After the real estate group under billionaire Li Ka-shing, Cheung Kong Holdings, discounted their new property project in Yau Tong called "Seaside Residency II", the market's response was fervent. The subscription rate exceeded expectations by 60 times, marking it as Hong Kong's most subscribed new property.

The effects of the price cuts were evident. Consequently, on August 14th, Cheung Kong unveiled the next phase of the project, "Seaside Residency I", which includes 50 apartment units. The post-discount price stands at around HK$15,250 per square foot, marking a 1.7% hike from the initial batch of Seaside Residency II, setting the starting price at HK$3.858 million.

Price Drops Ripple Across the City

The discounts on properties under Li's umbrella have seemingly sparked a wave of price reductions in the Hong Kong real estate market. On the other side of the Kowloon Peninsula, a new property development in Ho Man Tin named "Proud Gem", owned by the former chairman of Ko Yin Financial, Pan Su-tong, is relaunching its sales after a temporary halt due to takeover by creditors. The property offers discounts going as low as 60%.

Reportedly, the project plans to sell the remaining approximately 380 units through a bidding process, managed by PricewaterhouseCoopers. Similar to a "foreclosure", these are brand new properties adhering to first-hand sales standards. Potential buyers can visit the site for a tour.

Insiders from Centaline Property Agency in Hong Kong revealed that the project hasn't officially announced its prices. However, given its creditor-driven nature (akin to a "foreclosure"), it's clear that the price will be much lower than before. The current transaction price for a two-bedroom unit is around HK$17,000 per square foot, marking nearly a 40% drop from previous rates.

"Proud Gem" is located at 17 Sheung Shing Street, Ho Man Tin, developed by Ko Yin Financial. It boasts six towers offering a total of 401 units. Most of these are fully-furnished units, with standard designs featuring two and three-bedroom layouts, sizes ranging from 848 to 1,447 square feet, complemented by 26 unique units.

Ho Man Tin, located north of Kings Park and east of Mong Kok, is renowned as an upscale residential area in Hong Kong. Pan Su-tong had invested significantly in the property's development, ensuring "Proud Gem" had top-notch amenities and views. However, financial troubles began for Pan in 2020. Due to debt-related issues, the progress of "Proud Gem" experienced multiple setbacks. In September 2021, the project's presale consent was revoked due to the developer's inability to address cost overruns. It was only in August of the following year that approvals were reinstated.

In 2022, the court declared Pan bankrupt. Ko Yin Financial also suspended trading and began asset liquidation, which included "Proud Gem". Eventually, the project was taken over by Oaktree Capital, which had previously financed HK$7.5 billion for it. It's estimated that "Proud Gem" has a market value of around HK$17 billion, surpassing the former HK$8 billion-valued property in Wan Chai owned by China Evergrande and later seized by China Construction Bank, making "Proud Gem" one of the most significant seized properties in recent Hong Kong history.

More Developers Join the Discount Bandwagon

In the wake of Li Ka-shing's property price reductions, other developers have followed suit with discounts.

On August 8th, the Bal Residence in Kwun Tong, developed in collaboration between Lai Sun Development and the Hong Kong Housing Authority, revised its pricing after its initial February launch. Prices of 26 units were reduced by 6% to 10%, with the most substantial cut reaching HK$852,000.

After adjustments, the starting price for a one-bedroom unit in the Kwun Tong new property batch is around HK$5.5686 million.

The current slump in Hong Kong's property market is a primary reason for these price reductions by developers.

Since the third quarter of the previous year, the Hong Kong property market has been experiencing a downturn. While there was hope that the market would rebound with the full resumption of border crossings between mainland China and Hong Kong and the introduction of talent acquisition policies by the Hong Kong government, the initial uptick in the first quarter was followed by a decline in the second.

Data from Centaline Property indicates that in July of this year, property transactions in Hong Kong totaled 4,426, with an amount of HK$32.967 billion. This marks a seven-month low in transaction volumes since December 2022 and a six-month low in value since January 2023. Property transaction registrations have been declining for four consecutive months, dropping from over 8,000 to below 5,000.

In the backdrop of U.S. Federal Reserve rate hikes, the supply-demand imbalance puts increased pressure on developers, leading to more properties being sold at reduced prices.

According to estimates from Midland Realty, by the third quarter of this year, the average discount on new Hong Kong properties will expand to 10%, marking the highest level since 2005.