Developers from the People's Republic of China were awarded fewer residential sites in Hong Kong in 2018.

 According to JLL's new Residential Sales Market Monitor, the strike rate of People's Republic of China (PRC) developers in Hong Kong's government land sales market fell significantly in 2018, with the competitive bidding rate for residential construction sites falling to 27% from 70% the year before.

Just three of the government's thirteen residential sites were won by PRC developers in 2018, with Poly Property winning a residential site in Yau Tong and Goldin Financial and China Overseas Land and Investment winning sites at the former Kai Tak airport. All three sites' Accommodation Values were within consumer expectations, with two of them falling towards the lower end. The remaining sites were mostly sold to big-name developers in the area. Qatar For Sale - Property Hunter

While PRC developers' participation in government land sales decreased from 90% in 2017 to 73% in 2018, their continued participation reflects their long-term optimism in Hong Kong's residential property market. They were, however, more cautious on which sites they bid on and more conservative in their pricing.

JLL's Senior Director of Capital Markets, Henry Mok, said, "The shift in mindset can be explained by the slowing mainland economy, which expanded at its slowest rate since the Global Financial Crisis in the third quarter. With a simmering trade war between China and the United States, the mainland government has taken steps to limit capital outflow, making it more difficult for PRC developers to invest abroad, particularly in the Hong Kong land market." In the short term, we expect PRC developers to be selective and conservative when bidding on government land sales. Furthermore, if capital outflow constraints are tightened further, the situation could worsen. Local heavyweights will seize the opportunity to increase their land holdings and continue to dominate the land sale market with less successful PRC bidders. And, with housing prices projected to drop 15% in 2019, land prices are expected to fall "Cathie Chung, Senior Director of Research at JLL, said, "Follow."

 

In October, selling rates in Hong Kong's new residential projects fell dramatically.

According to JLL's Residential Sales Market Monitor, first-day sell-through rates for newly launched mass residential projects (with more than 80 units in the first batch of sales) fell sharply in October 2018.

According to JLL research, first-day sell-through rates for newly launched mass residential projects averaged just 51% in October, compared to a 97 percent average from January to September this year.

According to government data released in October, primary market transaction volumes surpassed secondary market transaction volumes by 23% in September, the first time this had happened since November 2015, when the housing market briefly weakened.

JLL's Senior Director of Capital Markets, Henry Mok, commented, "Developers have lowered asking prices to offload stocks as a growing number of buyers adopt a wait-and-see attitude. As a result, the pressure on sellers to lower secondary market prices can only grow. Additionally, developers are aggressively attempting to capture more demand from the secondary market by providing greater rewards such as loans with higher Loan-To-Value (LTV) ratios up to 80% and aggressive sales tactics such as extended payment periods; in some cases, enabling the buyer to occupy the unit until final settlement "ayment," she says.

JLL's Senior Director of Research, Cathie Chung, said, "The city's housing market is facing greater downside risks due to rising trade tensions between China and the United States, as well as a slowing mainland economy. We anticipate a 15% drop in home prices in 2019, with sales activity remaining concentrated in the primary sector ""market," she says.