City&Country: Offshore-- More new flats to hit Hong Kong market soon

Developers are poised to accelerate releases of new projects in Hong Kong to take advantage of a strong rebound in prices, agents believe.

Some believe developers will be prudent in their pricing strategies because new levies on quick resales have driven speculators from the market. But others expect growing demand from end-users will ensure strong support, even if prices are raised significantly, since new supply remains limited. About 2,000 new flats are awaiting release this month.

“The faster than expected rise in home prices last month indicated that end-users have returned to the market after seeing that prices have shown little sign of easing,” says Patrick Chow, head of research at estate agency Ricacorp Properties. Developers were likely to be growing in confidence about market sentiment and could therefore be expected to release their new projects.

Midland Realty recently released the results of a survey that shows overall home prices rose 2.1% m-o-m in January despite the government’s imposition in November of further cooling measures, including the resale levies, to curb speculation and rein in prices.

In response, most developers deferred the launch of sales for new projects but are now reviewing those decisions, agents say.

Sun Hung Kai Properties is the only developer to have brought to market a mass-housing project since the tightening measures were announced on Nov 19. Flats at the project, Park Nara in Hung Shui Kiu, sold for an average price of HK$4,800 psf.

Since sales started last month, about 150 of the 173 flats there have been bought, a sign that genuine buyers have not been scared off by the cooling measures.

“The positive sales outcome of Park Nara last month has persuaded other developers to release their new projects for sale,” says Anita Cheung Pui-lui, research manager at Midland Realty.

Upcoming projects ready for pre-sale, or for which developers are in the process of applying for pre-sale permits from the government, are Cheung Kong’s 734-flat Uptown in Yuen Long and another three developments by SHKP — the 650-flat Imperial Cullinan in West Kowloon, the 117-flat i.UniQ Residence in Shau Kei Wan, in which 70% of the flats have one bedroom, and the 459-flat Avignon in Tuen Mun.

SHKP says it will release 50 duplexes at the Avignon this week at an indicative price range of HK$13,000 psf.

Cheung says the outcome of sales of the Uptown apartments will serve as an indicator of the market outlook for the mass residential sector, while the Imperial Cullinan will set a benchmark for the high-end sector.

With short-term speculators likely to be absent from the market, she believes developers will take a prudent approach to raising prices.

“The price gap between the primary and secondary markets is likely to narrow to 20% from 40% in the first quarter of last year, when home prices were rising rapidly,” Cheung says.

David Ng Ka-chun, the head of regional property research at the Royal Bank of Scotland, takes a different view.

“Developers still hold pricing power due to a lack of choice for buyers. Even if there are surprising negative measures, we believe we are unlikely to see a lot of direct price competition,” he writes in a research report.

Developers other than Cheung Kong would probably keep prices high even if it makes sales less certain.

Ng says they see little chance of new-home prices falling even if the government takes more steps to rein them in or interest rates are raised sooner than expected, reducing activity in the market.
Eric Chan, regional sales manager at Centaline Property Agency’s Yuen Long branch, says the upcoming sale of Uptown would attract more potential buyers to Yuen Long.

“Home prices in Yuen Long, except for the new development of Yoho Midtown, launched last year, still lag behind other areas. Some estates are still selling at 50% below their peak level in 1997,” he says.

About 200 flats changed hands last month in Yuen Long’s major housing estates, about 30% more than in the same period last year, as prices in urban areas had become unaffordable, Chan says.
Sales of new homes dropped to a two-year low last month, with only 310 purchase agreements signed.

The decline follows November’s announcement that additional stamp duty would be levied on homes resold within two years. The additional duty is as high as 15% if a home is resold within six months.

At the same time, the Hong Kong Monetary Authority reduced the amount banks can lend to buyers of homes worth HK$12 million or more from 60% of the property’s value to 50%. The maximum mortgage ratio for properties worth between HK$8 million and HK$12 million has been cut from 70% to 60%.

But Midland’s Cheung says the market has absorbed the impact of these measures and he expects sales of new homes to rebound this month and in March, since more new projects were likely to be launched. — SCMP

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 845, Feb 14-20, 2011