Hong Kong developers are known for the strategies they use to lure buyers into paying more. They seem to be able to work this magic even when home prices are falling.
In a competitive property market, a developer will have a higher chance of achieving good sales if a new project becomes the focus of the market's attention when it's initially launched.
Sun Hung Kai Properties (SHKP) this month fired a slick marketing salvo by releasing the price list of 118 units at its luxury housing project, The Cullinan, in West Kowloon. It offered 70 per cent subsidies to buyers facing higher stamp duty costs.
The announcement instantly made headlines in most of Hong Kong's Chinese-language newspapers. It was widely reported that the incentives plus the discount effectively translated into a 20 per cent to 40 per cent discount.
The result: more than 2,000 prospective buyers signed up for the first 60 units which were offered at an average price of HK$29,098 per square foot. All units were snapped up on October 12, and this allowed SHKP to release the second batch of 20 units at a 5 per cent to 10 per cent premium of HK$32,000 per sq ft, on par with secondary market transaction prices.
It sold out again, and the developer released the third batch of 35 units as much as 8 per cent higher than the second batch, or HK$32,800 per sq ft. All units were sold on Sunday. The fourth batch of 40 units were sold for a price as much as 26 per cent higher than the announcement of the price list two weeks ago.
Of the 40 units that will be put up for sale on Friday, the price of a 933-square-foot unit on the 80th floor has been raised to HK$39 million, or HK$41,906 per sq ft, about a 26 per cent increase from the HK$33,258 per sq ft when it launched two weeks ago.
Look at the small print and you will see that the discount for the first batch at The Cullinan was not as steep as what agents had said.
Out of the 115 units that had been sold as of Sunday, 82 of them were restricted to local buyers, who need not pay the 15 per cent buyer's stamp duty.
For local permanent residents, who are first-time buyers, they will receive up to a 17 per cent discount from SHK, as they be exempt from the doubling of stamp duty to 8.5 per cent for properties worth more than HK$20 million.
Albert Wong, managing director of Traffic Light Management Consultancy and the former deputy chairman of Midland Realty, offers this piece of advice to homebuyers: head to the secondary market as individual owners cannot compete with the developers offering tax rebates and other incentives. Cutting prices is the only option available in the secondary market.