Discounts, higher commissions heat up luxury market
New strategy sees developers record 63 per cent increase in revenue to HK$8.3 billion this month
Sales in the primary residential market have been dominated by luxury homes after Sun Hung Kai Properties started a discount sale of the Cullinan project at West Kowloon Station.
The discount of more than 20 per cent, which began last month, has encouraged more developers to follow suit in providing sweeteners.
The strategy to offer subsidies to help buyers meet extra stamp duties and to increase sales commissions to property agents appears to have paid off.
For the first 21 days of this month, developers generated HK$8.32 billion in revenue from the sales of new homes, up 63 per cent from HK$5.1 billion for the whole of last month, according to Midland Realty.
To speed up sales, developers have been forced to increase sales commissions to a standard 3 per cent, from 2 per cent.
In some cases, developers even offered commissions of up to 10 per cent. Of course, at such high commissions, it means developers are pitching themselves out of the market.
The average new flat has been sold for HK$13.24 million so far this month, compared with HK$6.59 million last month, Midland said.
Assuming developers offered 3 per cent commissions, agents would have earned HK$397,200 for every deal they made this month, compared with HK$197,700 last month.
According to industry practice, commissions are shared between the agent and his employer. Based on a 20 per cent share of that commission, agents would have pocketed about HK$80,000 for each deal. That share can increase to 30 per cent if their sales exceed a quota set by the company.
No wonder the developers managed to pull in sales of HK$22 billion - largely from the Cullinan and the Austin - since last month.
All 576 units at the Austin, atop the Austin MTR station built by Wheelock Properties and New World Development, had been snapped up. The two developers generated sales revenue of HK$10 billion. Meanwhile, Sun Hung Kai Properties sold about 180 units at the Cullinan for more than HK$4 billion.
But not all agents could get a deal done. Among the 27,000 licensed agents, there were only 628 transactions in the primary market this month. It means 42 agents fought for each deal as most of them focused on broking new flats.
The Avenue, jointly developed by Sino Land and Hopewell, in Wan Chai will be the new battlefield among agents tomorrow. The first batch of 220 units have attracted about 3,000 potential buyers.
Unit prices in the first batch start from HK$6.1 million for a 338 square foot unit, after factoring in up to 17 per cent in discounts. It means the developers would give least HK$180,000 in commissions, based on a 3 per cent rate, for each flat.
No surprise then I received a call from an agent trying to get me interested in the project. Alas, it was beyond my price range.