Agencies
Hong Kong
Hong Kong’s once-thriving property market, a symbol of the city’s financial strength, is facing a severe downturn. Property revaluations have revealed significant declines in profits, with demand for properties waning amid an ongoing affordability crisis. The market is further strained by the city’s gloomy economic outlook and economic troubles in mainland China, creating a challenging environment for property developers grappling with sinking property values, as reported by Nikkei Asia.
Sun Hung Kai Properties (SHKP), one of the region’s leading developers, recently reported a sharp decline in profits, highlighting the sector’s ongoing struggles. SHKP’s net profit for the financial year ending June 2023 fell by 20 percent to approximately $2.43 billion. The company attributed the drop to a revaluation loss on its investment properties, which reduced their worth by about $308 million, a stark contrast to the previous year’s gain of around $28 million.
SHKP Chairman and Managing Director Raymond Kwok Ping-Luen noted that the net revaluation loss primarily impacted the company’s office portfolio due to declining market rents. However, the company saw gains in the value of its retail and serviced apartment segments, partially offsetting the overall losses.
The downturn in the property market is not limited to SHKP; other major developers are facing similar challenges. Sino Land, another key player in Hong Kong’s real estate sector, reported a 25 percent drop in net profit for the financial year ending June 2023. The family-owned developer, originally from Singapore, experienced substantial losses, with its performance weakened by approximately $74 million in investment property losses, factoring in deferred taxation. Robert Ng Chee-siong, the company’s second-generation tycoon, acknowledged the adverse impact of the declining market conditions.
New World Development (NWD) has also warned of a potential annual net loss of up to approximately $2.55 billion, a dramatic reversal from the $115 million profit it recorded a year earlier. Following the announcement, NWD’s stock suffered a significant decline, with the company projecting total losses that could reach around $1.2 billion.
Henderson Land Development, another major player in the market, reported a substantial decline in profits, with its half-yearly net profit until June dropping by 47 percent to about $409 million. The company’s fair value loss on investment properties, including those under development, increased nearly twentyfold, underscoring the severe challenges faced by the sector.
Economists have expressed growing concern about the broader implications of these market developments. According to Nikkei Asia, OCBC Hong Kong economist Cindy Kueng forecasts a full-year growth rate of just 2.3 percent for Hong Kong. She noted that approximately 34 percent of household wealth has been eroded, which has further weakened consumer sentiment. These financial losses suggest a bleak outlook for Hong Kong’s property market, with the risk of it entering a prolonged negativeeconomic cycle.
The ongoing struggles in Hong Kong’s property market reflect deeper economic vulnerabilities and highlight the need for strategic adjustments to navigate the currentdownturn.
