Table of Contents
The Hong Kong property market continues to adjust, with mini-units in Sha Tin District seeing shocking sales. Li Zongwen, manager of Centaline Property Agency's Shatin City Centre branch, revealed that Room 8 on the middle floor of Block B of Tsui Wah Garden was recently sold at a "bloody price" of HK$2.788 million, a significant evaporation of HK$1.232 million compared to the purchase price four years ago, making it one of the worst loss cases in the district in recent years.
Transaction details
Property: Room 8, Middle Floor, Block B, Green Wah Garden, Shatin
Saleable area: 215 square feet (one-bedroom layout)
Sold price: HK$2.788 million
Cumulative reduction: 1.012 million yuan (26.6% less than the initial asking price of 3.8 million yuan)
Holding period: 4 years
Book loss: 1.232 million yuan (depreciation 30.6%)
Price per square foot: $12,967
The digital code behind the bloody and tearful transaction
The transaction trajectory of Room 8 on the middle floor of Block B of Tsui Wah Garden, which caused market turmoil, is a microcosm of the Hong Kong property market. By comparing the data from the Rating and Valuation Department, we found that the unit was sold for HK$4.02 million in 2021, which was at the peak of the "abnormal bull market" caused by the epidemic. At that time, the average price per square foot of nano-flats (with a usable area of 200-300 square feet) in Hong Kong reached HK$18,743, a surge of HK$231,000 from before the epidemic in 2019. But as the US Federal Reserve launched a violent interest rate hike cycle, this over-financialized market began to show its fragility.
It is worth noting that the final transaction price per square foot of the unit was HK$12,967, which is lower than the transaction price of HK$13,502 per square foot of a similar unit in the same housing estate in 2016. The actual price has regressed to the level of seven years ago. If the inflation rate of approximately 12% over four years and the mortgage interest cost of approximately 4.8% are taken into account, the actual loss of the owner exceeds 45%. Centaline Property Agency senior associate director of research, Yeung Ming-yee, said: "This phenomenon of negative real returns is extremely rare in the past 30 years of property market cycles."
Four-dimensional analysis of the causes of the crash
Oversupply crisis: Nano buildings’ “dammed lake” effect
According to the latest "Private Residential Primary Market Supply" report by the Transport and Housing Bureau, there will be 52,000 new units supplied in Hong Kong in the next three years, of which 35% are nano-units with a usable area of less than 300 square feet. What is more serious is that data from the Rating and Valuation Department showed that the vacancy rate of nano buildings reached 9.8% in the third quarter of 2023, more than double the overall private building vacancy rate of 4.1%.
Leverage disaster under the interest rate storm
Taking this case as an example, if the owner had taken out a 90% mortgage that year, more than 80% of the payment amount over the four years would have been used to pay interest. Liu Yuanyuan, chief analyst of Meridian Mortgage, calculated that if the owner adopted a H+1.3% floating-rate mortgage, the actual payment interest rate would have soared from 2.05% in 2021 to the current 4.1%, and the monthly payment would have increased by 47%. “These highly leveraged investors are the first to bear the brunt of the normalization of interest rates.”
Declining regional competitiveness: Shatin’s aging dilemma
The average age of housing estates in Shatin city centre is 38 years. Faced with competition from new-generation housing estates such as the Parkview Tower at Tai Wai Station, the aging problem is becoming increasingly prominent. Chen Guoliang, regional manager of Midland Realty, pointed out: "The management fee for new properties in the same district is HK$4.2 per square foot, while that for old housing estates is only HK$2.8, but young buyers would rather pay more for smart home packages." In addition, data from the Census and Statistics Department showed that the net outflow of population in Sha Tin District from 2021 to 2023 will reach 12,000, accelerating the loss of regional purchasing power.
The “discarding and detaching” sell-off caused by the immigration wave
Data from the Immigration Department shows that the net outflow of Hong Kong residents reached 67,000 in the first half of 2023, and the continued immigration wave is changing the property market ecology. A senior real estate agent who wished to remain anonymous revealed: "Among the urgent sales commissions we received, about 40% of the owners stated their immigration schedule, and some even accepted offers that were lower than the bank's valuation of 15%-20%."
The domino effect is taking shape
The deal has set off a chain reaction. According to statistics from Midland Realty, among the 12 properties currently listed for sale in Cuihua Garden, 7 adjusted their prices after the news broke, with an average price reduction of 8.5%. What is even more alarming is that Bank of China (Hong Kong) recently lowered the valuation coefficient of nano buildings in Sha Tin District by 0.15, which directly affects the mortgage amount of buyers. DBS Bank's head of retail banking, Ng Wei-hong, warned: "Downward valuations could trigger a negative asset crisis, especially for investors who entered the market at high levels in 2019-2021."
Policy shift exacerbates market differentiation
The government’s “withdrawal of tax incentives” policy unexpectedly became the last straw that broke the camel’s back for mini households. Shih Wing-ching, founder of Centaline Property Agency, pointed out: "Developers are becoming more aggressive in their pricing strategies for new projects. A new project in Yuen Long recently launched a 288-square-foot unit priced at only HK$4.5 million, directly snatching customers from the secondary market." In fact, the transaction volume of first-hand nano-units in the third quarter of 2023 increased by 62% year-on-year, while the secondary market fell by 39% during the same period, indicating that purchasing power is being siphoned off by new projects.
Market analysis shows that the price drop of this unit reflects a number of unfavorable factors.
1. Oversupply of nano-sized buildings: In recent years, mini-sized buildings have been completed in many areas, diversifying the source of buyers
2. Pressure from high interest rates: Rising mortgage costs weaken investment appeal
3. Aging supporting facilities in the area: Housing estates in Shatin city centre face competition from new properties
4. Impact of immigration wave: some owners rush to cash out and leave
It is worth noting that when the original owner purchased the unit for $4.02 million in 2021, the property market was at its peak during the pandemic. The agent revealed that the unit's price had been adjusted three times since November last year, from 3.8 million to 3.299 million, and was finally reduced by another 511,000 before attracting a buyer. Currently, the asking price for similar properties generally remains above 3 million yuan. This transaction may trigger a wave of price cuts in the area.
Industry insiders warned that as developers push forward new projects after the government withdraws its stimulus measures, the secondary market, especially small units, will continue to be under pressure. It is recommended that property holders should regularly review market changes.
Further reading:
