Henderson chief sees home prices steadying

Lee Shau-kee cites doubling of supply and high building costs as factors keeping homes in the mass market in a tight range for two to three years

PUBLISHED : Tuesday, 04 June, 2013, 12:00am
UPDATED : Tuesday, 04 June, 2013, 3:57am

Hong Kong housing prices will consolidate in the next couple of years, owing to an increased supply of flats and high construction costs, Henderson Land Development chairman Lee Shau-kee said yesterday.

"In the past few years, annual flat supply was about 10,000 units. In the next few years, annual supply will jump to 20,000 units," Lee told reporters at the firm's annual general meeting. The doubling of supply would bring the increase in home prices back to a reasonable level and squeeze developers' profits, he said.

"Developers will not make big profits," Lee said.

He cited Tseung Kwan O and Tsuen Wan as examples. Land cost in these two areas is about HK$4,000 to HK$5,000 per square foot.

Together with the construction cost of HK$3,000 per square foot, the total development cost is between HK$7,000 and HK$8,000 per square foot, which is close to the average selling price of flats in the area, he said.

However, Lee said, high construction costs would keep home prices in the city from plunging.

"Home prices on average will go up or down not more than 10 per cent in the next two to three years," he said.

Earlier, international property consultancy Knight Frank predicted mas market home prices would fall 10 per cent this year, while Colliers International expected luxury home prices would drop an average of 10 per cent in the next 12 months.

Sales have remained weak since the government announced on February 22 the doubling of stamp duty on residential and non-residential transactions valued at more than HK$2 million.

A report by investment bank BNP Paribas said 13 second-hand units were sold at the 10 largest residential estates tracked by Centaline Property Agency last weekend, 31.6 per cent fewer than the 19 units sold the previous weekend.

In the primary market, no units were sold last weekend, compared with four the previous weekend. Only 69 new units have been sold at three projects since the Residential Properties (First-hand Sales) Ordinance, which imposes stricter rules on marketing, took effect in late April.

Lee said more developers would relaunch their projects over the next few months when they got used to the new rules.

Centaline's latest Centa-City Leading Index rose 0.23 per cent week on week to 119.06, bringing the year-to-date increase to 2.8 per cent.

Figures from brokerage mReferral yesterday showed the number of mortgage registrations last month fell 19.6 per cent month on month to 6,407 deals.

Meanwhile, Lee said Henderson Land would not be aggressively bidding for government land sites in view of its sizeable land bank.

He highlighted the positive future contributions from the redevelopment of old buildings in urban areas.

As of last year, the company had 32 urban redevelopment projects for old tenement buildings with sole or over 80 per cent ownership, which are expected to provide a total attributable gross floor area of about 2.7 million square feet, according to its financial results for last year announced on March 25.