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Hong Kong housing

Tseung Kwan O new flat price drops to three-year low of HK$3.51 million

Goldman Sachs predicts 20 per cent drop in Hong Kong home prices from now to 2018

PUBLISHED : Thursday, 05 May, 2016, 8:40pm
UPDATED : Thursday, 05 May, 2016, 8:39pm

Developers continue to undercut second-hand home prices as sales volumes claw back from near record lows, with Wheelock Properties launching its new project in Tseung Kwan O at prices starting at HK$3.51 million, the lowest for new flats in the area in three years.

The launch came after brokerage house Goldman Sachs forecast home prices would drop 20 per cent from now to 2018, driven chiefly a potential 150 to 200 basis point increase in interest rates.

On Thursday, Wheelock Properties released the first batch of 161 flats at Savannah at discounts of 15.5 per cent to 19.5 per cent.

We have not seen new flats selling below HK$4 million for some years in Tseung Kwan O
Sammy Po, Midland Realty

With discounts of up to 19.5 per cent, the cheapest flat, a 310 sq ft unit, will cost HK$3.55 million. But buyers who are previous purchasers of Wheelock flats or who buy more than one unit will receive an additional 1 per cent discount, taking the price for the unit down to HK$3.51 million.

“We have not seen new flats selling below HK$4 million for some years in Tseung Kwan O,” said Sammy Po, chief executive of Midland Realty’s residential department.

The first batch of Savannah units, ranging from 288 sq ft to 748 sq ft, have been priced at between HK$4.21 million and HK$11.87 million. Factoring in a maximum discount of 19.5 per cent, prices will range from HK$3.51 million to HK$9.56 million, or HK$10,310 to HK$12,971 a square foot.

Industry experts said the price range was the lowest since the government introduced tougher rules to regulate developers’ sales of new flats in April 2013.

Po said the average discounted price at Savannah was 11,680 a square foot, 5 per cent to 10 per cent lower than the going rate for units in other recently launched new projects in nearby areas.

Agents said owners in the secondary market in Tseung Kwan O had cut prices by 8 per cent to 10 per cent to entice buyers.

Hong Kong real estate agents face tough times as home sales drop 39 per cent in first quarter

“With volumes at near-record-low levels, more developers will likely need to offer steep discounts to attract the attention of buyers,” said Henry Mok, regional director of capital markets at property consultant JLL.

Hong Kong’s overall property transactions, including apartments, shops and industrial units, dropped to a 17-year low of 2,583 in February. Driven by steeper discounts being offered by developers and individual owners, overall sales rebounded to 5,613 last month, still far lower than the 10,000 deals per month during the market boom.

Agents said an increasing number of highly geared investors had dumped their apartments at a loss.

Recently, a 1,091 sq ft unit at the Cullinan luxury development at Kowloon Station changed hands for HK$39.9 million, or HK$36,600 a square foot. The vendor lost HK$4.18 million from the HK$44.08 million he had paid in mid-2011. Together with stamp duties and agent fees, the seller’s total losses rose to HK$6.89 million.

Hong Kong property sales plummet to lowest in 25 years and the worst is on the way

In a new report, Goldman Sachs analyst Justin Kwok wrote the firm had revised its forecast and expected home prices to drop 20 per cent from now to 2018, compared with its previous forecast of a 10 per cent drop from 2016 to 2017.

Kwok said he expected Hong Kong home prices to decline 10 per cent this year, and by 5 per cent in each of the next two years.

Separately, the Lands Department awarded a commercial site in Kwai Chung to Sun Hung Kai Properties for a higher than expected price of HK$350.1 million on Thursday. The price for the site, which could yield a total gross floor area of 57,975 sq ft, represents HK$6,039 a square foot.