Salomon predicts fall in costs as sales volume dips

PUBLISHED : Friday, 27 October, 2000, 12:00am
UPDATED : Friday, 27 October, 2000, 12:00am

Residential property prices could fall 10 per cent by the end of this year on diminished transaction volume in the fourth quarter, Salomon Smith Barney predicts in its latest research.

The securities house said the severity of the present market slowdown was evident from the poor results for recent project launches.

It said Oscar by the Sea in Tseung Kwan O and The Belcher's in Pokfulam, two big property developments launched this month, sold only 32 per cent and 11 per cent of units on offer, respectively.

'New project take-up rates have fallen from [more than] 90 per cent to less than 40 per cent within the span of three months,' it said.

Salomon said since the middle of last month, residential market sentiment had quickly reverted from optimism to extreme caution, due to stubbornly high oil prices, trouble in the Middle East and volatile stock markets worldwide.

It also attributed the slowdown to a large amount of buying power being absorbed in the third quarter, with 7,948 primary market sales registered.

In this situation, the firm expected fourth-quarter transaction volume to fall to below the third quarter's level of 26,157 deals, and well short of the 17,310 deals in last year's fourth quarter.

Salomon expected more market gimmicks, which it said were nothing but 'price cuts by another name', to come as developers felt an urgency to move stock.

With a growing backlog of units launched but unsold, developers would be reluctant to put additional projects on the market, worsening the inventory overhang at a later date.