Hong Kong Halts Land Sales in Q1 2024 Amid Slow Demand

Hong Kong's government has announced that it will not be selling any residential or commercial land in the first quarter of 2024.

Hong Kong's government has announced that it will not be selling any residential or commercial land in the first quarter of 2024. This decision comes as a response to the sluggish market sentiment and high vacancy rates in the region. Analysts have noted that this marks the first time that the government has refrained from rolling out any residential sites in a quarterly sale, underscoring the weak demand in one of the world's most expensive property markets.

The announcement follows a series of unsuccessful land auctions in 2023, with the government selling a residential rural land site to the only bidder at the lower end of price expectations. Additionally, private home prices in Hong Kong have been on a downward trend, falling for the seventh consecutive month in November to their lowest level since February 2017. Analysts predict that prices will continue to decline in the first half of 2024, driven by weak buying sentiment in a higher interest rate environment.

Secretary for Development Bernadette Linn stated at a press conference that the decision not to sell any residential sites in the fourth quarter is a response to the sluggish market sentiment in land tender. She also highlighted that the government has already secured land supply from various sources for the current financial year, providing capacity to build 11,530 apartments, which is close to the government's target of 12,900.

In terms of commercial land, Linn noted that the government needs to take into account the current high vacancy rate and soft land appetite. She pointed out that several large commercial buildings are set to complete construction in the coming years, leading to an increase in supply. Real estate consultancy CBRE reported that vacancy rates of Grade A office space in Hong Kong reached an all-time high of 16.4% in 2023, resulting in a 6% decline in rent for the year. Additionally, the total value of commercial property investment deals worth over HK$77 million each halved in 2023 to HK$40 billion, marking a 15-year low.

Jonathan Chau, executive director of CBRE Hong Kong, expressed optimism about the anticipated rate cuts, suggesting that they will likely improve business and investment market sentiment and lead to a recovery in deal flow in 2024.

The decision by the Hong Kong government to refrain from selling any residential or commercial land in the first quarter of 2024 reflects the challenging market conditions in the region. With weak demand and high vacancy rates, the government is taking a cautious approach to land sales in response to the current economic environment.