HK sellers cut prices amid crisis in Japan

The nuclear crisis in Japan prompted some Hong Kong home sellers to drop asking prices last week in a bid to secure quick sales, agents say. But the discounts were insufficient to lure some nervous potential buyers to risk entering the market. The radiation fears in the wake of the destruction caused by the March 11 earthquake and subsequent tsunami cast a long shadow over market sentiment in Hong Kong. Secondary home sales here fell nearly 30 per cent last week, according to data compiled by estate agency Ricacorp Properties. The dent to buyer confidence prompted some owners to drop asking prices by up to 10 per cent, agents said. But many buyers remained on the sidelines. The Ricacorp data showed that in the 50 housing estates it monitors there were 248 sales agreements signed during the week from March 14 to 20, down 29 per cent from 349 units a week earlier. 'The market is bracing for at least two weeks of limbo,' said Patrick Chow, Ricacorp's head of research. 'Potential buyers will stay on the sidelines until the nuclear crisis in Japan is contained. I do not expect a big fall in home prices, but sellers are now willing to offer more room for negotiation in the wake of the disaster in Japan, which could create uncertainty about the outlook for the global economy.' City One, Sha Tin, a housing estate that is popular among speculators and end-users due to the small deposit required to buy, appeared to have the largest number of owners willing to cut asking prices. The discounting comes after prices in the estate jumped more than 40 per cent in the past two years. Man Lai, manager at Centaline Property Agency's Sha Tin branch, said: 'In a quiet market, sellers have no choice but to offer bigger discounts in order to get the deal done.' About 20 to 30 per cent of owners at City One had cut their asking prices by between 3 and 6 per cent, he said, citing the example of an owner who had his home on the market at HK$2.4 million before the quake in Japan, and had now cut his price by about 6 per cent to HK$2.25 million. A 395 sq ft flat in the estate sold for HK$1.95 million at the weekend, down 4.9 per cent from the pre-crisis asking price of HK$2.05 million. The deal nonetheless allowed the owner to pocket a gross profit of HK$575,000 on the property, for which he paid HK$1.375 million in 2009. Profit-taking deals were also done in the high-end residential sector, with a 1,050 sq ft flat in Comfort Mansion, Happy Valley changing hands for HK$12.2 million, or HK$11,619 per sq ft, after the seller cut the asking price by HK$800,000, according to Hong Kong Property Services (Agency). The seller made a gross profit on the transaction of HK$3.2 million after he paid HK$9 million for the apartment in 2008. Elsewhere, in Mei Foo Sun Chuen, an owner sold a 621 sq ft flat for HK$3.23 million, or about 10 per cent lower than the original asking price of HK$3.6 million. The seller made a gross pre-inflation profit of HK$1.23 million after he bought the flat for HK$2 million in 1998. Property investor Jenny Chan also plans to cash in her investment in Mei Foo Sun Chuen, since average transaction prices reached HK$5,384 per sq ft on Monday, just 6.4 per cent below the HK$5,754 per sq ft peak of 1997. She is offering her 890 sq ft flat for sale at HK$5.2 million and said she had so far received offers of between HK$5 million and HK$5.1 million as potential buyers wanted to take advantage of the market uncertainty and asked for a discount. 'But I have no plan to lower the asking price as the mortgage for the apartment has been cleared,' she said. 'I am in no hurry to sell.' In January, Chan made a gross profit of HK$1 million from the sale of a 500 sq ft office in Mong Kok for HK$2 million. She said she would invest the proceeds in either the property market or blue chip stocks. On Saturday, developer Cheung Kong (Holdings) withdrew from sale 172 flats at Festival City in Tai Wai. Analysts said the move was due to the market uncertainty, but Cheung Kong said the deferral was because it might raise the selling prices. Alex Yau, assistant sales manager at Midland Realty for Island East district, favoured by expatriate Japanese workers, said he had not seen evidence of an exodus of Japanese investors from the market. 'Japanese tenants account for about 10 per cent of leasing at Taikoo Shing, but I have not heard of any early termination cases,' he said. 'It will not adversely affect the leasing market even if Japanese firms scale back their overseas operations. 'But it is still too early to make a prediction.' News reports last week said a Japanese company director had sold a flat in Hilltop Mansion, North Point, for HK$24.5 million, or 2 per cent lower than the HK$25 million asking price. The company initially bought the flat for HK$5 million in 1995.