New | It’s a buyers’ market as Hong Kong flat owners slash prices to secure sales
Plagued by weakening market sentiment, rising interest rates and a slowing economy, flat owners in Hong Kong are feeling compelled to slash prices to attract buyers, pushing secondary home prices down for four straight months.
Home prices at 50 housing estates monitored by property agent Ricacorp Properties fell 1.8 per cent in December.
The secondary home prices, which were peaked in August last year, have seen an accumulated decline of 4.9 per cent between September and December, said Ricacorp Properties’ director Willy Liu.
“Prices will continue to drop another 1.5 to 2 per cent in January, bringing a total decrease of 10 per cent this year,” said Liu.
A 375 sq ft unit at Westlands Court also in Quarry Bay was recently sold for HK$4.9 million, or HK$12,312 sq ft, back to the price level in June 2014.
“The owner originally asked for HK$5.9 million in December,” said Jason Yuen , sales manager at Centaline Property Agency’s Quarry Bay district.
As home owners are willing to slash prices more than 10 per cent, transaction volume will go up, said Liu.
In its research report released on January 12, investment bank Credit Suisse said that the residential sector is only at the beginning of a multi-year correction cycle.
The investment bank expects home prices to drop 15 per cent this year and 5 per cent each in each of the following two years.
Credit Suisse said the undersupply situation in Hong Kong has been changing.
“We estimate over 25,000 units will be ready for launch in 2016, versus an average take-up of 18,000,” the report said.
Investment bank CLSA said the correction in Hong Kong residential prices last year has been sharper than expected.
CLSA had forecast a 2 per cent price correction in the fourth quarter of 2015. Instead, prices tumbled 7.5 per cent during the quarter, according to CLSA calculations.
“We expect the price correction to accelerate in the first quarter of 2016, driven by developers’ price cuts,” the investment bank said in a report.
In the fourth quarter of 2015 developers had largely used non-price marketing strategies, such as direct offer of first mortgages or waiving of stamp duties to entice buyers.
However, price reductions could become a feature of developers’ marketing plans this year.
“With the price downtrend now so obvious, there is no longer incentive to hide price cut,” CLSA said.
With rising land supply between 2012-15, a higher level of supply will persist for the coming three to four years.
CLSA believes developers will get aggressive in their pricing strategy and the secondary market will follow until the “more determined” sellers, stacked up in the past year, are cleared.
“This is the reason we expect a front-loaded price correction of three per cent per month in the first quarter of 2016.
The pace of priced reductions will likely ease in later quarters, CLSA said, adding that it expects prices will drop 10 per cent during the year.
