Kowloon project extends Hong Kong’s property recovery but downturn may return
Buyers snapped up nearly all the units offered at a small residental property project in Kowloon amid an ongoing market recovery, but agents warned that rising supply and economic uncertainties could derail the price rebound later in the year.
Some 125 out of 130 units offered were sold within three hours on Sunday at The Ascent, a project in Cheung Sha Wan district jointly developed by Hong Kong-listed Paliburg, its subsidiary Regal Hotels International and the Urban Renewable Authority, Paliburg chief operating officer Donald Fan Tung said in a statement.
The developers plan to offer the remaining 27 units on Monday, and any price increase will not exceed 5 per cent, he said.
The 130 units were priced at between HK$4.07 million to HK$6.94 million, averaging around HK$14,100 for each usable square foot after discounts and incentives.
“The project sold well mainly because demand from first-time buyers for small units is strong,” said Midland Realty’s residential chief executive Sammy Po. “While most of the buyers are end-users, around 30 per cent of the units were bought by investors for renting, which can generate an annual return of close to 4 per cent.”
The Ascent comprises 157 open-plan to two-bedroom units ranging from 276 to 458 sq ft each.
Although Hong Kong’s overall property sales volume plunged nearly 40 per cent year on year in the first half of the year, “the worst six-month number recorded” according to Midland, private home prices rebounded 0.7 per cent in April and 0.73 per cent in May after a downtrend.
Still, prices are 10 per cent off their September 2015 peak, government data showed.
“For units priced under HK$7 million – the threshold for tighter mortgage restrictions – as long as the prices are attractive, they tend to sell well,” said Thomas Lam, head of valuation and consultancy at Knight Frank. “The larger more expensive units are more difficult to sell.”
Lam expects the overall home price correction trend will continue for another one to two years, albeit with intermittent minor rebounds driven by economic news.
“The main factor affecting prices will unlikely be interest rates given that any rate hike in the United States is expected to be benign ... the employment market and government land and housing policy will play a bigger role,” he added.
Po expects the relatively buoyant property market conditions to continue into the third quarter, but ongoing uncertainties over Britain’s departure from the European Union and a potential price war could result in renewed price decreases in the fourth-quarter, given competition will heat up as up to 15,000 new units could potentially be launched.
For existing homes, Hong Kong Property Services chief executive Richard Lee Chi-sing said some 15 transactions were recorded in the city’ 10 largest housing estates over the weekend, up around 25 per cent from the previous weekend.
While property owners have pared reductions on their asking prices recently, Lee expected transaction volumes will fall later as existing property sellers will face keen competition from new home developers adopting “all sorts of” pricing incentives to attract buyers.