As the first half of the year ends soon, the property market has not yet recovered from the depressed trend. In recent times, the low mortgage interest rates were derived from the low HIBOR rates attracting a certain number of users to buy low in sluggish market. After a short term rebounded, second-tier developers immediately cut prices for its excess flats inventories to attract customers, causing overall property prices to adjust downward again.
The current market weakness is entirely caused by the fact that second-tier developers are under great financial distress. Indeed, they have no choice but to cut prices to sell inventories to cash out. Recently, a renowned finance media reported that six Hong Kong developers currently have a debt-to-equity ratio of higher than 80%, among which a Chinese background company ranked first has a debt ratio of 170%, and the second place’s developer has a debt ratio of higher than 125%. These six second-tier real estate developers have a total debt of HK$ 172.4 billion.
In order to avoid bankruptcy, these six developers will cut its inventories prices further in the second half of the year so as to cash 
out quickly in order to reduce the chance of debt defaults. Therefore, the great market crash is imminent. The low-price strategy of the second-tier developers will cause a domino effect to the overall property market. As a result, the second-hand property price will fall synchronously with the downward price of first-hand inventory.
Do not think of It is as a fairy tale. In fact, the price of semi-new properties in Sao Kwun Wat, Tuen Mun has fallen by more than 50%. According to this market situation, the overall price will fall by further 10% in the second half of the year. Therefore, the second falling wave of the property market has been gradually forming.
Even the above-mentioned developers cut prices to launch their inventories, there is still a 60% chance that they will not be able to cash in adequate funds to solve their illiquidity problem. As more serious debt defaults cases will occur, and the financing banks will have to make huge write-offs for these non-performing assets. As a result, the monetary crisis is caused by the sharp drop of property price which has been quietly creeping in.
