Flat prices soften as higher tax hits sales

Property firms offer incentives to buyers to clear unsold units before new law and as housing market enters cyclical weaker phase

PUBLISHED : Monday, 22 April, 2013, 12:00am
UPDATED : Monday, 22 April, 2013, 2:50am

Developers have begun to cut asking prices at their new residential projects because of weakening market sentiment and a law on sales practices that will take effect in late April.

Cheung Kong sold the remaining 14 flats at One Kowloon West in Lai Chi Kok in two days after it added sweeteners on April 17, and a senior manager at a large local property agency said weekend sales of new homes had been weak, forecasting only up to three deals overall.

Cheung Kong offered buyers a HK$500,000 subsidy for redecoration or a car parking space. It also gave a 20 per cent discount on parking spaces. These incentives were on top of an 11 per cent price cut early last month.

Henderson Land Development is also offering a subsidy for redecoration for buyers at High Point in Sham Shui Po and High Place in Kowloon City. The subsidies are HK$1,000 and HK$500 per square foot, respectively.

The developer is also exempting buyers at High Place from management fees for two years, as well as ad valorem stamp duty. The prices of the flats are in effect at least 8 per cent lower than before the new sweeteners.

A property agent said many developers have also raised agent's commissions to boost sales. He said developers are trying to clear out the remaining flats at existing projects before the new law aimed at shielding buyers from dishonest practices takes effect on April 29.

It requires developers to quote prices in terms of the usable area of flats and not "gross floor area", which includes an allocation of common areas.

However, Nichole Wong, regional head of property research at CLSA, said developers' eagerness to sell the units is not because of the new law.

"It is because Hong Kong's property market has entered the down phase of the cycle. It won't be a problem for developers to adopt the new rules, as they have been in the market for 30 to 40 years. It was because the doubling of stamp duty has hit their property sales," Wong said.

"And the series of cooling measures has changed buyers' perception of the trend of property prices. They have begun to believe that property prices may drop, as the government will continue to release new cooling measures if prices increase again."

Wong said developers will price new projects more moderately and will refrain from launching luxury projects in the short term.

Economist Kwan Cheuk-chiu said the asking prices of new projects will be 10-15 per cent less than at similar projects released before the cooling measures.

"The new housing supply will increase significantly. Developers have to cut prices in order to lure buyers," Kwan said.

Research by Ricacorp Properties shows there are about 30,300 new homes available for sale this year, the most in five years.

Professor Eddie Hui Chi-man of Polytechnic University's building and real estate department said: "The new rule and the poor market sentiment forced developers to [aggressively promote their projects]. Property sales dropped sharply after the government released the measures [on February 22]."

Hui expects the average price difference between new homes and second-hand apartments to narrow to 20 per cent from 30 per cent previously.