Hong Kong's property market grappling with sinking property values

Hong Kong, September 6 : Hong Kong's renowned property market, once a beacon of the city's financial prowess, is experiencing a substantial downturn. Property revaluations are revealing significant declines in profits, while demand for properties continues to wane due to an ongoing affordability crisis.
The city's darkening economic outlook, coupled with mainland China's economic woes, has further dampened market sentiment, leaving property developers grappling with sinking property values, reports Nikkei Asia.
Key developers, Sun Hung Kai Properties (SHKP), one of the region's most prominent developers, are reporting sharp declines in profits.
One of the region's most prominent developers revealed that its net profit for the financial year ending June 2023 had fallen by 20 per cent, landing at HKD 19.04 billion, reported Nikkei Asia.
The company attributed the drop to a revaluation loss on its investment properties, which reduced their worth by HKD 2.41 billion. Last year, the company saw a gain of HKD 221 million, according to SHKP Chairman and Managing Director Raymond Kwok Ping-Luen.
SHKP noted that the net revaluation loss primarily impacted its office portfolio due to falling market rents. However, this was partly mitigated by a gain in the value of its retail and serviced apartment portfolio. The company's filing to the Hong Kong Exchange echoed concerns about the downturn in market conditions, particularly in the office sector.
Other developers in the region are experiencing similar struggles. Sino Land, another significant player in Hong Kong's real estate scene, reported a 25 per cent drop in net profit for the financial year ending June 2023.
This family-owned developer, originally from Singapore, has faced substantial losses, according to Nikkei Asia. Robert Ng Chee-siong, the company's second-generation tycoon, stated that the market's performance had been weakened by HKD 580 million in investment property losses after accounting for deferred taxation.
The challenges aren't isolated to these two companies. New World Development (NWD) recently warned that it could experience a staggering annual net loss of up to HKD 20 billion, a sharp reversal from the HKD 900.9 million profit it posted a year earlier.
The company's stock suffered a significant decline on Monday following this revelation. The total loss could reach HKD 9.5 billion, according to the company's statements.
Henderson Land Development, another key player in the Hong Kong real estate market, also reported a substantial decline in profits. The company's half-yearly net profit until June dropped by 47 per cent, falling to HKD 3.17 billion. Its fair value loss on investment properties, including those under development, increased nearly twentyfold, highlighting the challenges facing the sector.
Economists are becoming increasingly concerned about the broader implications of these developments. The same Nikkei Asia report quoted OCBC Hong Kong economist Cindy Kueng, who forecasted a full-year growth rate of just 2.3 per cent for Hong Kong.
She further noted that approximately 34 per cent of household wealth has been wiped out, contributing to weakened consumer sentiment. These financial losses suggest a dim outlook for Hong Kong's property market, with the possibility of it entering a negative economic cycle.