Warren H. Lau Predicts Hong Kong Property Market Will Face Nine Months of Decline Before Stabilizing

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Warren H. Lau | Author of "Winning Strategies of Professional Investment" and “China's Comeback".

INPress Editor: Good afternoon, and thank you for joining us today. You've made some bold predictions about the Hong Kong property market and the broader financial landscape. Let's start with your views on the recent interest rate cuts in the United States. How do you see this impacting the Hong Kong property market?

Warren H. Lau: Thank you for having me. The recent U.S. interest rate cuts have indeed had a short-term positive effect on the Hong Kong property market, leading to what some might call a 'little spring' in the market. However, this is just a temporary phenomenon. We've already seen an increase in the volume of new home sales, but prices are actually falling, which supports my earlier predictions.

INPress Editor: Interesting. And what about the anticipation for China's next round of market rescue efforts?

Warren H. Lau: The financial markets are eagerly awaiting China's next move to rescue the market. I believe it will happen, but not immediately. The perfect timing would be after the U.S. stock market bubble bursts. According to traditional Chaozhou business wisdom, 'the beginning of a rise is not yet a rise, and the beginning of a fall is not yet a fall.' George Soros also discussed the cyclical nature of all financial assets in his book 'The Alchemy of Finance.' He explained that before a true rally begins, there's often a brief period of optimism followed by a quick return to the starting point before the real rally starts.

INPress Editor: Can you elaborate on the current supply and demand dynamics in Hong Kong's property market?

Warren H. Lau: Certainly. Since 2021, the annual transaction volume in Hong Kong's new private residential market has been around 10,000 units. However, there are currently 21,000 unsold units, 72,000 units under construction, and 19,000 units on land ready for development, totaling a potential supply of 110,000 units. At this rate, it would take 11 years to clear the inventory held by developers.

INPress Editor: That's a significant oversupply. How is this affecting property prices and sales?

Warren H. Lau: The oversupply is putting immense pressure on property prices. For instance, the 'Tiara' project in Kai Tak is being sold below cost, which is causing concern among banks about further valuation pressures. This is increasing the risk of 'call loans' for owners of second-hand properties, leading to a surge in price reductions. There are tens of thousands of potential new and second-hand homes on the market, far exceeding demand.

INPress Editor: What about the construction sector and government land sales?

Warren H. Lau: The construction sector is feeling the pinch. A major contractor for New World Development has announced plans to cut its workforce by 40% and has decided not to purchase land for the next three years. Given the oversupply in both the residential and commercial property markets, it's likely that government land sales will face a 'buyer's market' for the next five years. Additionally, many tech startups that rely on government funding are experiencing delays in receiving promised financial support.

INPress Editor: How do you see the role of interest rates in influencing buyers' decisions?

Warren H. Lau: Loan interest rates are a significant factor. If buyers expect rates to continue falling over the next two years, they'll likely postpone their purchases. This anticipation is contributing to the current turmoil in the Hong Kong property market, with more price reductions on the horizon.

INPress Editor: Looking ahead, what's your outlook for the property market?

Warren H. Lau: The oversupply situation is unlikely to change. The only positive scenario would be if the U.S. stock market bubble bursts and quantitative easing is reintroduced. In that case, I estimate that Hong Kong property prices will bottom out in nine months and then stabilize for three years.

INPress Editor: Thank you for sharing your insights with us today. Your analysis provides a comprehensive view of the challenges and potential future trends in the Hong Kong property market.