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Strong flat sales to trigger price rises

Developers may take advantage of improving sentiment as negative equity cases decline

Two major developers are mulling whether to raise prices of their residential projects to cash in on improving market sentiment after strong sales this week.

The ambitious plan follows a quarter-on-quarter fall of 16.3 per cent in the number of negative equity cases for the first three months of this year - the first dip after two straight quarterly gains.

Sino Land general manager of sales and marketing Mark Hahn Ka-fai yesterday said it would raise the price for its popular Vision City next week after nearly 400 flats of the 1,466-unit Tsuen Wan redevelopment project were snapped up at an average of $5,400 per square foot since its debut on Saturday.

Cheung Kong (Holdings) said it would bring about 100 of the remaining 400 unsold units of its Apex residential project in Kwai Chung forward to the market next week, one month ahead of its original schedule. More than 500 of the 924 units in the project have been sold at an average of $4,500 to $4,600 per square foot since March.

Both developers said they were yet to decide the increment levels.

'Homebuyers' confidence has obviously become stronger recently on growing economic fundamentals,' said Warren Leung Cheuk-hang, a sales manager at Cheung Kong, which aims to reap some $400 million proceeds from the 100 upcoming units.

Bucking the market trend, Sun Hung Kai Properties slashed its price for some of its remaining flats at its 1,624-unit Chelsea Court in Tsuen Wan to stimulate sales.

Property agents said SHKP had cut the price for some of the 300 unsold units by 20 per cent to 30 per cent yesterday, although the developer insisted the discount was only about 10 per cent. The new price was set at about $3,800 per square foot, down from the original $4,600.

'The price cut is mainly aimed at attracting market focus and bring up sales momentum,' said Sun Hung Kai Real Estate Agency executive director Eric Chow Kwok-yin, adding they were not pessimistic about the outlook.

Market optimism was given a lift after the Hong Kong Monetary Authority unveiled the number of negative equity holders dropped by 1,790 cases to 9,193 with an aggregate value of $16 billion in the three months to March.

The number of cases of negative equity, which refers to holders of mortgage loans whose outstanding value exceeds the value of their properties, hit 106,000 at its peak in mid-2003.

About 70 per cent of negative equity cases derived from mortgages granted when the 1997 boom was at its peak. Some 72 per cent of the properties are in the New Territories, 12 per cent on Hong Kong Island and 16 per cent in Kowloon.

However, the authority added a note of caution to a bullish property market sentiment.

'It seems that the local property market at present is still way below the peak in 1997 in terms of risk assessment,' said chief executive Joseph Yam Chi-kwong. 'However, we need to pay attention to the fact that society's vulnerability to any significant downward adjustment in the property market is relatively higher than in 1997.'

Mr Yam said highly leveraged mortgage loans could expose buyers to higher risk while the local economy was not yet as buoyant as it was in 1997.

Market players said the likelihood of next week's possible rate rise of 25 basis points could cast a pall over the property market.

The prospect of higher rates, however, has done little to dampen the enthusiasm of developers who have been aggressively offering mortgage sweeteners to lift sales.

Sino Land has teamed up with China Construction Bank to offer a six-month prime rate minus 3 per cent mortgage to lure buyers.

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