Sun Hung Kai duty subsidy seen working after The Cullinan sales
Sale of 20 more flats at The Cullinan project yesterday suggests firm's tactic is working
Sun Hung Kai Properties' strategy of offering a 70 per cent subsidy on stamp duty seems to have paid off after it sold 20 more flats at its luxury residential project in West Kowloon at a higher price even as property analysts warn home prices could tumble up to 25 per cent from their peak by next year.
All units at The Cullinan were sold by 2pm yesterday, with one buyer snapping up three apartments, market sources said.
The latest batch of 20 units was offered at an average price of HK$32,000 per square foot, 5 per cent to 10 per cent above the price of the 60 units launched on Saturday at a discount of up to 20 per cent on the going rate in the area.
"Sales in the secondary residential market in the area froze once SHKP announced the discounts for The Cullinan last week as all potential buyers headed for the new flats," said Ken Chui, a director at Ricacorp Properties' Kowloon district.
Given that 16 of the Cullinan units were earmarked for locals, he said there were only a few mainlanders among the buyers. He added that sales were orderly after buyers swamped the office on Saturday as the firm decided to announce the results of the ballot a day ahead of official sales.
Some 1,400 people had signed up for the latest sale, compared with more than 2,000 prospective buyers who registered for the 60 units on offer on Saturday. Including yesterday's 20 units, SHKP has sold a total of 80 flats since Saturday.
"Other developers are likely to follow SHKP's tactic of providing buyers a subsidy on stamp duty," said Raymond Ngai, analyst at Bank of America Corp's Merrill Lynch unit. Ngai expects home prices to drop 5 per cent this year and another 15 per cent next year.
The head of Hong Kong and China property research at UBS, Eva Lee, forecast Hong Kong home prices to drop 15 per cent to 20 per cent next year, following an expected 5 per cent decline this year. "By the end of 2014, prices would be back to early 2011 levels."
She said stamp duties and a lower loan to value ratio had narrowed the potential client base to only end-users. "The residential projects under development might not match the changes in buyers' appetite. This could pose earnings and valuation risks to developers," said Lee.
SHKP is Hong Kong's second-biggest developer by market value.
Home prices have more than doubled since early 2009 amid low mortgage rates, a shortage of new supply and an influx of mainland buyers. Sales have fallen since the government raised stamp duties.