Hong Kong’s Old Airport Becomes Symbol of City’s Property Pain
Kai Tak was one of the city’s hottest addresses, but with prices falling fast, many homeowners owe more than they could get by selling their property.
The stadium at Kai Tak has been delayed until next year; the former runway stretches out into Kowloon Bay.
Photographer: Eugene Lee/SCMPHong Kong’s Kai Tak Airport was legendary among pilots—who had to thread their way between high-rises to land—and passengers, who gripped their armrests and held their breath as they peered into apartment windows on the way down. After the new airport at Chek Lap Kok opened in 1998, Kai Tak was handed over to developers, who planned to fill the facility and its former runway stretching out into Kowloon Bay with million-dollar condos and upscale shopping.
For the better part of a decade, the area has generated record-breaking sales at land auctions and attracted eager buyers. About 14,000 units have been built there, more than 8% of the city’s total new supply since 2014, according to brokerage Jones Lang LaSalle Inc.
But today, with home prices falling across Hong Kong, growing numbers of homeowners at Kai Tak have underwater mortgages—owing more than they could get by selling the property. In July, two companies listed apartments for an average of HK$17,000 ($2,200) per square foot, the lowest price in the district since 2016 and 25% below the price of similar projects three years ago.
While other neighborhoods have seen even more dramatic price declines, the former airfield is home to increasing numbers of underwater mortgages because the bulk of the properties there were purchased relatively recently. “Kai Tak has a concentration of negative equity because it has been the center of new projects for the past decade,” says Eric Tso, chief vice president of mReferral Mortgage Brokerage Services.
In the second quarter, Hong Kong residents held about 30,000 underwater mortgages, with a total value of HK$155 billion, government data show. While the number improved a bit from the first quarter—when it stood at a two-decade high—JLL predicts it will top 100,000 by yearend if prices continue their current downward trajectory. Given the city’s property woes, “cash-strapped developers will jettison empty units at fire-sale prices,” Bloomberg Intelligence analysts Patrick Wong and Yan Chi John Wong wrote in a July note.
A decade ago, when the government started auctioning plots, Kai Tak was an easy sell: a new neighborhood near the heart of a land-starved city. The district promised water views, abundant greenery and a state-of-the-art sports stadium, all with easy access to the skyscrapers in Central. Traffic expected at a new cruise terminal augured a slew of restaurants, stores and entertainment venues. The first homes hit the market in 2016, just as prices across Hong Kong began a dramatic ascent, climbing by half in the next three years.
That’s all been derailed by development hiccups. Kai Tak Sports Park—the city’s largest sports venue, with a 50,000-seat stadium—was to be completed by 2023, but it’s been delayed until next year. A monorail expected to open last year has been shelved, and an alternative rail link to the nearest subway—a 45-minute walk from the towers in the former runway area, where most of the development has been concentrated—won’t likely open until the late 2030s. Residents have hung banners along the streets demanding a transit system for Kai Tak and opposing a plan to build public housing in the area.
And all the promised amenities? Just a handful of supermarkets serve the area’s tens of thousands of residents. The cruise terminal is largely deserted, averaging fewer than three ships a week last year. The area is devoid of cafes and pubs, with just a single restaurant—in the terminal, aimed at Chinese tour groups. “There’s a lack of public facilities such as museums, libraries and markets,” says Daniel Yip, who owns a two-bedroom flat at Monaco One, a high-rise development near the unfinished stadium.
For now, the mortgage woes pose a limited threat to the banking system. Delinquencies almost doubled, to 0.11%, at the end of June from the previous quarter, but they remain far below the record of 1.42% in 2001, when the property market was still reeling from the Asian financial crisis. “Late payments are still rare,” says Ivy Wong, managing director at Centaline Mortgage Broker Ltd. “The risks for banks remain low, though that could change if the economy slows and unemployment rises.”
Alfred Tsui, the 38-year-old owner of a hair salon, bought a three-bedroom apartment in 2017 in K. City, one of the first developments in the area. Four months ago, he put his flat on the market for 5% below what he paid. While he had some early nibbles when the government scrapped taxes for second-home purchases, he hasn’t sold the apartment. Still, he considers himself in pretty good shape compared with many other Kai Tak homeowners. “I’m actually quite lucky,” he says. “Anyone who bought at the peak in 2019 has it much worse.”
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