Wary buyers force developers to think on a smaller scale

Players are reducing their exposure to a potential drop in sales revenue by releasing projects with fewer flats

Hong Kong developers are having to think up new strategies to sell their properties as investors and end-users hesitate to enter the home market amid concerns of further interest rate rises.

Developers were testing the market by selling projects with fewer flats, rather than launching large-scale developments, property consultants said.

Ricacorp Properties executive director Willy Liu Wai-keung said developers were turning to small developments to minimise their losses as a result of a fall in property revenues.

'They do not have to face a big loss even if the sale of these developments has a poor response,' he said.

Centaline (Holdings) chairman Shih Wing-ching said: 'Developers are hesitant to launch large projects while the market [outlook is uncertain]. It would affect the total revenue of developers if the sale of projects recorded a poor response in the first stage.'

Coming on the market, the 95-unit CentrePlace project at No 1 High Street in Mid-Levels West is Henderson Land Development's smallest project this year.

Other developments in the Henderson stable include the 1,782-unit Grand Waterfront in To Kwa Wan and luxury development The Beverly Hills in Tai Po, which has more than 500 houses.

Henderson Land general manager Tony Tse Wai-chuen denied that the company was being cautious about the market outlook by launching CentrePlace first.

He said the property had been put on the market because it was the first to be ready.

'The government approved the occupancy permit of CentrePlace last month. We decide to launch the project first as the refurbishment of the show flat has been completed,' he said.

Mr Tse said the sales arrangement was also in response to market demand.

'While the market is not active, developers will pick the projects which are located in the districts where there is limited new supply. The supply in the western area of Mid-Levels is limited; it is the right time to launch CentrePlace,' he said.

Medium-sized developer Nan Fung Development's director Victor Mak Yat-king said it was difficult for developers to sell large projects with more than 1,000 flats as the market had soured.

He said the outlook was uncertain, citing the sales response of Nan Fung's residential project as an example.

'We sold about 75 per cent of houses of the Fiori luxury development in Yuen Long within two weeks. But the positive market response lasted for two weeks only, and then sales slowed down.

We don't know the reason.'

Mr Mak said he believed that potential buyers were hesitant to enter the market amid concerns of rising interest rates.

He said many homebuyers who had entered the market last year were investors who could not resell their properties when the market consolidated in the second half of last year. As a result, not many investors had entered the primary property market this year, which had resulted in a significant drop in transactions.

Property agents said the housing market would see fierce competition in the second half of this year as Chinese Estates (Holdings), K Wah International, Sun Hung Kai Properties, Henderson Land and Cheung Kong (Holdings) had plans to launch six large projects over the next seven months.