Against the backdrop of ongoing Sino-US trade frictions and increasing downward pressure on the mainland’s economy, the Hong Kong economy and real estate market are significantly contracting. Hong Kong’s property developers, which were once flourishing, are facing unprecedented challenges, with declining revenues, sharp profit reductions, and a need for immediate transformation.
Over the past year, a sense of chill has pervaded the commercial property market. Prominent Hong Kong developers such as Henderson Land Development, Ryoden Development, Swire Properties, and Hongkong Land all reported lackluster financial performance in their 2024 annual reports, highlighting the industry’s predicament.
Henderson Land Development, with high-end commercial real estate as its core business, recorded a revenue of HK$11.242 billion in 2024, an 8.98% year-on-year increase, but the income growth did not translate into profits. Property sales revenue of HK$1.538 billion ultimately resulted in an operating loss of HK$245 million – selling more led to greater losses.
The core business’s leasing income decreased by 6% year-on-year to HK$9.515 billion, with a 5% decline in the mainland market and a 9% decrease in the Hong Kong market. Revenue at Henderson Plaza in Shanghai declined by 6%, with tenant sales plunging by as much as 22%. Meanwhile, income and tenant sales at Henderson Plazas in Shenyang and Wuhan witnessed double-digit declines.
As a result, Henderson Land Development’s overall operating profit was HK$6.455 billion, less than the previous year’s HK$7.389 billion, with net profit attributable to the parent company plummeting by 45.77% to HK$2.153 billion.
Ryoden Development faced an even more challenging situation, with revenue of HK$8.173 billion last year, representing a decrease of over 16% year-on-year; net profit attributable to the parent company was HK$180 million, a significant drop of 77.78%. The company explained this as a result of “reduced completion of residential properties and decreased confirmed property sales.”
The annual report exposed a severe overreliance on single projects. Out of residential sales totaling HK$14.553 billion, one project, Tsui Lake City Phase Six, contributed HK$11.979 billion, accounting for 82%. Contrarily, the performance of Tsui Lake Riverside launched during the same period was poor, with only 14 out of 90 units sold at the opening.
Future performance will heavily rely on the Wuhan project. Out of salable residential properties worth HK$26.9 billion, Wuhan Changjiang Tian Di accounts for HK$17.7 billion, representing 66%. Since its opening in 2023, the project has launched 890 units, with only 368 units sold as of May this year, a turnover rate of 42%, which led to a nearly 30% price reduction earlier this year.
Swire Properties experienced a transition from profit to loss, with its revenue decreasing by 2% year-on-year to HK$14.428 billion last year, and the net profit attributable to the parent company dropping from HK$2.637 billion in the previous year to a loss of HK$766 million, primarily due to the fair value loss expanding to HK$5.996 billion on investment properties.
Rental income from office properties was HK$5.488 billion, down from HK$5.835 billion in the same period last year. Rental income from Hong Kong office property portfolios was HK$5.109 billion, a 7% year-on-year decrease. Among Swire’s Hong Kong office property portfolio, Tai Koo Place had the highest occupancy rate at 95%, while Tai Koo Fong Two had the lowest at only 69%.
The company predicts a continued sluggish Hong Kong office property market in 2025. Facing financial pressure, as of the end of 2024, the company had HK$5.121 billion in cash, with a need to repay debts amounting to HK$6.76 billion within a year.
In 2024, Hongkong Land incurred a full-year loss of US$1.385 billion, a further increase compared to the previous year, mainly impacted by the decline in Hong Kong office rental income and the retreat from mainland residential development businesses.
The group announced its withdrawal from mainland residential development businesses last year, recognizing an impairment of US$314 million for the “built-and-sold business,” and there are still US$5.8 billion in existing residential assets to be gradually phased out as the company transitions towards purely high-end commercial real estate.
The company plans to increase investment in flagship integrated projects in core markets such as Hong Kong and Singapore, aiming to grow real estate management assets from US$40 billion to US$100 billion by 2035. The plan includes selling off non-core commercial assets to retrieve US$10 billion in funds over the next 10 years.
Hong Kong-based property developers are collectively under pressure amidst the commercial property winter, and traditional business models are facing challenges. According to the International Financial Times’ “Real Estate In-Depth Report,” major developers are addressing the dilemma through asset disposal and business transformation, yet the road ahead remains filled with uncertainty.