Hong Kong's Real Estate Titan Stumbles

Hong Kong’s prominent property developer, New World Development, is bracing for its first annual loss in 20 years. The company, owned by the billionaire Cheng family, expects to report a loss of up to HK$20 billion (£2 billion) for the year ending in June, citing failed investments, rising interest rates, and the depreciation of the renminbi. Core profit is forecasted to drop by up to 23%. Following this news, New World’s shares hit a 21-year low of HK$6.80.

Founded in 1970, New World’s vast portfolio, which includes residential projects, malls, offices, and hotels, reflects the overall economic health of Hong Kong. The city has faced multiple recessions since the pandemic, a period during which Beijing tightened its grip through a controversial national security law. This crackdown has driven pro-democracy activists into exile and forced many Western businesses to retreat from Hong Kong, further straining the economy.

China’s property market downturn, driven by strict government regulations on developer borrowing, has added to Hong Kong’s challenges. Evergrande, one of the most prominent Chinese developers, was forced into liquidation earlier this year with HK$328 billion in debt. Property prices in Hong Kong are forecasted to drop by up to 10% in 2024, with residential prices already falling 3.1% in the first half of the year.

Despite efforts by President Xi Jinping to revive the market, including relaxed mortgage rules and a 300 billion yuan (£32 billion) “re-lending” facility, concerns persist. UBS recently downgraded its forecast for China’s 2024 economic growth from 4.6% to 4%, partly due to the prolonged property slump. As former Morgan Stanley Asia chairman Stephen Roach remarked, “It pains me to admit it, but Hong Kong is now over.”