Cheung Kong's home price cuts 'will affect market' says analyst

While observers are split over whether Cheung Kong's high-profile price-cutting strategy is a marketing gimmick to drum up sales, or a reflection of the belief of Li Ka-shing, the company's chairman, that the property market has peaked, one analyst said the price cuts themselves would have an effect on the market.

Three weeks after the developer's controversial sale of all 360 hotel units at Apex Horizon in Kwai Chung at a low price of HK$5,400 per square foot, it took the lead again on Thursday and cut the prices of flats at its One West Kowloon project in Lai Chi Kok by 6 to 17 per cent.

Justin Chiu Kwok-hung, an executive director at Cheung Kong, said the group's next project in Tsuen Wan would be launched at discounted prices.

Chiu also said he expected home prices to fall 10 per cent this year.

Cheung Kong plans to release a record 5,238 homes in the city and 2,500 on the mainland for sale this year, in an attempt to generate revenue of as much as HK$40 billion.

Venant Chiang, an analyst at Jefferies Equity Research Asia, wrote in a report: "We conservatively estimate [the supply of new homes] amounts to 16,000 to 18,000 units this year. Cheung Kong's new supply alone accounts for about 30 per cent of our estimate. Therefore, its pricing strategy will have a meaningful impact on the market."

Because of shrinking demand after a couple of rounds of policy tightening, the take-up rate for new supply is uncertain, which could potentially lead to deeper-than-expected price reductions, Chiang said.