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HONG KONG: Sun Hung Kai Properties (SHKP), the biggest developer in Hong Kong in terms of market share, says it will build more small flats in its new projects in response to a sharp fall in demand for luxury homes.
The decision comes after transactions for homes priced above HK$20 million (RM8.24 million) dropped by half in May as buyers baulked at continuing to pay stamp duties that were doubled on a sliding scale from 4.25% to a top rate of 8.5% in the case of homes sold for HK$21.73 million and above. That lifted the top duty on a flat sold for this price to HK$1.85 million from HK$923,525.
The stamp duty move was aimed at curbing investment demand, and the latest market data indicates it is achieving that objective, said agents and property analysts.
“In view of the recent changes in the condition of the market, small units will have better marketability,” said SHKP deputy managing director Victor Lui Ting.
The phase three development of its residential project Yoho Town in Yuen Long will be dominated by units sized between 400 and 500 sq ft. Larger flats previously aimed mainly at mainland buyers will be scaled down by as much as a third of their former size to reduce their selling prices.
“Several years ago buyers wanted bigger terraces, bigger roofs and bigger private pools. But now the profile of our clients has changed and they have different tastes,” said Lui.
The next phase of the Yoho Town development will contain fewer special units with smaller terraces, sized between 1,000 and 2,000 sq ft. The previous phase of development included 3,000 to 4,000 sq ft units with large terraces and private pool.
For the first quarter (1Q) of this year mainlanders accounted for 10% of sales of high-end homes worth HK$12 million or more, said property consultants Knight Frank. For 1Q of 2011 mainlanders accounted for 40% of such sales.
The sharp decline in mainland demand came after the Hong Kong government introduced a 15% additional tax on property purchases by corporate and non-permanent resident buyers last October.
At its Imperial Kennedy development in Sai Wan, SHKP will also focus on building smaller units of 400 to 800 sq ft each.
ITC Properties and Couture Homes on Monday launched their single residential block, Yoo Residence. The Causeway Bay project is comprised mainly of small-size flats. Prices of the first 50 units for sale, sized from 355 to 539 sq ft in saleable area, range from HK$10.16 million to HK$19.1 million each.
Vincent Cheung Kiu-cho, national director for Greater China at Cushman & Wakefield real estate firm, said small flat strategies in the New Territories would cater for first-time home buyers while those in urban areas would likely attract investors.
“Buyers of these shoe box-sized flats in prime locations will hold for leasing,” he said.
Thomas Lam, head of research for Greater China at Knight Frank, said end users were likely to dominate home sales in the foreseeable future as investors had retreated from the market because of the government’s anti-speculation activity.
“It is very difficult to find buyers for flats selling for HK$50 million to HK$60 million now in the absence of mainland purchasers,” he said.
According to Midland Realty, the number of big-ticket deals for homes priced at above HK$20 million plunged to 55 in May, down 47% from 104 deals in January, the month before the introduction of double stamp duty.
Knight Frank’s Lam says he now expects buyers to target homes priced at below HK$4 million. — South China Morning Post
This article first appeared in The Edge Financial Daily, on July 26, 2013.
