Hong Kong property developers are putting the finishing touches on the biggest stockpile of new homes in nearly two decades, a potential glut that could weigh down prices in 2023 as the market tries to pick up steam following the worst year for new-home sales in nine years.
As many as 119 new private housing projects could be ready for launch this year, with a total of about 40,291 units, according to Ricacorp Properties. The burgeoning inventory could weigh down prices, said Derek Chan, head of research at Ricacorp, adding that areas with the newest homes may see prices lag other districts by 2 percent.
However, as long as the market stabilises, the impact will not be substantial, he said. “Previously locked-up buying power will return to the market to increase absorption, and developers will launch projects in an orderly manner in line with market conditions,” Chan said.
The actual number of new homes to hit the market will depend on developers’ assessments of actual market conditions and is likely to be closer to 20,000, according to Ricacorp. That would still represent a large increase over 2022, when 27 developments with 12,030 units were launched, according to Centaline Property Agency.
Projects connected to railway stations are the largest source of supply, involving seven stations, 16 projects, and 12,227 units, or 30.3 percent of the possible 2023 total of 40,291, according to Ricacorp’s data.
The Kai Tak area of Kowloon represents the second-largest source of the glut, with 14 projects encompassing 8,592 units. The biggest single development will be phase 13 of Lohas Park, a railway development with 2,550 flats. It is followed by a development in Tai Po that will offer 1,500 flats.
New home sales hit a nine-year low in 2022 at 9,974 because of the pandemic, a slumping stock market and increasing interest rates. Ricacorp’s Chan expects new home sales to surge about 50 per cent to around 15,000 this year.
Prices for the Kai Tak projects may correct by 5 percent based on the huge supply and their relatively high initial prices, said Raymond Cheng, Managing Director at CGS-CIMB Securities.
Recent low land prices in Kai Tak will also negatively impact market sentiment for flats in the area, Leung said. However, Leung said prices in the area should catch up over time as commercial enterprises including shops and restaurants gravitate to the area. He cited Tseung Kwan O as an area where initially low prices eventually caught up with the overall average.
