Hong Kong's Property Market Faces Major Downturn Amid Economic Uncertainty

Hong Kong's property market is experiencing a significant downturn, with major developers like SHKP and Sino Land reporting sharp profit declines due to revaluation losses and low demand. Key economic challenges and China's economic issues are exacerbating the situation, leading to broader implications for the city's economy.

The renowned property market of Hong Kong, once a stronghold of the city's financial success, is currently facing a significant downturn. Major property revaluations are revealing notable profit declines, and demand for properties is plummeting amid an ongoing affordability crisis. The worsening economic outlook, coupled with economic challenges in mainland China, is further dampening market sentiment, leaving developers dealing with depreciating property values, reports Nikkei Asia.

Sun Hung Kai Properties (SHKP), a notable developer in the region, reported sharp declines in profits. For the financial year ending June 2023, SHKP's net profit fell by 20 percent to HKD 19.04 billion. The decline primarily stemmed from a revaluation loss on its investment properties, which dropped in worth by HKD 2.41 billion. The previous year witnessed a gain of HKD 221 million, according to SHKP Chairman and Managing Director Raymond Kwok Ping-Luen. The loss predominantly impacted the office portfolio due to decreasing market rents, though there was a slight gain in the value of retail and serviced apartment properties. SHKP's filing to the Hong Kong Exchange highlighted the market downturn, particularly in the office sector.

Other significant developers are facing similar challenges. Sino Land reported a 25 percent drop in net profit for the financial year ending June 2023, largely due to HKD 580 million in investment property losses after deferred taxation adjustments. New World Development (NWD) also warned of a potential annual net loss of up to HKD 20 billion, a staggering reversal from a HKD 900.9 million profit the previous year. The company's stock experienced a significant decline following this announcement, with potential total losses reaching HKD 9.5 billion.

Henderson Land Development, another major player, reported a 47 percent fall in half-yearly net profit until June, dropping to HKD 3.17 billion. The fair value loss on investment properties, including those under development, increased nearly twentyfold. Economists, quoted in the same Nikkei Asia report, express concerns about the broader implications. Cindy Kueng from OCBC Hong Kong forecasted a full-year growth rate of just 2.3 percent for the city, noting that 34 percent of household wealth has been eroded, weakening consumer sentiment. These financial setbacks suggest a challenging outlook for Hong Kong's property market, possibly leading to a negative economic cycle.

(With inputs from agencies.)