More Hong Kong Home Buyers May Lose Deposits, Say Agents

Deposit defaults on new homes shot up by 75% to 449 last year, and real estate agents see the trend continuing into 2025

More homebuyers in Hong Kong surrendered their deposits on new flat purchases last year, and real estate agents expect such defaults to continue at a high level amid elevated interest rates and uncertainty about the direction of the city’s property market.

A report from property agency Centaline showed that 449 buyers of first-hand property forfeited their deposits last year, a 75% increase from a year earlier and the highest since 2019. The final quarter saw 104 such cases, just short of triple the 40 cases in the third quarter. The agency did not report the value of the forfeited deposits, but the typical initial deposit is HK$100,000 (US$12,844), according to market sources. The number of default cases will stay high in the short-term, agents said.

“As the market will be busy after Lunar New Year, and developers will be offering discounts, we expect the number of defaults on new property units to remain high,” said Yeung Ming-yee, a Senior Associate Director at Centaline. “There will be around 100 such cases in the first quarter of 2025.”

The number may decline over the longer term after the government reduced mortgage requirements for buyers of unfinished flats late last year, agents said. Forfeits indicate either that buyers are not able to move forward with their purchases, or that they expect to find significantly better deals. Flats that originally sold while prices were peaking between December 2019 and December 2021 resold at discounts of 25% or more from their initial purchase prices, Centaline’s report said. 

Higher Interests 

"We hope the overall economy will show a stable and positive trend, along with the possibility of continued interest-rate cuts,” he said. “Additionally, banks are also relatively easing their mortgage arrangements, which may help improve the situation regarding defaults.”

Derek Chan, Head of Research at Ricacorp Properties.

In lockstep with the US Federal Reserve, the Hong Kong Monetary Authority raised interest rates on 11 occasions between March 2022 and July 2023, pushing them to a 23-year high. A policy-easing cycle began in September. With a further reduction in borrowing costs in October and December, most of the units that were abandoned by buyers found new owners, albeit often at lower prices, the report said. 

Given an uncertain economic outlook, defaults could go either way this year, said Derek Chan, Head of Research at Ricacorp Properties. “We hope the overall economy will show a stable and positive trend, along with the possibility of continued interest-rate cuts,” he said. “Additionally, banks are also relatively easing their mortgage arrangements, which may help improve the situation regarding defaults.” Default cases could fall below 400 in this scenario, Chan said. On the other hand, with sales of new homes estimated to rise by about 7% this year to 18,000 units, a potentially protracted pause on interest-rate easing and a sluggish economy could combine to “lead to a proportionally higher number of potential defaults”, he added. Meanwhile, with US President Donald Trump threatening more tariffs on Chinese exports, another bruising trade war could erupt between the world’s two largest economies. “There is currently no clear direction,” Chan said. “We hope that the US-China relations will not be too poor, as this would impact Hong Kong property.”

The Quinn Square Mile in Tai Kok Tsui, a project by Henderson Land, logged 15 transaction cancellations in 2024, topping all developments, followed by Grand Jete Phase Two in Tuen Mun by Sun Hung Kai Properties (SHKP) and CK Asset, at 11 cases, according to Centaline. All buyers in these transactions defaulted on their further deposits, which are usually 5 to 7% of the total property price. Separately, SHKP said recently that it planned to offer nearly 2,000 units in the first quarter of 2025.

The offerings include Yoho West in Tin Shui Wai, the second phase of Cullinan Sky in Kai Tak, and a development in Sai Sha in Sha Tin. “The government has attracted abundant new residents through various talent schemes, in addition to incoming non-local students, which will amplify the demand for housing and drive up rents,” said Victor Lui Ting, a deputy managing director with the developer. “We expect rents and property prices to go up together.”

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