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Worst is over as property buyers return

Kenneth Ko

THE fall in property transactions to the lowest level in five years, as shown by the Land Registry's latest figures, is no surprise.

They just confirm that the market was really in the doldrums at the beginning of the year when most buyers stayed away.

The accumulated effect of interest rate rises and the Government's insistence on controlling residential prices dampened the desire to buy.

The warning by the Secretary for Planning, Environment and Lands, Tony Eason, in January that property prices might drop again scared potential buyers further.

Estate agents reported that residential prices fell quite heavily after Mr Eason's warning, but few home-seekers moved in to take advantage of lower prices.

Some agents said market sentiment at that time was even worse than the atmosphere following the Tiananmen Square massacre in June 1989.

But the market experienced a dramatic turnaround after the Lunar New Year, with a number of home-seekers looking for bargains.

Whether their return was seasonal or due to large accumulated buying power, transactions have increased sharply since then and in some popular housing estates a slight rise in prices has been reported.

Property sellers are more realistic now and do not ask aggressive prices, leaving room for buyers to bargain and strike deals in the end.

Developers also recognise that they have to price their properties reasonably to attract buyers. These factors have contributed to the increase in activity since February.

The sale of about 500 flats at Hang Lung Development's Kornville project in Quarry Bay and that of more than 1,000 units at Sun Hung Kai Properties' Royal Ascot in Sha Tin were well received and reflected strong buying interest at prices below the market value.

Strong sales have not only raised people's confidence in the market, but also accelerated cash returns for developers, who can use the proceeds to finance other projects or buy land at lower prices.

Both Sun Hung Kai and Hang Lung made their moves at Tuesday's Government auction, with the former paying $1.61 billion for a residential site and the latter paying $1.24 billion for the other lot.

Even though they may sell property at lower prices, it is not a losing game for them in the end because they have better cash flows to replenish land banks or buy other properties.

The Land Registry's figures reflected the worst market sentiment in recent years, but the worst is apparently over.

As market conditions improve, developers will launch more properties for sale. Activity is bound to rise sharply in coming months.

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