Up to 10 housing projects are in the pipeline this quarter, as developers hope to take advantage of an upswing in sentiment Developers are preparing to accelerate the launch of new projects and take advantage of the upswing in the primary residential market to boost sales, which have fallen below expectations this year. They have been encouraged by the public turnout at the sales launch of Sino Land's Vision City project in Tsuen Wan over the long weekend. More than 80,000 potential buyers visited the showroom and more than 300 units were sold. As many as 10 residential projects comprising 2,000 units are in the pipeline for the second quarter, according to developers and property agents. 'Sentiment has clearly improved recently,' Sun Hung Kai Real Estate Agency executive director Victor Lui Ting said. 'Developers are likely to bring more new projects forward to the market in the next two to three months as a result.' Projects in the pipeline include a 22-house development on Severn Road by Sun Hung Kai Properties (SHKP), a 95-unit project at CentrePlace in western Mid-Levels by Henderson Land Development and a 120-unit project in Lau Fau Shan by New World Development. Most developers' property sales are still lagging behind targets set at the beginning of the year - for one major reason. Most held back their new project launches to avoid any price cuts amid uncertainty over the direction of interest rates. The big four developers had expected to sell 13,800 units this year, but have sold less than 10 per cent of that target to date. Cheung Kong (Holdings) has sold 600 units so far this year, against a sales target of 4,000. Henderson Land Development has sold 100 units against a 3,000-unit target. SHKP sold 97 units in the first quarter, against its 2,800-unit target, which includes Hunghom Peninsula, a joint venture with New World Development, according to Centaline data. Developers' sales in the primary market for the first quarter were at their lowest since 1996, with the number of transactions plunging 70.3 per cent from the previous quarter to 1,227, according to Centaline. However, many developers remain upbeat despite falling behind sales forecasts as they expect the peaking of interest rates and the increasingly buoyant local economy to lift transactions this year. 'Increasing salaries will encourage people to buy properties, which will drive the real estate market up,' said Cheung Kong executive director Justin Chiu Kwok-hung. 'Our strategy is to sell residential projects once we receive the pre-sale consent from the Lands Department. But so far, only the Apex in Kwai Chung has been approved for pre-sale this year.' New World Development sales and marketing manager Akan Wong Ho-yin said developers and banks would also offer aggressive mortgage pricing to stimulate the market. Hopes surfaced in the market that interest rates would peak soon after Federal Reserve chairman Ben Bernanke said last week that US policymakers might put the brakes on a rate rise. The Fed, which raised rates 15 times since June 2004, will meet on May 10 to decide the next movement. However, despite the positive outlook for Hong Kong's economic growth, analysts expect the property market to grow slowly this year because a combination of homebuyer caution and higher interest rates would curb developers' ability to raise prices. 'Even though interest rates are expected to peak, significant price rises have already raised mortgage payments and lowered affordability, making homebuyers more cautious,' said Moody's Investor Services senior vice-president Clara Lau Wai-ping, anticipating a 5 per cent to 8 per cent price growth this year. According to a Moody's report on the local residential market, salary rises in Hong Kong will average between 3 per cent and 6 per cent against a backdrop of slower economic growth this year. The ratings agency also said the gap between rental and buying had reversed. 'The local property market is expected to be volatile this year,' said Standard & Poor's corporate rating director Raymond Woo. 'Two offsetting factors - economic growth and interest rate rises - are still driving the market from time to time. But what can be certain is that the market is unlikely to see big swings in price growth this year.' Meanwhile, Macquarie Equities analyst Eva Lee did not think developers needed to adopt a lower price strategy as most of their earnings for the year had been secured. Centaline Property Agency senior research manager Wong Leung-sing agreed, adding that most developers could boost their earnings through the spin off of reits (real estate investment trusts).
