• Wed
  • Jul 23, 2014
  • Updated: 3:41am

Owners rush for tenants to avoid penalty

PUBLISHED : Wednesday, 09 November, 2011, 12:00am
UPDATED : Wednesday, 09 November, 2011, 12:00am

Speculators who bought new flats before last November's introduction of stamp-duty penalties for quick resales face a tough decision.

With delivery of their flats now falling due, they must sell and be hit with extra stamp duty of up to 15 per cent, or find tenants so that they can sell later and avoid the extra duty.

The ensuing competition among such speculators to secure tenants has seen rents plunge by as much as 18 per cent in Tai Wai and Tuen Mun, property agents say.

As more speculators delay selling and offer their flats for rent amid declining buying interest, overall rents have started to ease and dipped 1.3 per cent last month from September, according to Ricacorp Properties. 'Given the surge in the number of units available for lease, owners have found that they need to offer attractive rents if they want to find a tenant as fast as possible,' said Patrick Chow, Ricacorp's head of research.

At the 1,368-flat second phase of Festival City in Tai Wai, where completed homes are now being handed over to their owners, there has been a spike in the number of flats offered for lease and an ensuing fall in rents to a new low of HK$16.50 per square foot. Pre-sales of the second phase began in November last year, days before the government brought in the penalties for resales within two years. An additional 15 per cent duty will be levied on homes sold within six months of purchase; 10 per cent extra will be payable on those resold within a year, and 5 per cent on those resold within two years.

Agents said the release of 200 flats in the second phase of Festival City had helped bring rents down because the owners would prefer to find tenants rather than sell, so as to avoid paying the extra stamp duty.

'We saw the same trend in phase one of the development as well,' said Chow. It would take two to three months for the market to absorb the release for sale of such a large number of flats.

A four-bedroom, 1,273 sq ft flat in the second phase at Festival City was recently let for HK$21,000 a month, or HK$16.50 per square foot - the lowest rent for a private residential development in Tai Wai.

That was also lower than the HK$18 per square foot rate at Holford Gardens, a nearby government-subsidised housing estate developed under the private sector participation scheme. Average rents for flats in its second phase are about HK$20 per square foot, compared with HK$18 to HK$26 per square foot for flats in the first phase, according to Centaline Property Agency.

Agents said there was a similar situation at two other new projects - Oceanaire, in Ma On Shan, and Avignon in Tuen Mun, which are ready for occupation.

'Developers began gradually handing keys to the units to their new owners recently,' said Chow. Average rents at Avignon were HK$25 per square foot, with some individual owners willing to lower the asking rents by 17 per cent to HK$20.60 per square foot, he said.

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