Launch of new flats set to slow

PUBLISHED : Wednesday, 28 September, 2011, 12:00am
UPDATED : Wednesday, 28 September, 2011, 12:00am


Developers may slow or delay the launch of new flats after Cheung Kong (Holdings) only sold about 500 in its Tseung Kwan O project in the first three days of sales, according to property analysts.

'Sales at Cheung Kong's project were worse than expected, given it said 1,700 potential buyers had registered with agents before the launch,' the head of research at brokerage house GuocoCapital, Eric Yuen Chi-fung, said.

'Since buyers lack confidence, I believe the launch of first-hand properties will be slower and some developers may even hold back on their sales plans,' Yuen said.

Cheung Kong's 1,168-flat residential project La Splendeur, the latest phase of its Lohas Park development in Tseung Kwan O, saw 390 flats sold on its launch day last Friday, followed by 110 sales on the weekend. It has put about 600 flats on the market so far and has released the price list of all flats except for a special home.

'Market sentiment has weakened on a new round of mortgage rate hikes and stock market plunges. Sales at La Splendeur are slower than expected,' Samsung Securities' analysts said in their latest report. This was despite a 6 per cent discount offered to cash buyers that reduced the asking price of La Splendeur flats to about HK$5,569 per sq ft, only 7 per cent above the HK$5,200 per sq ft prices at which secondary homes were sold recently in Lohas Park.

Samsung Securities analyst Patrick Wong Chi-leung said poor sales were due to mortgage rate rises and the stock market slump.

When the market was hot, about half the potential buyers who registered and lodged deposit cheques before a launch would eventually buy a flat. However, fewer than 30 per cent of the 1,700 potential buyers had done so in this project, Wong said.

The Samsung Securities team expects higher mortgage rates and a deteriorating global economic outlook to affect coming launches, and Wong said some large projects such as Sun Hung Kai Properties' The Wings in Tseung Kwan O might need to come up with more marketing strategies or mortgage offers to lure clients.

Meanwhile, more banks have raised their mortgage rates, including Standard Chartered, which increased its Hibor-based rate by 30 basis points to Hibor plus 2 to 2.5 per cent with a cap of prime rate (5.25 per cent) minus 2 to 2.35 per cent. It also raised its prime-based mortgage rate by 15 basis points to prime rate minus 2.35 to 2.65 per cent.

Nan Fung Development sold four flats at its Winfield Building project over the weekend, while two homes at New World Development and the Urban Renewal Authority's The Masterpiece were sold, according to Samsung Securities.

In the secondary market, transactions at the 50 largest private housing estates monitored by Ricacorp Properties dropped 18 per cent to 159 in the week of September 19 to 25, an 11-week low. There were no sales at eight of the estates.

Ricacorp director David Chan said the decrease was due to the launch of La Splendeur, as well as the drop in stocks and rise in rates.

'It's difficult to see a boost ahead for market sentiment when the stock market does not stop falling. With the [chief executive's] policy address to be announced in mid-October, some potential buyers and sellers have turned to watch the market situation so it will take even longer to seal any deal,' he said.

In another report, Morgan Stanley's analysts said they believed the interest rate rises could make properties unaffordable. But lower transaction volumes along with recent price drops could put further pressure on near-term property prices.


The Centa-City leading index, which tracks changes in average property prices, for September 5 to 11, down 0.06 on the previous week