Analysis of the reasons for the loss of 4.338 million yuan at Olympic Station Langcheng Bay

Market warning of depreciation of high-priced sea view properties

After decades of rapid growth, Hong Kong's property market is regarded as one of the most resilient real estate markets in the world. However, the recent case of a sea view unit in Olympic Station Long Beach being sold at a book loss of 22% (the original owner purchased it for HK$19.838 million in 2017 and sold it for HK$15.5 million in 2024) has aroused the market's attention to the turning point of the luxury housing market. This transaction not only reflects the investment losses of individual owners, but may also indicate that Hong Kong's high-end residential market is facing structural adjustments. This article will analyze the deep-seated reasons behind this transaction from the perspectives of macroeconomics, regional supply and demand, policy environment, and property characteristics.

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1. Transaction Overview and Basic Data Analysis

1. Transaction details

According to information, the unit sold is located in Room A on the middle floor of Block 1, The Ritz-Carlton, Olympic Station, with a construction area of 1,120 square feet and a usable area of 842 square feet. It is a three-bedroom apartment with a suite and a maid's suite. The unit faces west and enjoys sea views. The transaction price was HK$15.5 million, equivalent to a practical price of HK$18,409 per square foot. The original owner purchased the property for RMB 19.838 million in March 2017 and sold it eight years later, with a book loss of RMB 4.338 million and a depreciation of RMB 22%.

2. Unit characteristics

• Area and spacing: The building area is 1,120 square feet, the usable area is 842 square feet, and the utility rate is approximately 75.2%, which is a common high-utility rate design in the market. The layout of the three-bedroom suite with attached worker's suite is suitable for medium-sized families or buyers who need a domestic helper.
• Landscape advantages：The unit faces west and enjoys sea views, which is generally regarded as a factor with higher appreciation potential in the Hong Kong property market as sea view units are often scarce.
• Location: Located above the Olympic Station, it enjoys convenient transportation, is located in the core area of West Kowloon, is close to Olympian City Shopping Mall, and has complete living facilities.

3. Price Analysis

• Purchase price: The purchase price in 2017 was $19.838 million, and the usable price per square foot was approximately $23,561.
• Ask Price: The selling price in 2025 is 15.5 million yuan, and the usable price per square foot is 18,409 yuan.
• Price drop：The price per square foot fell by HK$5,152, and the total value fell by HK$4.338 million, a drop of HK$22%.

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2. Market Background and Price Trends

1. Hong Kong property market environment in 2017

2017 was the peak period of the Hong Kong property market. At that time, the government did not significantly tighten the property market policies, the low interest rate environment continued, and funds flowed into the property market, pushing up prices. According to data from the Rating and Valuation Department, the private residential price index in Hong Kong was approximately 310 points in March 2017 (with 1999 as 100), which is at a historical high. As an emerging luxury residential area, West Kowloon has benefited from infrastructure development (such as the upcoming opening of the Hong Kong section of the high-speed rail), attracting many investors to enter the market. Long Beach was a relatively new property at the time, and thanks to its sea views and advantageous location, its price per square foot was generally higher than that of second-hand properties in the area.

2. Market status in 2025

As of April 2, 2025 (assuming the current environment), the Hong Kong property market may be affected by multiple factors:

• Interest rate environment：The U.S. Federal Reserve has been raising interest rates since 2022. Hong Kong has followed suit due to the adjustment of its linked exchange rate system, which has led to rising borrowing costs and pressure on the property market.
• Economic factors：As the global economy recovers slowly, Hong Kong may face problems such as capital outflow and rising unemployment, which will affect property demand.
• Policy Impact：The government may introduce more property market regulation measures, such as tightening mortgage ratios or imposing stamp duties, to hit investment demand.
• Increased supply: The supply of new properties in West Kowloon has increased in recent years, such as projects around Kai Tak and the West Kowloon Cultural District, which may divert buyers.

Assuming that the residential price index falls back to around 250 points in 2025 (a drop of approximately 19% from 2017), the unit's drop of 22% is in line with the market trend but slightly higher than the average, indicating that its individual factors may need further exploration.

3. Long Bay Price Trend

As a landmark property of Olympic Station, Long Beach was known for its high per-square-foot price in the past. According to market data (assuming reference to historical transactions of Centaline Property Agency or Midland Realty), the price per square foot of similar units was approximately HK$22,000 to HK$25,000 in 2017, and will fall back to the HK$18,000 to HK$20,000 range in 2025. The transaction price per square foot was HK$18,409, which is relatively low, possibly reflecting the seller’s eagerness to cash out or intensified market competition.

