Hong Kong Luxe Project Sales Buoyed Mainland Chinese Buyers Post Policy Easing Says Dbs
In February 2024, the Hong Kong government announced its decision to abolish the Special Stamp Duty (SSD), Buyers’ Stamp Duty (BSD), and New Residential Stamp Duty (NRSD) for residential properties. This move by the government created an opportunity for developers to offer more new residential projects for sale and expedite the sales of their inventory to tap into pent-up demand.
The response to project launches in Hong Kong has been enthusiastic, with the return of mainland Chinese buyers and property investors and an increase in purchases by local end-users. In fact, in March and April alone, about 6,000 primary units were sold, compared to fewer than 900 units in 2023. According to DBS Group Research, a “meaningful portion” of these purchases were made by mainland Chinese buyers.
With the return of affluent mainland Chinese buyers and property investors, luxury developments are expected to be more resilient and fare better than mass market projects. On the other hand, mass market projects could potentially see price declines of 5% in 2024 if rate cuts fail to materialize, according to the report.
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Since March, developers have been faced with the challenge of a rise in new home supply and sizeable unsold inventory, leading them to maintain a flexible pricing strategy to encourage sales. This has been particularly evident in the launch of residential projects near railway stations, which have been well-received due to their strong connectivity and attractive pricing.
Several new residential projects have been launched and sold successfully since March, including CK Asset Holdings’ Blue Coast (The Southside Package 3B) in Wong Chuk Hang and Great Eagle Holdings’ Onmantin, which have collectively sold over 1,000 units for over HK$6 billion (about S$1.02 billion). Other notable sales include the YOHO Hub II by Sun Hung Kai Properties, which sold all 210 units on the first day of its launch, and Dynasty Court by Sun Hung Kai, which sold 31 luxury apartments for over HK$1.7 billion (about S$290 million).
Hong Kong-listed property developers are currently trading at a 60% discount to their current NAV (net asset value), according to DBS analysts. However, the prolonged interest rate upcycle remains a key investment risk.
Overall, DBS projects that 19,000 primary units will be sold in 2024, representing a 78% increase year-on-year. This sharp rebound in primary market activities can be attributed to the resurfacing of investor demand and a more active attitude from local end-users.
In conclusion, the Hong Kong property market has seen a significant boost in activity since the government’s announcement to abolish several stamp duties. This has led to a surge in demand for new residential projects, particularly from mainland Chinese buyers and property investors. While there are concerns about potential price declines in the mass market segment, luxury developments are expected to remain resilient.