squarefoot 5平方 Logo

Market Decline: Ricacorp CEO Predicts 8-10% Drop in Property Prices for Second Half of the Year

Squarefoot Editor  2024-06-14  #Property Hit News

Ricacorp's Willy Liu: Annual Property Prices Expected to Drop 8% to 10%
Willy Liu, CEO of Ricacorp Properties, stated that the complete removal of property cooling measures at the end of February brought a brief rebound in both transaction volume and prices. However, relying solely on the removal of these measures without significant improvements in other factors has left the market with insufficient momentum for sustained growth. Once the most eager buyers have entered the market, a cooling trend is expected. Looking ahead to the second half of the year, Liu predicts a "decline in both volume and price," with annual property prices potentially falling by 8% to 10%. Long-term, Liu remains optimistic about the Hong Kong property market, expecting it to stabilize and improve with the recovery of the mainland economy.

At the beginning of the year, Liu had anticipated a 5% to 8% increase in annual property prices following the complete removal of cooling measures. However, after several months of observation, there have been no favorable developments in interest rates, supply, or the economy. In fact, some factors have worsened, potentially dragging the market down in the second half of the year, leading to further declines in both volume and price. 

Inventory Pressure on Developers Due to Slow Sales
Over the past two years, slow sales of new properties have put pressure on developers' inventories, with unsold units reaching nearly 21,000 at the beginning of the year. Despite developers actively launching new projects in recent months, they have not been able to clear their inventories, resulting in an increase in unsold units. The market's excitement following the removal of cooling measures was short-lived, quickly returning to its previous state. Facing excessive inventory, developers are compelled to reduce prices, putting downward pressure on the second-hand market and continuing to depress property prices. Additionally, the economy has not shown clear signs of recovery, and high interest rates are increasing mortgage pressure, suppressing investment and consumer spending. Many businesses facing liquidity issues may also sell properties at a loss to raise cash.

Property Prices and Rent Trends
Liu noted that property prices rebounded by 2% to 3% in the first half of the year following the removal of cooling measures, but this gain has been entirely erased, with prices now trending downward. He expects a 3% to 4% drop in prices for the first half of the year. Coupled with unfavorable factors, the second half of the year is likely to see further declines, with prices potentially falling by another 5%, resulting in an annual decline of 8% to 10%. Specifically, prices for small and medium-sized residential properties are expected to drop by 5% in the second half and 8% for the year. Luxury properties, affected by high interest rates and a lackluster stock market, could see price drops of 6% to 8% in the second half, with an annual decline of around 10%.

Rental Market Outlook
In terms of rental performance, continued influx of talent and increased intake of international students by local universities are expected to support rental growth. For the second half of the year, rents for small and medium-sized residential properties are projected to rise by 3%, with an annual increase of at least 6%. Luxury property rents are expected to increase by 1.5% in the second half, with an annual rise of nearly 3.5%.

Commentary from Ricacorp Director Kent Chui 
Ricacorp Director Kent Chui pointed out that property prices were under pressure and continued to decline at the beginning of the year. Although the government's removal of cooling measures briefly stimulated a rebound from the bottom, the continuous low pricing of new developments has eroded demand from the second-hand market. This has significantly reduced owners' ability to ask for higher prices, leading to a short-lived increase followed by a gradual decline. 

Disclaimer: All wordings and pictures which indicated Squarefoot editor are the copyright of 7 Advertising LIMITED. Acknowledgement is required if other parts of this publication are used. The content is for reference only, does not constitute investment advice and it does not mean that Squarefoot agreed the points. The area which show in the article is salable area if there is no special circumstances. The pictures is for reference also.

Share by Facebook

Share by Whatsapp

Share by email