A LONG-awaited turnaround seems to be approaching for the depressed residential property market. Encouraging sales results have been reported over the last few days, including the release of Hutchison Whampoa's remaining Oasis units in Ap Lei Chau and Swire Properties' Robinson Place in Mid-Levels. This came despite a decision by developers to raise prices moderately. Swire raised the prices of its remaining units at Robinson Place by 5.4 per cent to $6,993 per square foot, while Henderson Land offered its Fairview Height in Mid-Levels at a higher-than-expected $5,982 per sq ft. Prices of the latest 128 units at Henderson's Flora Plaza in Fanling have gone up about six per cent to $3,030 per sq ft. The developers' move to increase prices may indicate a possible end to the price war that has broken out over new flats. Having fallen about 30 per cent in the past 18 months, residential prices appear to have found support at current levels. The market's pick-up in momentum may have been fuelled by hopes of a possible relaxation in the Government's pre-sale controls as well as positive remarks by Financial Secretary Donald Tsang. Although he dismissed any imminent relaxation of mortgage lending policies, Mr Tsang said last week that the market was near the bottom and back on the right track. The 70 per cent mortgage ceiling, which was imposed in November 1991, sets barriers for home-buyers but it has not proved successful in discouraging speculation. Property prices more than doubled between November 1991 and the market's peak in April 1994. Perhaps, one advantage of the 70 per cent mortgage limit was that it effectively reduced the possibility of defaults during the market's dramatic downturn. Under the restrictions, home-buyers must pay 30 per cent of a flat's value at the time of purchase. Few would choose to default after committing so much. Earlier this year, banks and developers teamed up to provide mortgages over the 70 per cent limit under a joint finance scheme which won the Hong Kong Monetary Authority's tacit approval. The joint effort by First Pacific Bank and FortWay Finance to provide 90 per cent mortgages for last week's Oasis sale made newspaper headlines. Although First Pacific Bank stressed that the extra lending was a personal loan, it is possible that other banks may follow suit to increase their competitive edge in the sluggish mortgage market. There are positive developments in the residential market, with prices stabilising and activity increasing. But confidence remains fragile for the time being and it is still unsure whether the market's improvement will last long.
