As the year draws to a close, the property market remains sluggish, with the so-called full-scale rebound seeming far-fetched. According to the Rating and Valuation Department, the private residential property price index reached 294.3 points in October, marking five consecutive months of increases. The continuous accumulation for the first ten months of the year was approximately 1.76%, with an estimated full-year increase of only 2%, far below the 5% predicted by private agency companies. Just as the property market was gradually stabilizing, the blaze at Wang Fuk Court in Tai Po fully exposed the safety hazards of older, secondhand buildings, inevitably leading to a revaluation of these properties. In addition to the volatile internal environment, geopolitical risks are also worsening. In summary, the property market will face four major challenges next year.
Following the Tai Po fire, the investigation is in full swing. Various indications suggested that the fire involved multiple
organizations and government agencies. The entire investigation process and the improvement of the maintenance system are expected to take several years. Before the problems are fixed, the maintenance-related issues will be frequently drawn to the public's attention. To protect themselves, banks will unavoidably lower the valuation and mortgage ratios for older buildings which have not undergone major repairs. In fact, astute homeowners have already begun to accelerate the sale of older properties that have not completed major repairs. Therefore, the transaction prices of 30 years old secondhand properties will gradually slide down next year. These are core issues that real estate KOLs do not dare to touch upon.
The second challenge to the property market is the overseas capital pulling out of Hong Kong real estate market. For example, Mapletree Real Estate, formerly a Singaporean company, recently announced the sale of its office portion in Festival Walk in Kowloon Tong for HK$1.96 billion. As scheduled, this transaction will be completed in February next year. This property has a floor area of 213,982 square feet, with a transaction price of HK$9,160 per square foot. Earlier, McDonald's announced that it would arrange the sale of 23 self-owned shops properties in Hong Kong, with a total value of HK$3 billion. The continuous sale of commercial and office properties by foreign investors in Hong Kong will lead to the prices will fall steadily. Those buyers of investment properties mainly were large state-owned enterprises and local educational institutions.
Regarding luxury homes, the downward trend in prices remains significant. Earlier this year, a high-floor unit in Sun Hung Kai Properties' North Point luxury residential complex "Victoria Harbor” was purchased by a 90s-born internet celebrity known as "Xiao Si" for HK$64,000 per square foot. However, a three-bedroom unit on a mid-floor floor of the same complex was sold for HK$51,950 per square foot in mid of December, which meant the price drop of 19%. Furthermore, a property at 15 Gough Hill Road on The Peak, once owned by Chen Hong Tian, chairman of Shenzhen Xiangqi Group, was sold for HK$790 million in August. This transaction price was HK $ 1.3 billion lower than the purchase price. Cases of wealthy individuals facing financial difficulties being forced to sell luxury properties are expected to continue next year, and luxury property prices are facing serious challenges in 2026.
In recent years, office property prices have been falling sharply. A few investors, due to excessive borrowing, have recently been calling loans by banks, but the banks have not yet taken further action. Until recently, a well-known, deceased commercial and shops property investor was declared bankrupt by a bank. Through filing for bankruptcy, the bank froze related assets to facilitate further debt recovery. Banks have escalated their debt collection efforts against debtors to reduce the risks caused by unperformed debt. Therefore, it will be a new normal that the non-perform debtors will be declared bankrupt one by one by banks next year.
