With the growing tension of the trade war between the United States and China, as well as the unprecedented level of street protests and public unrest in Hong Kong, demand for residential property has been impacted, causing the city’s inventory of unsold residential property to reach 10,000 at the end of the second quarter, which is 1,000 more than at the end of March, and also the highest number in more than a decade.
The expanding stock underscores a proposal by Hong Kong Chief Executive Carrie Lam to tax developers to bring housing supply in line with demand and help rein in prices.
If passed by the city’s legislature, the proposed duty will slap a retroactive duty of about 5 per cent of a property’s value on the developer if the property remains unsold a year after its completion.
In response, developers have increased their marketing and sales activities in May and June to clear as much stock as possible before the proposed tax kicks in.
Industry experts feel that some developers might also slow down the construction work of their new projects if market sentiment and outlook are not optimistic. Slowing down the construction could mitigate the burden of paying special rates if developers forecast difficulties in selling new units.
On May 25, Wang On Properties sold only two units out of 104 at its Maya by Nouvelle project in Yau Tong. After an estimated 1 million people marched on the streets on June 9 to oppose a controversial extradition bill, sentiments got worse. These protest rallies have continued, even though Hong Kong Chief Executive Carrie Lam declared the bill “dead”, and are turning increasingly violent.
On July 13, Wing Tai Properties and China Overseas Land & Investment managed to sell only a quarter of the 442 new apartments on offer in Tuen Mun and Tai Po. Fullsun International Holdings Group postponed a sale of the first 30 of 79 apartments at its La Salle Residence flats in Kowloon Tong, citing “a change in market sentiment”.
Most of the flats that are left empty are luxury apartments, defined as those that cost at least HK$20 million (US$2.56 million).
The high supply could cause home prices to drop by as much as 5 per cent in the second half of this year.