Investors cut prices in rush to sell flats

HONG KONG: Flat owners are cutting prices to unload their investment properties because they fear the government will launch more cooling measures on top of last month's tighter restrictions on mortgage loans.

Investor Jenny Chan has sold all her property investments — four flats in Mei Foo and an office unit in Mong Kok — during the past few months in anticipation of more measures to come.

"I have just kept one unit to live in. I do not know when the government will impose measures again, but prices are too high," Chan said. "I expect prices will drop sooner or later and I am waiting for another property cycle to begin again."

According to property agents, more owners of flats of all sizes had cut asking prices by between 5% and 8%. Some had made even deeper cuts of more than 10%, with the aim of offloading their property assets as soon as possible.

On Hong Kong Island, a 675 sq ft flat at Lei King Wan sold for HK$5.95 million (RM2.3 million). The flat owner originally asked for HK$6.5 million but cut the price by 8.5% in the wake of the slow market activity. In Sha Tin, an investor sold his 395 sq ft flat at City One for HK$2.28 million — nearly 12% lower than his original asking price of HK$2.59 million.

"It's getting more obvious that investors want to get rid of their properties as they worry that the government may launch more measures to curb soaring prices in the policy address in October," Century 21's Sha Tin regional manager Jessica Chow Suk-ping said.

"They want to realise their gains first, and then watch the market before they make their next move."

Last month, the government cut the maximum amount that banks could advance on a mortgage loan for homes valued above HK$10 million by 10 percentage points to 50% of the property's value. For properties priced from HK$7 million to HK$10 million, the maximum loan-to-value ratio was lowered to 60% from 70%. Tougher mortgage restrictions were also imposed on non-resident borrowers.

Chow said the latest round of cooling measures had a stronger impact on sentiment than the previous round of measures in November, when the government introduced the additional stamp duty of up to 15% on homes resold quickly.

"Last time, only one in 10 flat owners was willing to lower their asking price," she said. "But this time, half of them are cutting prices and they think flat prices may have already peaked. On the buyer's side, they want to bargain for the lowest price possible and about 90% of them are end users."

Gary Lam Lung-nam, a senior district sales manager at Centaline Property Agency's North Point branch, said investors were stunned by the government's determination to curb price surges.

"At least 30 to 40% of owners are taking the initiative to lower their asking prices by about 3% at the beginning," he said. "But they are then willing to reduce prices further by as much as 7 to 10% if buyers are willing to pay deposits by cheque because there aren't a lot of buyers in the market."

Lam said sellers with properties priced between HK$9 million and HK$11 million were most affected by the latest mortgage rules. For example, a client had cut the price of his 1,048 sq ft flat in North Point's City Garden by 8.8% or HK$920,000. It eventually sold for HK$9.58 million.

With buyers and sellers retreating from the market, Ricacorp Properties said that from June 27 to July 3, there were only 146 secondary market flat sales in the 50 largest housing estates in Hong Kong it monitored. That was down 3% on the 151 transactions of the previous week. That was the lowest figure since November 2005 after taking out Lunar New Year periods when the market is quieter.

Eight housing estates recorded no transactions during the week. They include Kornhill, Residence Oasis, Island Harbourview, Park Avenue, and Villa Esplanada.

Ricacorp director David Chan said although more sellers were cutting prices, buyers remained conservative. He said that since the market lacked clear drivers transaction volumes were likely to remain low this week. — SCMP