Higher profit margins are encouraging some developers to continue to build luxury flats even though the high-end residential market has been hardest hit by the government's market-cooling measures.
"The profit margin of our luxury project The Hampton, in Happy Valley [released for sale in 2011] reached 100 per cent," said Jimmy Fong Man-bun, managing director of CSI Properties' residential arm Couture Homes. "We only had 11 flats. But we generated HK$1.1 billion in sales."
Most buyers in the luxury residential market are mainlanders and investors. But the introduction of stamp duty for non-permanent residents discouraged mainland buyers, while double stamp duty and tighter lending saw investors lose interest.
Data from Centaline Property shows that only 184 new and second-hand luxury flats (worth at least HK$12 million) were sold in August, down 63 per cent from the 500 deals recorded in February, before the government introduced cooling measures.
The total transaction value of the flats sold in August was 45 per cent less than in February.
Due to poor market sentiment, Sun Hung Kai Properties and K Wah International have announced they will build more mass residential flats.
But many mid-sized developers are still interested in luxury residential projects.
Fong said Couture Homes would continue to focus solely on high-end developments because it was more confident about developing luxury projects and the profit margin was higher.
He said flats in luxury residential sites they bought this year and last year would not be released for pre-sale in the short term.
"It takes three to four years to develop the projects," he said, adding that market sentiment may change in that time.
Meanwhile, the weakening market made it a good time to acquire land.
"It is difficult to buy luxury residential sites at a cheaper price," Fong said. "It is a good time for me to buy sites given the current market sentiment.
"Hong Kong's luxury residential market will always be there. And there is still room for us.
"Our previous projects have offered tailor-made designs to buyers. It attracts buyers who are looking for a difference and the large developers are reluctant to develop that kind of project."
Julian Poon Yui-man, the vice-president of Lai Sun Development, said: "We are still interested in developing luxury residential projects as we don't have many … on hand. We will maintain our development strategy and continue to look for luxury and mass residential sites at the same time."
Guangzhou-based developer Yuexiu Property is building two luxury residential projects, one in Ho Man Tin and the other in Tuen Mun.
Yuexiu's deputy general manager, Zhu Chen, said the Ho Man Tin project would attract upgraders, and with both projects in prime locations and of good quality, it was confident about sales.