Hong Kong property

Liquidity crunch forces mainlanders to cash out of Hong Kong luxury homes

PUBLISHED : Thursday, 20 March, 2014, 4:01pm
UPDATED : Friday, 21 March, 2014, 12:15pm

Cash-strapped mainland Chinese are scrambling to sell their luxury homes in Hong Kong, and some are knocking up to a fifth off the price for a quick sale, as a liquidity crunch looms on the mainland.

Wealthy Chinese were blamed for pushing up property prices in the city, where they accounted for 43 per cent of new luxury home sales in the third quarter of 2012, before an increase on stamp duty on non-resident buyers was announced.

The rush to sell coincides with a forecast 10 per cent drop in property prices this year as the increase in duty and rising borrowing costs cool demand.

At the same time, credit conditions in China have tightened. Earlier this week, the looming bankruptcy of a Chinese property developer owing 3.5 billion yuan (HK$4.4 billion) heightened concerns that financial risk was spreading.

“Some of the mainland sellers have liquidity issues say, their companies in China have some difficulties so they sold the houses to get cash,” said Norton Ng, account manager at a Centaline Property Agency office close to the border, where luxury houses costing up to HK$30 million have been popular with mainland buyers.

Property agents said mainlanders own close to a third of the existing homes that are now for sale in Hong Kong – up 20 per cent from a year ago. Many are offering discounts of 5-10 per cent below the market average – and in some cases as much as 20 per cent – to make a quick sale, property agents and analysts said.

In a Hong Kong housing development called Valais, about 10 minutes drive from the border, real estate agents said between a quarter and half of the 330 houses are now on sale.

At the development’s frenzied debut in 2010, a third of the HK$30 million-HK$66 million units were sold on the first day, with nearly half going to mainland buyers.

Dubbed a “ghost town” by local media, the development, built by Sun Hung Kai Properties, is one of many estates where agents are seeing an increasing number of mainlanders eager to sell.

“Many mainland buyers bought lots of properties in Hong Kong when the market was red-hot three years ago,” said Joseph Tsang, managing director at JLL. “But now they want to cash in, as liquidity is quite tight on the mainland.”

A spokesman for SHKP said the occupancy rate at Valais was 75 per cent, and most of the second-hand units for sale were “looking for a good selling price and not eager to sell at deep discounts”.

In a nearby development called The Green – developed by China Overseas Land and Investment – about one-fifth of the houses delivered at the start of this year are up for sale. More than half of the units, bought for between HK$18 million and HK$60 million, were snapped up by mainlanders in 2012.

“Some banks were chasing [mainland owners] for money, so they need to move some cash back to the mainland,” said Ricky Poon, executive director of residential sales at Colliers International. “They’re under greater pressure from banks, so they’re cutting prices.”

In West Kowloon, an area where mainlanders bought up close to a quarter of the flats in many newly developed estates, some mainland owners are offering discounts on the higher-end, three- to four-bedroom flats they bought just a few years ago.

This month, a mainlander sold a 1,300 square foot flat at the Imperial Cullinan – a high-end estate developed by SHKP in 2012 – for HK$19.3 million, 17 per cent less than the original price.

The landlord told agents to sell the flat “as soon as possible”, said Richard Chan, branch manager at Centaline in West Kowloon.

In the same area, a 645 sq ft, two-bedroom flat in the Central Park development was sold in just two days after the mainland owner put it on the market at HK$6.5 million in what agents called the year’s best bargain – the cheapest price for a unit of its kind over the past year.