Hong Kong luxury housing market back in spotlight after record sale prices
Real estate experts say luxury property buying sentiment is improving in Hong Kong as recent transaction prices rank among highest ever
There are signs of a revival in homebuyers' interest in the Hong Kong market, thanks to developers' discounts, low interest rates and a government concession on stamp duty, but top-end properties are once again the talk of the town, with some recent prices ranking among the top five deals ever.
Analysts said the recent deals would boost buying sentiment but had reservations about whether they would lift up the entire luxury market, which has been losing momentum in the absence of external demand from investors and wealthy mainlanders following a series of government measures designed to rein in the market, beginning in October 2012.
Howard Lo, senior district sales director at property agent Midland Realty, said about 80 per cent of buyers in the luxury residential market were locals buying for their own use or long-term investment.
"The number of mainland buyers has dropped by 80 per cent," he said.
After 18 months in the doldrums, the luxury residential market has been in the spotlight recently following Sun Hung Kai Properties' sale of all four houses at The Seafront development in Tsing Lung Tau, Tsuen Wan West, for prices that went as high as HK$55,880 per square foot - a record for a New Territories residence.
Swire Properties said earlier this month that it had sold a 5,409 square foot unit occupying the entire 11th floor at its Opus Hong Kong development on Stubbs Road for HK$430 million - about 8 per cent lower than its asking price in December, when it failed to attract a single bid. The price was HK$79,497 per square foot of saleable area, making it the fourth most expensive transaction for a flat in Hong Kong.
Analysts say the next transaction to stun the market is likely to come from Sun Hung Kai Properties' sale of 12 houses at Twelve Peaks on The Peak.
SHKP deputy managing director Victor Lui Ting said it would invite interested parties to tender for the houses this month. "We are preparing the tender document and will disclose some particulars next week," he said.
Twelve Peaks is expected to set one of the highest transaction prices for luxury homes in Hong Kong, topping HK$100,000 per square foot. With a saleable area of 3,700 sq ft to 4,300 sq ft, each house is likely to cost more than HK$370 million.
SHKP bought the site at 12 Mount Kellett Road in 2006 for a record HK$1.8 billion, or HK$42,196 per square foot.
The most expensive home in the city is House 10 at Skyhigh on Pollock's Path, which measures 5,989 square feet and fetched HK$800 million, or HK$133,578 per saleable square foot, at sale in June 2011. The second priciest house is a 5,145 sq ft house at 3 Gough Hill Road, which was sold in February this year for HK$650 million, or HK$126,336 per saleable square foot.
Landscope Christie's International Real Estate chief executive Koh Keng-shing said there had been an improvement in luxury property buyer sentiment.
"We have received more calls from clients in the past two weeks," he said. "But will these enquiries turn to transactions? It is still too early to jump to a conclusion."
He said the market was still clouded by negative factors such as expectations of an interest rate increase and property cooling measures that were still in place. However the government's recent concession on double stamp duty had helped improve sentiment, he added.
The concession means that buyers will no longer have to pay double stamp duty of as much as 8.5 per cent if they can sell their first home within six months of signing a formal agreement to buy a new one, rather than a provisional agreement. Buyers of pre-sale flats in blocks being built could therefore have up to 36 months to sell their first property.
Cusson Leung, head of property at JP Morgan, said luxury property was a unique product that was not closely linked to household income growth. "It is a collection of trophies," he said.
Leung said he expected prices of luxury properties to be steady, with the fast growth seen before unlikely to return without external drivers - mainland buyers - to boost the market.
Joanne Lee, manager of research and advisory at Colliers International Hong Kong, said luxury home prices in traditional areas such as the Peak, Island South and Mid-Levels had fallen by 11 per cent after the government announced in 2012 the buyer's stamp duty - a 15 per cent levy on the value of property bought by non-permanent Hong Kong residents.
"Now prices have become stable," she said, while adding that the overall market had not recovered despite a modest improvement in sales.
Lee said she expected Twelve Peaks would rank among the priciest houses per square foot, but that it was difficult to clinch record-breaking deals when mainlanders and investors had not yet returned to the market.
Joseph Tsang, managing director of property consultancy JLL's Hong Kong office, took a more pessimistic view.
"You can see that the price of the 11th floor flat at Opus Hong Kong in Mid-Levels East was less than [that of] the flats sold [in 2012]," he said. A unit occupying the ninth floor sold for HK$455 million in 2012.
"There were a few houses sold for record prices in recent months. But they are exceptional cases," Tsang added. "Some buyers are willing to pay aggressive prices because of personal reasons, unique location and limited supply of houses. It doesn't mean the luxury market is improving."
According to the Land Registry, two of the houses at the Seafront were bought by locals and another was bought by a mainlander.
An agent said: "One of the buyers lived in a nearby property. They were willing to pay a premium price for the house because they wanted to stay in the area."