Developers may cut prices by 20pc to hit targets

Himo Liu

Hong Kong's home prices are expected to decline 3 percent this year and as much as 10 percent in 2024, S&P Global Ratings says.

And local developers may offer price cuts of as much as 20 percent to achieve their sales targets, the credit rating agency said in its latest report.

S&P Global had earlier forecast a 5 percent to 8 percent rise in Hong Kong residential property prices for this year. Now, the agency anticipates that prices will either remain stagnant or potentially decrease by up to 3 percent.

Additionally, there is a projected further drop of 5 percent to 10 percent in the coming year due to weak local economic growth, rising interest rates, and an oversupply, all of which are exerting pressure on the market, it said.

S&P Global believes that Hong Kong's developers, mostly market leaders, may potentially compromise their profit margins to meet sales goals.

They might withstand property price adjustments of up to 20 percent without breaching financial triggers, it said.

Furthermore, S&P estimates that if there's a 20 percent decrease in home prices next year, the debt ratios of these developers will increase by 0.4 to 0.8 times by 2025 or 2026.

The number of home transactions in Hong Kong is expected to be around 11,000 residential units this year, according to S&P's report, much lower than the initial estimate of 15,000 to 17,000 homes.

However, with the recent reduction in property stamp duties by the government, it is anticipated that the number of residential transaction might moderately increase next year.

Meanwhile, Henderson Land (0012) plans to upload its sales brochure for The Paddington on Sai Yeung Choi Street North today and release its first price list on Friday.