Table of Contents
1. Overview of transaction cases: The phenomenon of breaking the reserve price of three-bedroom silver-owner housing
In 2023, a shocking low-price transaction occurred in Baguio Villa, a long-established luxury housing estate in Pokfulam: a three-bedroom unit in Room B on the low floor of Block 25 was sold for HK$8.5 million, with a usable price per square foot of only HK$8,854, which not only fell below the psychological threshold of HK$9,000 in the estate, but was also similar to the price per square foot of mid-range estates in the New Territories (such as the recent price per square foot of City One, Shatin, which is about HK$11,000-14,000). This transaction has triggered market doubts about the price support of traditional luxury residential areas in Hong Kong Island, and also reflects the change in pricing strategy under the pressure of destocking by silver owners.
2. Silver main plate pricing logic: destocking pressure and market risk premium
The core feature of this transaction is its "bank-owner" attribute, which reflects the change in pricing strategy of financial institutions when disposing of non-performing assets:
- Discounts widen: From the initial asking price of 12.8 million to 8.5 million, the cumulative decrease is 33.6%, which is much higher than the general bargaining space in the second-hand market (usually 5-15%). This move shows that silver owners prioritize cash recovery speed rather than maximizing price.
- Risk Pricing Model：According to research by DTZ, the pricing of bank-owned properties usually needs to take into account the "forced sale discount". In the Hong Kong market, such discount rate is about 15-25%, but in this case it reached 33%, reflecting the increase in risk premium as market liquidity deteriorates.
- The superposition effect of financial costs: Banks holding silver stocks need to set aside 0.5-1% of capital reserves every month. Long-term holding will increase losses, forcing institutions to accelerate the liquidation of inventory.
3. Regional market comparison: Is the halo of luxury homes in Pokfulam fading?
Although this is an isolated case, the price trend in Pokfulam has shown structural changes:
Chart 2: Comparison of prices per square foot in Hong Kong Island South and New Territories East in 2023
| area | Luxury house price per square foot (yuan) | Mid-range residential price per square foot (yuan) |
|---|---|---|
| Pokfulam | 18,000-25,000 | 10,000-14,000 |
| New Territories East | 8,000-12,000 | 7,000-9,000 |
| Price per square foot | 8,854 |
Data shows that this transaction price is close to the lower limit of luxury homes in the New Territories East, but there are two key differences to note:
- Scarcity depreciates: Pokfulam is traditionally known for its low-density sea view residences, but this unit faces a retaining wall, which has lost its scarcity value and has become similar to the landscape conditions of ordinary residences in the New Territories.
- Holding cost difference: The management fee for luxury homes on Hong Kong Island is usually HK$5-7 per square foot, while in the New Territories it is only HK$2-4. The long-term holding cost weakens the price advantage.
IV. Long-term holding benefit analysis: the reality of 1.6 times appreciation
The original owner bought it in 1996 for $3.33 million, making a paper profit of $5.17 million (+155%), but after adjusting for inflation, the actual profit shrunk significantly:
Chart 3: Changes in purchasing power during holding period (1996-2023)
| project | Numeric |
|---|---|
| Nominal appreciation rate | 155% |
| Cumulative inflation rate over the same period | 82.3% (Government Statistics) |
| Real purchasing power growth | 72.7% |
| Annualized real rate of return | About 1.9% |
This rate of return is lower than that of the Hong Kong stock market during the same period (the annualized return of the Hang Seng Index is approximately 5.2%), indicating that the wealth preservation effect of long-term holding of luxury homes is limited, especially for units that lack the blessing of scarcity.
5. Market Trend Interpretation: Stratification of the Luxury Housing Market and the Silver Owner Market Trend
This transaction heralds three major structural shifts:
- Price stratification intensifies: Luxury homes with rare views (such as sea view units) can still maintain a high premium, while units with poor views will converge with the prices of mid-range homes in the New Territories.
- Silver main plate supply increaseAccording to China Real Estate Information Corporation, the stock of bank-owned properties will increase by 40% year-on-year in 2023, mainly concentrated in the mid-to-high-end market of 10 million to 30 million, reflecting the impact of the interest rate hike cycle on multiple mortgage owners.
- Increased bargaining power of buyers: In this case, the buyer successfully bargained for 33%, indicating that the market dominance has shifted from the seller, especially for assets that need to be liquidated quickly.
VI. Future Outlook: Investment Strategies during the Revaluation Period
- Bargain hunting opportunities and risks: The discount of the silver owner's project has been expanded to attract investors, but the renovation cost (the cost of removing the wavy platform in this case is about 100,000 to 150,000) and the resale tax cost need to be carefully calculated.
- Regional substitution effect: The development of the metropolitan area in the northern New Territories may further weaken the demand for non-scarce units in traditional luxury homes.
- Interest rate policy linkage: If the Federal Reserve cuts interest rates in 2024, liquidity pressure in Hong Kong's property market may ease, but the deleveraging process will continue until 2025.
in conclusion
The sale of Baguio Residences at the “new boundary price” is essentially a market reassessment of the value of non-scarce luxury homes. This case not only reflects the financial difficulties of individual owners, but also reveals that the Hong Kong property market is undergoing a deep structural adjustment: buyers' weighting of residential added value (landscape, decoration, and community quality) has increased significantly, and the previous pricing model that relied on the halo of location is facing challenges. Investors need to re-examine the definition of "luxury homes". In a liquidity tightening cycle, only truly scarce assets can resist price erosion.
Introduction
Baguio Villa is a beach in the Southern District of Hong Kong.PokfulamA private housing estate located inHong Kong IslandsouthwestSteel Wire BayThe Victoria Road runs through the middle of the mountain.New World DevelopmentCo., Ltd., designed by Mr. Pan Zhaotang, and managed by International Property Management Co., Ltd., which occupied the company from 1975 to 1979. When the estate was launched, it was advertised as "quiet environment, far from the hustle and bustle, unbeatable sea view, square layout, convenient transportation", which is a traditional Hong KongLuxury HomesOne of the housing estates.
Baguio Villa has a total of 21 residential buildings, 33 blocks and 1,535 units. The unit area ranges from 1,020 to 2,680 square feet, and all of them provide large units with 2-4 bedrooms. The entire estate is divided into Upper and Lower Baguio by Victoria Road. Blocks 19-26 in Upper Baguio and Blocks 16-18 in Lower Baguio are numbered according to the same building, while other blocks are numbered according to the same residential unit (for example, Blocks 41 and 42 are actually the same building).
