The continuous adjustment of the real estate market continues to affect the performance of Hong Kong property enterprises.

New World Development Company Limited, the major real estate developer with the heaviest debt burden in Hong Kong, is expected to record its first annual loss in 20 years this year.

According to the announcement submitted by the company to the Hong Kong Stock Exchange Friday evening, the company is expected to incur a loss of HK$19 billion to HK$20 billion (approximately US$2.4 billion to US$2.6 billion) for the fiscal year ending in June, attributed to asset impairment, investment losses, and rising interest rates.

In recent years, New World Development, controlled by the billionaire Cheng family, has attracted widespread market attention due to its high debt levels.

Due to its high debt levels, concerns about its financial condition in the market, and the pessimistic sentiment of investors towards the real estate market, New World Development's stock price has plummeted 35% this year, making it one of the worst-performing property companies in Hong Kong, far behind the 5.5% increase in the Hang Seng Index during the same period.

The reasons for the huge loss: insufficient revenue recognition and two large provisions.

New World stated that the insufficient revenue recognition from major projects such as Pollo Estates I and Pollo Estates II has affected the company's core profit.

In addition, the provision for impairment of two large assets is also the main reason for the company's profit downturn.

New World Development stated that the revaluation of investments and development properties, including goodwill evaluation, will result in non-cash losses of up to 8.5 to 9.5 billion Hong Kong dollars.

In addition, in June last year, the Cheng family proposed to acquire a business from New World Development to help reduce the company's debt. This transaction transferred cash from the family's investment holding company to New World Development, but also resulted in a one-time non-cash loss of nearly 8.3 billion Hong Kong dollars for the company.

The company spokesperson stated that all one-time non-cash revaluations and provisions do not affect the company's cash flow, but rather prepare for a fresh start in the future. The company has also completed more than 50 billion Hong Kong dollars in loan arrangements and debt repayments this year, maintaining overall financial stability.

Hong Kong's real estate companies are experiencing a 'bleak' situation.

Not only New World Development, but the entire real estate market in Hong Kong is facing difficulties under the dual pressures of high borrowing costs and a sluggish economy.

Property prices are at their lowest point in eight years, putting pressure on developers like New World. At the same time, the office market has reached a historically high vacancy rate, further suppressing rental income for major developers.

Recently, Hong Kong real estate companies including Henderson Land, Hang Lung Properties, Wharf REIC, and Swire Properties have successively released their performance for the first half of 2024.

Among them, Hongkong Land's net loss attributable to shareholders in the first half of the year was 0.83 billion US dollars, with a further expansion of losses; Wharf REIC's attributable surplus to shareholders in the first half of the year was a loss of 1.052 billion Hong Kong dollars, a year-on-year decrease of 158.28%; Hang Lung Properties' attributable surplus to shareholders in the first half of the year was 1.061 billion Hong Kong dollars, a year-on-year decrease of 55.68%; Swire Properties' attributable surplus to shareholders in the first half of the year was 1.796 billion Hong Kong dollars, a year-on-year decrease of 19%.