HONG KONG (Reuters) – Hong Kong said on Thursday it will not sell any residential or commercial land in the first three months of 2024, citing sluggish market sentiment and high vacancy rates respectively.
This would be the first time Hong Kong’s government has not rolled out any residential sites in a quarterly sale, analysts said, highlighting weak demand in one of the world’s most expensive property markets.
The decision came after the government sold a residential rural land site to the only bidder at the low end of price expectations last month, and six failed residential and commercial land auctions during 2023, the most on record.
Hong Kong private home prices in November fell for the seventh month in a row to their lowest since February 2017, official data showed. Analysts expected they will continue to drop in the first half of 2024, hurt by weak buying sentiment amid a higher interest rate environment.
“The fact that market sentiment in land tender is rather sluggish recently, the government will not separately put up any residential site for sale in the fourth quarter,” Secretary for Development Bernadette Linn told a press conference, referring to a financial year ending in March.
She added land supply from various sources for this financial year would already provide capacity to build 11,530 apartments, very close to the government target of 12,900.
Regarding commercial land, Linn said the government has to consider the current high vacancy rate and soft land appetite.
“And we see some gigantic commercial buildings will complete construction in the next few years, which means the supply will rise.”
Real estate consultancy CBRE said vacancy rates of Grade A office rose in the financial hub to an all-time high of 16.4% in 2023, leading to a rent decline of 6% for the full year.
Total value of commercial property investment deals worth over HK$77 million each also halved last year to HK$40 billion ($5.12 billion), a 15-year low, CBRE said, due to high financing costs, banks’ reluctance to lend and economic uncertainties.
“Anticipated rate cuts will likely improve business and investment market sentiment and result in a recovery in deal flow in 2024,” said Jonathan Chau, executive director of CBRE Hong Kong.
($1 = 7.8085 Hong Kong dollars) (This story has been refiled to add ‘this quarter’ in the headline)
(Reporting by Clare Jim; Editing by Alexander Smith)