"Haunted flats" give market the creeps

HONG KONG: Nothing kills the sale of a home faster than death. Murder, suicide, terminal illness - it does not matter. The "haunted home" is a tough sale, especially in a Chinese society like Hong Kong, according to the South China Morning Post (SCMP).

Most buyers simply will not buy this kind of unit, no matter whether the market is up or down," said Louis Chan, an executive director of Centaline Property Agency.

Why? Ghosts and bad luck.

Death of any sort is believed to have a bad influence on the fung shui of the property. Some believe those who left the world unhappily will come back to the real world.

"The incident immediately diminishes the unit's resaleability and its market value," said Chan. "The effects can last for decades and will also spread to nearby properties."

Owners of "haunted units" usually offered them at prices substantially below market, and the discount was subject to the "score" of the haunting, said Teddy Chan, a district manager of Ricacorp Properties in charge of Taikoo Shing and Island East.

"A person who kills himself at home or one who jumps out of the window - the value of the unit will be different," he said.

The higher the score, the lower the saleability and market value. A brutal murder gets the highest score.

A typical example is the 1996 multiple murder in a Tsuen Wan Centre flat. A man killed his wife and three children, as well as two other tenants, by a combination of poison and gas. The family had rented the 492 square foot flat but fallen behind on the rent because of business difficulties.

The unit has changed hands a few times in the past 13 years, and nearly every time, the transaction price was lower than the previous one. In April, the flat sold at HK$350,000 - 70 per cent below the average HK$1.3 million price for units in the same estate.

In April 1988, police arrested a 58-year-old woman for the murder of her businessman husband. The crime was believed to have occurred in their Kornhill flat. Newspaper reports said the couple had fought after the wife noticed that she did not receive a share of the money from the sale of the unit. The fight also involved an extramarital affair.

The wife was said to have killed her husband with a hammer while he was eating congee. She then cut up his body and cooked the parts, throwing them into the rubbish bin. The body was never found.

The flat was later bought by experienced haunted-unit investor Chan Ying-kai at about 50 per cent below the market price. Agents said that after the murder was revealed to the public, the prices of all the units in the same building declined.

Sometimes, the adverse effect is so strong that nearby buildings within the same estate are also affected.

Last month, a 752 sqft unit on the lower floor of Block D at Kornhill sold for HK$3.7 million, 20 per cent below the market price. Agents said the unit faced the unit where the woman murdered her husband. The asking price of the units in Block D was HK$5,700 per square foot, about 20 per cent below the other blocks, said Sam Ding Pui-hung, a sales manager at Ricacorp Properties.

A unit at Block R of Kornhill, where a single Korean woman residing alone was killed with a knife outside the flat in 2000, sold in June for HK$2.02 million, 26 per cent lower than the previous transaction price in 1996.

Even if there are some brave buyers looking for bargains, agents warn them of the high buying risk.

"It is not easy to clinch a deal, as banks are reluctant to provide mortgages to haunted units," said Chan of Centaline.

Banks had a list of haunted flats, he said.

AA Property Auctioneers managing director Tsang Kit-chun, who has auctioned haunted units in the past few months, said banks usually did not provide mortgages for such properties.

There were some exceptions. For the recent auction of a 944 sqft unit at Newton Harbour View in Shau Kei Wan, the bank that owned the foreclosed unit agreed to provide a mortgage, Tsang said.

Several banks, including HSBC (SEHK: 0005, announcements, news) , Hang Seng Bank (SEHK: 0011, announcements, news) and DBS, said they did not keep a list of haunted units.

But Derek Chung Siu-kuen, a senior vice-president for deposits and secured loans at DBS, said when independent property valuers assessed property, they considered many factors.

These included whether it was a haunted unit, a factor that would be reflected in the valuation. "They have the list," said Chung.

"Banks will not admit that they have a list of haunted homes. Do you believe them?" said a source who works closely with the city's lenders.

In the latest brutal murder to shock the city, a senior project manager for the Architectural Services Department was hacked to death in June at her Tin Hau home, allegedly after a fight with her maid.

The media widely covered the murder and described how the victim suffered multiple and serious chop wounds, mainly in the abdomen, and that blood splashed on the walls.

"Banks will not provide mortgages to this unit if it is sold now," the source said.

Banks are worried about the saleability of the haunted unit. If a new borrower fails to repay the mortgage, the bank may not be able to resell it. That would lead to a loan-loss provision, said a banker.

Shermaine Chan Yuen-yuen, the chief economic analyst at mReferral Mortgage Brokerage Services, advises bargain hunters to make sure they get a mortgage before signing a preliminary sales and purchase agreement on a home.

In the past, some buyers unknowingly bought "haunted houses", paying a deposit before securing a mortgage. When the bank refused to lend on the flat, they were unable to complete the purchase and forfeited the deposit.

Angela Lee, a partner at Baker & McKenzie, said buyers had the right to claim losses if their property agent had not provided information that would affect the unit's market value.

Murders or suicides at the unit were considered relevant information, she said.

However, there is always someone who loves a challenge. Chan Ying-kai is an example.

"I have invested in haunted units for decades," he said.

"I bought the Kornhill unit [the one in which the wife killed her husband and cooked his body] many years ago. I gained HK$300,000 from the unit."

What was the trick?

"I only invest in units that are 40 to 50 per cent below market value," he said. "Be patient. Wait for the right partners. Some people do not mind haunted properties, such as Christians or gweilos [foreigners]." - SCMP