Developers with projects up for sale in the New Territories will be competing fiercely for home buyers from now until June, property agents say.
That's because almost 70 per cent of new homes available for sale in the first half of the year are located in the New Territories, and since the government has signalled a move to increase land supply, developers will speed the launch of new projects to raise cash for land replenishment.
As many as 14 projects offering a total of 3,138 flats are in the sales pipeline for the second quarter, according to data compiled by Midland Realty. More than 2,100 are in the New Territories, 630 in Kowloon, and 405 on Hong Kong Island.
"Faced with the planned increase in supply and weakening buying demand, developers will have to offer their new projects at competitive prices in order to entice sales," said Buggle Lau Ka-fai, chief analyst at the agency.
Patrick Wong, an associate director of property research at BNP Paribas Securities, said many potential buyers expected property prices to correct in the short term and have adopted a "wait-and-see" approach.
"Although secondary volumes remain at an ultra-low level, we expect developers with flexible pricing strategies to attract fundamental demand, especially for projects in the mid-end segment," he said.
Last Thursday, Cheung Kong took the lead in the widely expected intensification of competition between developers, and cut prices of 20 units at One West Kowloon residential project in Lai Chi Kok by 6 to 17 per cent. The move came a week after the government doubled stamp duties for those who bought second flats in a bid to curb speculation and rising prices.
Since the government announced the introduction of a 15 per cent buyer's stamp duty to non-permanent residents and corporate buyers in October, the pricing gap between primary and secondary market has narrowed to 13.3 per cent in the last quarter of last year, from 24.2 per cent in third quarter, according a survey conducted by Hong Kong Property Services (Agency).
The gap was 8.3 per cent when the property market was gripped by the outbreak of the global financial crisis in late 2008.
"Buying interest will divert to the primary market if developers offer new flats at levels close to secondary transaction prices," said Sammy Po Siu-ming, a director at Midland Realty. "Therefore, sales in the secondary market in Fanling immediately froze."
But he did not believe Cheung Kong's price cut would spread across the market as the initial buying response to the release of flats in Green Code was strong.
In the New Territories, projects in the pipeline include the 728-unit Green Code in Fanling by Hong Kong Ferry; the 780-unit Riva by Sun Hung Kai Properties in Yuen Long; a 402-unit project called The Rise in Tsuen Wan; and the 193-unit The Graces in Tai Po by Sino Land, Nan Fung Development and Wing Tai Properties.
Moves by developers to speed up launches come as sales in the secondary residential market recorded a week-on-week 35 per cent fall last week. The number of flats that changed hands in 50 housing estates monitored by Ricacorp Properties dropped 35 per cent to 59 for the week ended March 10, compared with 85 in the previous week.
"A number of blue-chip housing projects recorded zero transactions. Currently, home seekers are hesitant about entering the market and sellers that remain firm in their asking prices will make negotiation more difficult," said David Chan, a director at Ricacorp Properties.
Chan believed that the number of transactions in major housing estates would stay on the low side with about 60 to 80 deals done next week.