According to Zhao Guoxiong, the current inventory of new developments in the Hong Kong market exceeds a reasonable level, reaching 20,000 units, well above the average annual transaction volume. This implies that the current inventory is equivalent to a two-year supply, and this does not even account for newly approved but yet-to-be-launched projects.
Faced with such high inventory pressure, developers have had to take a series of measures to boost sales.
On one hand, the actual interest rates, which had dropped to 1.4 basis points in 2021, have now risen to over 4 basis points. This has significantly increased the cost of property ownership, combined with the pressure from the inventory of new developments, leading to a less enthusiastic response from citizens towards home purchases.
To attract buyers, developers have had to adopt low-price strategies. For example, Cheung Kong Holdings' Oil Street Proximity Station and the Tuen Mun Soaring Project, developed in collaboration with Sun Hung Kai Properties, have been sold at "Flat Explosion Price" and "Deepwater Bomb Price," respectively, achieving a relatively high sales rate.
However, Zhao Guoxiong also pointed out that the sales strategy for future new developments may not necessarily continue to be based on low prices. Instead, it will be determined based on market conditions and the positioning of the projects themselves.
For instance, Cheung Kong Holdings' luxury residential project, 21 BORRETT ROAD in Mid-levels, is not expected to lower its prices as rare large-scale luxury new developments in the area. They will continue to implement a rotational sales strategy, adjusting sales based on demand to maintain price stability.
Additionally, Zhao Guoxiong mentioned various ways in which the Cheung Kong Group is increasing its land reserves. In addition to bidding for government land and railway development projects, they plan to convert some of their hotel projects into residential developments.
The proposed conversion of the Hotel COZi Harbour View in Tseung Kwan O has been approved and is expected to provide approximately 600 units, significantly increasing the group's land reserves.
In conclusion, Zhao Guoxiong remains optimistic about the future prospects of Hong Kong's real estate market. He believes that as long as the government can continue to improve land supply, maintain policy stability and predictability, and ensure that market mechanisms operate normally, Hong Kong's property market will continue to develop steadily. Despite facing some challenges, the Cheung Kong Group maintains confidence in Hong Kong's long-term prospects.
