Sales rush to raise cash for land banks
Developers in Hong Kong will speed up sales of their new projects to raise cash to replenish their land banks while land prices are low - a move that could see a fall in new home prices, agents say.
With more new flats in the pipeline this year, property agents expect most developers will adopt less aggressive pricing strategies as they bid to accelerate sales and build up cash reserves.
There are 16,000 new flats due to be released this year, up nearly 75 per cent from 2011 as a result of the government resuming its programme of land auctions to curb price growth, according to Midland Realty. Last year, 9,151 new flats came on the market for sale.
Midland Realty director Sammy Po Siu-ming said developers would speed up sales of new residential projects to take advantage of prevailing lower land prices. A number of prime residential sites are scheduled for auction or tender this year.
'The days of new flats being offered at sky-rocketing prices are over. Today, developers have to offer their new flats at more reasonable prices if they want to drum up sales.'
Po said that amid slowing sales developers were likely to cut the premiums they charged for new homes over secondary-market units in nearby areas to 20 per cent, from a previous 40 to 70 per cent.
According to agency Hong Kong Property Services, the number of registered residential transactions is expected to fall below 4,000 this month, - the lowest since the depths of the global financial crisis in November 2008, when 3,786 properties changed hands.
The release of flats in The Coronation in West Kowloon, which is developed by a consortium led by Sino Land, attracted a strong response when it launched this month, boosted by the seller's low pricing strategy, agents said.
The first batch of 50 flats was released at an average price of HK$13,688 per square foot, about 9 per cent below the average asking price of HK$15,000 per square foot for flats being resold at the nearby Sorrento housing project, close to Kowloon Station.
Sino Land's Victor Tin Sio-un said the group had banked more than HK$7 billion from the sale of more than 85 per cent of the 740-flat The Coronation as of Friday.
The project will be completed by the end of this year.
Tin was confident about prospects for the residential market. 'We will offer new projects for sale once we obtain pre-sale consent,' he said.
The next new development to be put on sale by Sino Land will be a joint venture development with the Urban Renewal Authority in Tai Kok Tsui. The project, due to be completed in 2014, comprises 464 flats.
Of the 16,000 flats in the pipeline, 79 per cent are in the New Territories, while 1,000 are on Hong Kong Island and 2,100 in Kowloon, according to Midland Realty.