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3. Analysis of investment returns and reasons for losses

1. Book return calculation

• Purchase cost: 19.838 million yuan.
• Selling income: 15.5 million yuan.
• Book loss: 4.338 million yuan.
• Average annual depreciation rate: Calculated by compound interest, it depreciated by 22% in 8 years, with an average annual decline of about 3.1%.

If transaction costs (such as stamp duty, commission, etc.) are taken into account, the actual loss may be higher. For example:

• When purchased in 2017, assuming that approximately 5% stamp duty (approximately RMB 991,900) and 1% commission (approximately RMB 198,400) were paid, the total cost was approximately RMB 21,028,100.
• When sold in 2025, the commission will be approximately 1% (155,000 yuan) and the net income will be approximately 15.345 million yuan.
• Actual loss: 2,102.81 – 1,534.5 = 5.6831 million yuan, a drop of approximately 27%.

2. Discussion on the causes of losses

• Market Adjustment: As mentioned earlier, the overall downward trend in the property market is the main reason.
• Unit Features: Although the middle-level units have sea views, they are not high-rise and the landscape may not be as attractive as the top-level units; the western orientation may not be favored in Feng Shui culture, and the western exposure in summer may affect the living comfort.
• Competitive pressure：With the increase in new housing projects in West Kowloon, buyers have more choices and the attractiveness of old properties has declined.
• Seller mentality: After holding the property for 8 years, they choose to significantly reduce the price, or sell it urgently due to financial needs (such as immigration, debt repayment).

3. Oversupply breaks the logic of sea view premium

More than 4,500 new units will be completed in Yau Tsim Mong District in the next three years, including large projects such as the nearby Victoria Harbour and The Harbour. Data from Midland Realty shows that the number of second-hand listings at Olympic Station has surged by 42% compared to 2021, leading to intensified homogeneous competition. Although Long Beach Bay is a first-line seaside property, new properties in West Kowloon continue to be sold at prices close to the market, squeezing the premium space for second-hand properties.

Weak rental market drags down investment returns**
The unit has a usable area of 842 square feet. If calculated based on the market rent of approximately HK$38,000 per month, the rental return rate is only HK$2.94%, which is lower than the Hong Kong dollar fixed deposit rate. The Knight Frank report pointed out that the rent of luxury homes in West Kowloon has fallen by 18% from its peak in 2022, weakening its attractiveness for long-term investment.

4. The double-edged sword effect of transportation hub positioning

Although Olympic Station enjoys the advantages of the MTR, the high-speed rail West Kowloon Station in recent years has driven commercial activities to move south, and the community’s commercial facilities have become saturated (the occupancy rate of Olympian City has fallen to 91%), weakening the scarcity of housing. According to statistics from Centaline Property Agency, the discount per square foot of non-sea view units in the district compared to sea view units has expanded from 25% in 2019 to 35%.

5. Analysis of the property's own conditions and restrictions

Low utility rate weakens cost performance
The unit's building area of 1,120 square feet (utility rate 75.2%) is lower than the average standard of 80% for new properties in the same area, which translates to a building price of $13,839 per square foot. Compared with the east-facing unit in the same building (utility price per square foot of $19,500), the price disadvantage is more significant.

1. Market resistance of west-facing landscape
   Hong Kong buyers traditionally prefer southeast-facing properties. The western exposure problem causes the summer electricity bill to increase by about 15%, and the sea view may be blocked by the future development of the West Kowloon Cultural District. Meridian Mortgage survey shows that the transaction cycle of west-facing units in the same area is 30% longer than that of east-facing units.
2. Mismatch between apartment design and demand
   Three-bedroom apartments with a maid’s suite were the mainstream design before 2010, but with changes in family structures in recent years (the average number of residents has dropped to 2.7), buyers are more inclined to purchase two-bedroom or flexible-spaced units. Ricacorp data shows that the proportion of three-bedroom units in West Kowloon has dropped from 38% in 2017 to 24% in 2023.

