Equivalent to 7 years ago property prices, Hong Kong's real estate market is experiencing a huge shock? Li Ka shing suddenly sold off his properties at a "70% discount" | Changjiang Industry | Li Ka shing

Recently, the news of Li Ka shing selling his property at a "70% discount" has attracted attention from the Hong Kong real estate industry. On August 3rd, Cheung Kong Holdings announced its first price list for its new property, "Pro Sea II". The cheapest open plan unit has a usable area of 210 square feet, and after deducting an 18% discount, the actual selling price is HKD 2.9 million, or HKD 13810 per square foot. It is worth noting that this price is 30% cheaper than the surrounding second-hand houses, even returning to the level of 7 years ago. Industry insiders have stated that the price list of "Pro Sea II" is like a "bomb" piercing through the psychological defenses of second-hand homeowners.

In fact, in recent years, Cheung Kong Holdings has been making moves to "drop depth bombs on the Hong Kong real estate market". Analysts have pointed out that the reason for the significant discount and sell-off may be that Changshi wants to reduce its holdings and recover funds, which may result in other investment returns outperforming real estate.

In addition, HSBC China's latest views on A-shares and RMB exchange rates have attracted market attention. On August 4th, Kuang Zheng, Chief Investment Officer of HSBC Global Private Banking and Wealth Management China, released a statement stating that the expected A-share profit growth rate in 2023 is expected to reach over 20%. The reserve requirement reduction is still possible in the near future.

Li Ka shing sells at a discount

Recently, the news of Li Ka shing selling off the real estate market at a 70% discount has attracted attention from the Hong Kong real estate industry.

On August 3rd, Cheung Kong Industries announced its first price list for the new property "Pro Sea II" in Yau Tong Dong Yuan Street. The cheapest open plan unit has a usable area of 210 square feet, with a discounted price of HKD 2.9 million or HKD 13810 per foot after deducting an 18% discount.

It is worth noting that this price is 30% cheaper than the surrounding second-hand houses, and even returns to the price level of 7 years ago. On average, the first batch of 132 units of "Pro Sea II" are priced at approximately HKD 14997 per square foot, which may be the lowest new development project in Hong Kong's urban area since 2016.

Industry insiders have stated that the price list of "Pro Sea II" is like a "bomb" piercing through the psychological defenses of second-hand homeowners, which may have an impact on second-hand market prices.

It should be pointed out that although Yau Tong is located in Kowloon, it is only one subway station away from Hong Kong Island. Some Hong Kong citizens believe that "this is buying a sea view house near Hong Kong Island at the price of Tuen Mun.". Therefore, this property has attracted the attention of all Hong Kong and even mainland China.

Compared to the newly listed properties in the region in recent years, the price advantage of "Qinhai Gui II" is significant. For example, in 2022, the first batch of 128 households, equivalent to an average price of 17938 yuan per square foot, in the partnership between Poly Real Estate and Shangjia Holdings, in the Yau Tong High Speed Road Langyu; In 2020, the first batch of 138 households, developed by Minmetals Real Estate, on the east bank of Ulan in Chongxin Street, Youtang, had an average selling price of 17688 yuan per square foot, which was about 15% higher than the average selling price of the "Pro Sea II".

"Flat explosive price" is a term used by Zhao Guoxiong, Executive Director of Changjiang Industry, to describe this new property. He expressed the hope that this batch of properties can help citizens get on the bus or change buildings and improve their living environment. Developers have a responsibility to solve the housing problem of citizens with an attitude of "don't make all the money, don't make too much".

Li Zeju, Chairman of Changshi Group, also stated on the same day that the pricing of "Pro Sea II" is indeed attractive, equivalent to the property price of 7 years ago, so it has been described by the media as a "bomb" like shock.

Guo Ziwei, Chief Manager of Changjiang Industrial Business Department, stated that the "Pro Sea II" project will receive tickets as early as this Saturday and open demonstration units to the public on the same day. The company's business manager, Chen Yongci, stated that the project will be available for sale as soon as possible within a month.

