in government land sales." Furthermore, if capital outflow restrictions are tightened further, the situation may worsen. Local heavyweights will seize the opportunity to grow their property holdings and continue to dominate the land sale market with fewer competing PRC bids. And, with home prices predicted to fall 15% in 2019, land prices are expected to fall as well," said Cathie Chung, JLL's Senior Director of Research.
In 2019, the luxury property market in Hong Kong is expected to slow.
In 2019, fewer than 100 premium residential units will be completed.
In 2019, less than 100 new luxury apartments (1,722 sq. ft. or more) will be completed in Hong Kong's traditional luxury residential neighborhoods, such as The Peak, Southern district, Kowloon Tong, Homantin, and Mid-Levels, according to JLL's latest Residential Sales Market Monitor Report.
According to JLL's Residential Price Index, capital values in the mass residential property market have declined by 4.2 percent since peaking at the end of August 2018, marking the end of a 27-month streak of increase. The luxury market, on the other hand, has held up better, with capital values basically unchanged in the fourth quarter of 2018.
Recently, a mansion at Ultima in Homantin was sold for HKD333.8 million, and another at Serenity Point in Sai Kung was sold for HKD188.0 million. In both cases, the deals set new highs in terms of unit price for their respective areas.
"The distinct character of buyers in the two market groups plays a crucial role in the duality in pricing trends," says Henry Mok, Senior Director of Capital Markets at JLL. While cash-rich investors support the luxury residential segment, which is focused on acquiring their dream houses, the mass residential segment is more susceptible to market mood and populated with purchasers who are more pragmatic when making purchasing decisions. Many in the latter will choose to wait and see if the market continues to be dominated by negative sentiment in order to obtain larger price reduction and lower transaction costs." Capital values in the mass category fell by 10.1 percent during the previous market downturn in 2016, when uncertainties resulting from a US Fed rate hike at the end of 2015 and Brexit weighed on Hong Kong's housing market. The luxury segment experienced a relatively modest 1.9 percent drop. Given that less than 100 units will be finished in conventional luxury neighborhoods in 2019, the top-end of the market is likely to be more resilient to sagging market sentiment during the present downturn, particularly if it is shorter and milder than projected," he noted.
"Needless to say, uncertainty reigns amid an escalation in trade hostilities between China and the United States, which might impair global economic development and depress investment activity," said Denis Ma, Head of Research at JLL. Hong Kong, as a small and open economy, will be impacted. In this regard, the current market outlook is still strongly reliant on the result of the trade war, which will determine market sentiment.