New rules to test sales at Hermitage

HONG KONG: Sales at Sino Land's The Hermitage in Tai Kok Tsui, due to be launched this week, will provide a reality check for the market under new guidelines imposed by the government for the release of new developments.

The project will be in the spotlight as it is the first large-scale development to be launched since the new rules took effect this month.

According to the guidelines, produced by the Real Estate Developers Association, developers of large-scale projects consisting of 100 or more flats are required to launch at least 50 flats, or 50% of the total number of flats, whichever is higher, in the first release.

For smaller projects, the minimum is 30 flats or 30% of the total, whichever is higher.

Developers are also required to release the price list of all units available for sale three days before their sales' launches. The requirements have changed the "rules of the game" in the primary market, agents say.

In the past, developers would only release price lists of a few units a day before the sales, to test buyer interest. Most of the units would be launched in the sales office, without releasing the price list.

This enabled developers to raise or cut asking prices, depending on the market response. But potential buyers would not know the asking prices of the flats they liked until the developers released them for sale.

The new rules would provide the market with a clearer picture of the sales of new projects, said BNP Paribas analyst Trevor Cheung.

"The information in sales offices used to be confusing, as the sales process lacked transparency," he said. "But now developers have to clearly state the asking prices of all the units they are going to sell.

"The sales results of the new projects would therefore be more reliable than before and developers would not be able to mislead potential buyers again."

The rules presented a challenge to Sino Land, as the first developer to work under the new practice, he added.

On Monday, Sino Land announced it would launch 75 units in Block 2 at The Hermitage for sale this week. Prices of the flats, sized from 1,005 to 1,552 square feet, range from HK$9.03 million to HK$21.28 million, or between HK$8,984 and HK$13,714 per square foot.

Yesterday, the developer launched another 75 flats with an average price of HK$10,818 per sq ft.

Property agents said the asking prices were competitive since they were close to the average prices of newer housing estates in the area.

According to Centaline Property Agency data, prices at the year-old Florient Rise project ranged from HK$8,900 (RM3,698) to HK$12,000 per sq ft in recent months. Prices at One Silver Sea, a four-year-old housing estate with a better view, were between HK$9,226 and HK$13,000 per sq ft.

Given the competitive pricing, the project was likely to attract investor interest, said a property agent. "Investors could generate a profit if prices were subsequently to rise by just 6% to 7%," he said.

"The asking prices of The Hermitage are attractive. Sino Land has not asked for aggressive prices, as Sun Hung Kai Properties did."

He believed this was because the views of 25% of the units on the lower levels were blocked by Hoi Fu Court, a Home Ownership Scheme estate, and also because of the imposition of the new guidelines.

"In the past, developers would sell larger flats at the first stage of sales so as to set a higher price for the project. This strategy would help them to sell smaller flats later at a higher price," he said.

Cheung expects The Hermitage will attract strong interest from buyers. Located at Hoi Wang Road, next to Central Park, it was developed by a consortium consisting of Sino Land, Chinese Estates Holdings and Nan Fung Development.

Its six residential blocks provide 964 flats sized from 375 to 1,882 sq ft. The project is scheduled for completion at the end of March next year.

Sino Land has invested heavily in the development of a clubhouse to lure buyers. "The design of the clubhouse is much more luxurious than Sino Land's previous projects, such as Lake Silver in Wu Kai Sha, and The Palazzo in Fo Tan," an agent said.

The location of The Hermitage is also better than Lake Silver, as it is close to the bus terminal at Olympian City Phase II and the MTR station.

"But the views from flats below the 20th floor will be blocked by the buildings nearby," noted the agent.

Jeff Yau, an associate director at DBS Vickers Securities, said the sales of flats in The Hermitage would be a good indicator of current housing demand. "Debt problems in Europe have become a major concern in the last few months."

"The Hermitage is the first large-scale project launched for sales after the issue of the new measures and sales would therefore provide an important indicator of sentiment," he said. -- South China Morning Post
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