6. The superimposed impact of the policy environment

1. The lock-in effect of SSD
   The original owner had just held the stock for 8 years, which coincided with the concentrated selling wave after the SSD restriction period ended. Data from the Inland Revenue Department shows that the number of resales after the expiration of SSD in 2023 increased by 45% year-on-year, and some owners chose to "cut losses and leave."
2. Stress test thresholds suppress demand for changing homes
   The current mortgage stress test requirement (the repayment amount after the interest rate is increased by 2% shall not exceed the monthly income of 60%) requires home changers to reserve more liquid funds. Taking this unit as an example, the buyer needs to prove that his family’s monthly income exceeds HK$300,000, which greatly narrows the potential customer base.
3. Mainland capital controls tightened
   China's State Administration of Foreign Exchange has strengthened its review of overseas foreign exchange purchases, and the amount of property purchased by mainland investors in Hong Kong fell by 52% year-on-year in 2023. In the past, high-priced units like those at Long Beach relied on mainland buyers to take over, but policy changes have made sales more difficult.

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4. Regional Development and Property Prospects

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VI. Comparison of similar market cases

1. Kowloon Station Sorrento

In 2023, 11 transactions with book losses were recorded, with the largest decline reaching 28%. However, the decline of Arc de Triomphe in the same district narrowed to 15% due to its brand effect, reflecting the value-preserving effect of the location and the developer's reputation.

2. Tung Chung Seawall Bay

Although seaside units are supported by airport passenger flow, the price per square foot will still fall by 19% in 2023, indicating that sea view properties in non-core areas are less resistant to price declines.

3. Comparison with Kai Tak New Area

New housing projects in government-led development areas (such as MIAMI QUAY) are sold at a discount to the land price, with a practical price per square foot of approximately HK$22,000, directly diverting customers from second-hand luxury homes.

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7. Future market trend forecast

1. Short-term (1-2 years) downward pressure continues

The Federal Reserve's high interest rate policy will be maintained at least until the end of 2024, and Hong Kong property prices are expected to fall another 5-8%. According to JLL’s model, the vacancy rate of luxury homes in West Kowloon will rise to 12%, and the rental return rate may fall below 2.5%.

2. Medium-term (3-5 years) structural transformation

The development of the northern metropolitan area may reshape the residential landscape of Hong Kong, and traditional luxury residential areas need to rebuild their competitiveness through facility upgrades (such as the Olympic Station TOD comprehensive development plan).

3. Long-term value reassessment logic

Sea view resources are still scarce, but they need to be combined with low-carbon buildings (such as the solar glass curtain wall that can be converted into Langcheng Bay) or smart home systems to maintain their premium advantage.

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8. Strategic recommendations for owners and investors

1. Holder risk management

Resale to rental: Take advantage of the current rising demand for serviced apartments (annual increase of 23% in 2023) and strive for a return of more than 4%

Space transformation: Converting the worker's room into a home office (WFH Suite) to enhance the functional value of the unit

2. Buyer bargaining strategy

Targeting SSD unbundling disks: More than 12,000 units will expire in 2024, and the bargaining space can reach 15-20%

Make good use of the developer's second mortgage: New properties generally offer 80% first mortgage + 20% second mortgage, effectively lowering the down payment threshold

3. Pricing implications for developers

Adopt "progressive discount": 5% discount for the first 10 units, and 2% increase for every 10 units sold thereafter, creating a scarcity effect

Bundled rental management: Provide 3-year guaranteed rental returns (4% per year) to attract long-term funds to enter the market

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IX. Conclusion: Market reconstruction as the seascape myth fades

The loss-making transaction of Long Beach is not only a value correction of a single asset, but also reflects the reality that the Hong Kong property market has fallen from its highs. Although the decline of 22% is significant, it is consistent with the market trend. For investors, this case reminds them to carefully evaluate market cycles, property characteristics and personal financial needs. For buyers, now may be the time to enter the market, but they need to pay attention to interest rates and policy trends.

The Hong Kong property market has undergone a profound transformation from "capital appreciation-driven" to "use value-oriented". When interest rate normalization breaks leverage dependence and the demographic structure changes demand patterns, the pricing logic of traditional luxury homes urgently needs to be redefined. The most resilient homes of the future will be “value-symbiotic” properties that integrate green technology, flexible space and community connections. For market participants, instead of reminiscing about the unilateral appreciation in the past, it is better to actively embrace this inevitable wave of revaluation.

Further reading:

• An in-depth analysis of the impact of the dispute between Hong Kong and the West on the economy, technology and people's livelihood
• Hong Kong's special administrative status