Specifically, the first batch of 132 households in the "Qinhai Gui II" project have a usable area of 210 to 718 square feet, including open to three bedroom units. Among them, 22 households are open, 43 households have one bedroom, 52 households have two bedrooms, and 15 households have three bedrooms. The unit price ranges from HKD 3.536 million to HKD 13.757 million.

Why sell at a discount?

In fact, in recent years, Cheung Kong Holdings has been making moves to "drop depth bombs on the Hong Kong real estate market".

For example, the Tuen Mun Flyer Phase 2, which opened in March this year, was the first batch of units launched at that time. The actual foot price ranged from HKD 11042 to HKD 13972, with the lowest foot price setting a new low for the surrounding area in three years, and was described as the "depth bomb price".

At the same time as this new property was showcased, Changjiang Industrial Group disclosed its 2023 interim performance report on August 3. According to the interim report, the confirmed property sales revenue of the group in the first half of this year was HKD 8.246 billion, a year-on-year decrease of 59.6%; The revenue was HKD 3.53 billion, a year-on-year decrease of 56.2%.

According to the interim report, as of June 30, 2023, the unaudited continuing business shareholders of Changjiang Industrial Group should have accounted for a profit of HKD 10.3 billion, a year-on-year decrease of 20.14%; Earnings per share of HKD 2.88, a year-on-year decrease of 18.9%; Mid term dividend of HKD 0.43 per share.

As of the end of the reporting period, the total sales of properties that have been contracted but not yet confirmed by Changshi Group amounted to HKD 14.82 billion, with approximately 76 million square feet of exploitable land reserves.

Analysts have pointed out that the reason for the significant discount and sell-off may be that Changjiang Industry wants to reduce its holdings to recover funds, and there may be other investment returns that outperform real estate.

At the performance press conference of Changjiang Industry, Chairman Li Zeju of Changjiang Industry Group stated that the diversified business of the group enables the group to cope with adversity and storms, and business diversification enables the group to maintain stable financial performance in cyclical fluctuations. In fact, not putting all the eggs in the same basket is a basic investment principle.

Regarding the latest outlook on the Hong Kong real estate market, Li Zeju stated that compared to three years ago, there is a higher possibility of a decline in interest rates at present, and the trend is more clear. The land price has also fallen to near the government's cost price, and compared to previous years, the possibility of further decline in land price is lower.

HSBC's latest announcement

On August 4th, Kuang Zheng, Chief Investment Officer of HSBC Global Private Banking and Wealth Management in China, released a statement stating that China's gross domestic product (GDP) grew by 6.3% year-on-year in the second quarter, with a considerable growth rate and an improvement in the month on month growth. However, considering the low base effect, the growth rate was lower than market expectations, but the positive signal was that it had already passed the bottom of the economic cycle.

After entering July, positive policy signals are constantly accumulating. Kuang Zheng believes that since July, various stable growth measures in the fields of finance, currency, real estate, and consumption have supported a mild recovery of the Chinese economy.

At the same time, monetary policy will also exert efforts to support economic recovery. Regarding this, Kuang Zheng stated that the last reserve requirement reduction occurred at the end of March this year. Looking back at the reserve requirement reduction operations since 2010, the interval between two reserve requirement reductions in the same broad currency cycle often does not exceed four months. This may mean that reserve requirement reductions can still be expected for a period of time in the future.

Regarding the Chinese stock market, Kuang Zheng believes that with the current reasonable and objective expectations for economic growth, the probability of further downward revision of the A-share profit growth rate is decreasing, and it is expected that the A-share profit growth rate is expected to reach over 20% in 2023.

In the short term, Kuang Zheng believes that the phased potential for the rebound of the Chinese stock market can refer to the upward trend brought about by the two policy environment changes last year; In the medium term, market attention will return to the degree of policy implementation and the improvement of profit expectations for real economy enterprises, which will dominate the continuation of market momentum.

Looking ahead to the trend of the RMB exchange rate, Kuang Zheng stated that since July, with the expected peak of the US dollar policy interest rate and the improvement of global risk appetite, the US dollar index has been pushed back, providing support for the rise of the RMB. With the sustained and moderate recovery of the Chinese economy under comprehensive policy efforts, the renminbi is expected to appreciate slowly and slightly in the coming months.