Developers' shares, home sales plunge

HONG KONG: Shares of the city's big developers slumped yesterday after the government's tough new measures to cool speculation in the property market sparked a 50% drop in home sales over the weekend.

Speculators' fingers are already getting burned by the government's move, which reduces mortgage loan availability for luxury and investment properties. One speculator, who holds several units, sold a 1,491-square-foot luxury apartment at Celestial Heights in Ho Man Tin for HK$18 million (RM7.32 million) - nearly HK$1 million less than he paid for it - in fear of further decline in home prices.

Financial Secretary John Tsang Chun-wah on Friday announced a ban on resales of new flats before the initial sale is completed.

Banks, meanwhile, will have to cut loans for luxury homes costing HK$12 million or above to 60% of a property's value from 70%.

On the supply side, the government said three development sites in Chai Wan, Fanling and Hung Hom would be released for auction next month.

Hit by a collapse in buying confidence in the property market, developer stocks fell by between 3 to 5% yesterday, with Sino Land the worst performer among major property firms.

Sino Land declined 5.68% to close at HK$13.28, while Sun Hung Kai Properties, the world's largest builder by market value, dropped 4.09% to HK$110. Cheung Kong (Holdings) fell 2.31% to HK$99.35.

"It is not the end of the correction for developer stocks: I would not be surprised to see a further fall of three to five% given the negative market sentiment," said Delta Asia Financial Group head of equity research Conita Hung Lai-ping.

Both property buyers and investors would delay decisions in anticipation of home prices falling, she said.

Lee Wee-liat, a regional property research head at Samsung Securities, believed the current policies to cool the market were more comprehensive than previous measures, demonstrating the government's resolve to curb rising prices.

"We expect more measures to be rolled out if these are ineffective," he wrote in a research note.

Over the next two to three months Lee expected transaction volume to decline significantly, as potential buyers stayed on the sidelines and developers probably slowed the release of new projects.

The decline in transaction volumes would hurt property agents such as Midland Holdings and developers such as Cheung Kong, which had a significant number of launches in the second half, Lee said.

On Sunday, SHKP said the firm would stop the sale of its joint venture luxury development Larvotto in Ap Lei Chau from Thursday. The project, due to be completed in March 2011, would release the remaining units on the market when it was ready for  occupation.

Insiders said the developer sold just 20 Larvotto units, or half of the number of units put on sale, on Saturday, a day after the government announced the cooling measures to curb speculation.

Since SHKP launched Larvotto a month ago, the developer has sold 640 units, or 90% of the 715-unit project, for a combined HK$14 billion. The project is jointly developed with Paliburg Holdings and Kerry Properties.

Hung said the market would now focus on the outcome of the government auction of two sites today.

"The result will demonstrate how developers view the market outlook," she said.

Surveyors have lowered by three to 10% their valuations of the two sites in Argyle Street, Ho Man Tin, and the Hung Hom Bay Reclamation, and say they will be sold for a total of between HK$5.7 billion and HK$6.2 billion. -- South China Morning Post

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