Hong Kong property

Up, up and away: Hong Kong residential flat prices rise on aggressive financing

New projects greeted by massive oversubscriptions and sold-out responses despite bleak local economic outlook

PUBLISHED : Saturday, 10 September, 2016, 7:40pm
UPDATED : Saturday, 10 September, 2016, 7:40pm

Senior analysts have warned frothy prices may have re-emerged in Hong Kong’s residential market as new projects released for sale on Saturday saw massive over-subscriptions and sold-out responses from local flat buyers.

Experts warn buyers may be in the market purely driven by aggressive financing deals offered by property developers. But they are doing so with little regard for future interest rates adjustments while the outlook for the local economy is still poor.

Among the key residential projects over the weekend: Sun Hung Kai sold the entire stock of its Grand Yoho project in Yuen Long, even after adjusting its asking prices up by 20 per cent to a level of HK$15,000 per square foot since the project debuted in the market one month ago.

Joseph Tsang, head of capital markets at property consultancy JLL, described prices as “not cheap”.

“The prices are getting quite toppy,” he said. “The demand is huge.”

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“It goes to show there really are many buyers in the market who want to purchase property, even when the property market is supposedly still under the shadow of a rising rates threat in the second half of the year and the economy is no better,” he added. “Hongkongers just don’t feel it’s a huge issue. That’s why they are back in the market.”

The prices are getting quite toppy
Joseph Tsang, JLL

In Tseung Kwan O, property developer ChinaChem’s director of sales Ng Shung-mo also said the company had fully cleared all its stock of two-bedroom units at its The Papillons project by 3pm Saturday, just a few hours after the flats were put up for sale.

Buyers’ responses were reportedly enthusiastic. ChinaChem sold 70 per cent of its 311 units released there.

Louis Chan Wing-kit, managing director in charge of residential sales at Centaline Property cited “the Brexit effect”.

“People have lost faith in foreign currency-tied investments,” he said. “Property developers have been disciplined in their pricing. Added with their aggressive financing deals, first-hand buyers will continue to drive the market for the rest of this year.”

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Chan said the market was now witnessing a new high in terms of total turnover since September 2007, with transactions this year already exceeding 10,000. “We think the total number of transactions for this year could go as high as 18,000,” he said. “It will be just a little shy of the government’s 20,000 new units supply target.”

But Tsang warned that most buyers had forgotten that the peak of the new unit supplies would hit the market in the next few years. Since 2013, the government has aggressively sold land with a view to raise new supplies to as many as 25,000 and 26,000 new units in the market a year by 2020.

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“The financing deals the developers are offering now are just good for about three years,” he explained. “After three years, they’d expect people to go figure out alternative financing.”

“So at a financing cost of about 2.5 per cent, most of Hong Kong’s mass residential yield is still just about 3 per cent,” he added. “Forget the luxury market. So there is actually no premium at the end if you are taking the flats as investments. It’s okay, though, if you are purchasing them for self use.”