Hong Kong developers report first mixed weekend in five years as buyers’ sentiments turn sour
While SHKP sold out all of its 117 flats at Cullinan West II, Lai Sun reported its worst sales performance since 2013 at its Monti project in Sai Wan Ho
Hong Kong’s developers, who typically sell their residential property on Saturdays and Sundays, reported their first mixed weekend in five years, as a combination of rising mortgage rates and additional supply gave eager homebuyers cause for pause.
Sun Hung Kai Properties (SHKP), the city’s largest developer, sold every one of the 117 flats at its Cullinan West II development in Sham Shui Po for a total of HK$1.9 billion (US$242 million). It was the developer’s second sold-out weekend, after raking in HK$5 billion from 354 apartment units a week earlier.
It was a different story in Sai Wan Ho, where a venture between Lai Sun Group and the city’s Urban Renewal Authority (URA) managed to sell only five of the 80 units of Monti on offer, making it the developer’s worst weekend since 2013.
Sentiment among homebuyers in the world’s most expensive residential property market turned since July, when Hong Kong’s Chief Executive Carrie Lam Cheng Yuet-ngor proposed a vacancy tax to stop developers from hoarding completed projects. Even though the tax would take months to be gazetted into law, its very proposal underscored the government’s determination to move on housing prices, prompting one developer after another to release more property for sale.
Further Reading: Sun Hung Kai’s low-price tactic for new flats at Cullinan West II appears to pay off
Meanwhile, the city’s major banks began to raise mortgage rates, after keeping them unchanged for more than a decade, reacting finally to higher interest rates. The first salvoes of the unfolding US-China trade war also brought a sense of uncertainty to a city that is heavily dependent on trade between the world’s two largest economies, analysts said.
“Homebuyers have become more cautious, and selective, in view of the property market conditions, which are being clouded by uncertainties,” said Lung Siu-fung, an analyst at China Merchants Securities International. “Many investors are holding back on making immediate commitments.”
Prospective buyers will have more options to choose from, as new projects are expected to be launched in the coming months, which will give them more reasons to delay making their decisions, Lung said.
The upcoming sale of Nan Fung Development’s 2,392 -unit LP6 project in Lohas Park will serve as the indicator for the market outlook, property agents said.
The buoyant response received by Cullinan West II - located atop the Nam Cheong subway station in Sham Shui Po - was partially down to SHKP’s solid quality as well as pricing strategy, which was close to market prices, said Sammy Po Siu-ming, the chief executive of Midland Realty’s residential division.
“Cullinan West II is also in an excellent location, as it is not only built above an MTR [station], but is also going to benefit from the high-speed rail link that is built around the corner,” said Po.
The apartments at Cullinan West II, ranging in sizes from 270 sq ft to 1,254 sq ft and priced at an average price of HK$26,005 per square foot, were sold at prices ranging from HK$6.4 million to HK$37.23 million.
The sale helped SHKP, the largest developer in Hong Kong by market value, realise HK$1.9 billion on Sunday.
The company was under pressure to sell Cullinan West II, due for completion in June 2019, as it could be affected by the new vacancy tax designed to compel developers to release completed flats for sale.
SHKP may face HK$200 million in vacancy tax charges for Victoria Harbour flats
The tax, announced on June 29 but not yet implemented, will impose financial penalties on developers that do not put up completed units for sale in a timely manner. The levy, which is believed to be the equivalent of 5 per cent of the value of a property, according to analysts, will apply to all newly completed flats that have been vacant for six months in a year. Flats are considered completed a year after an occupation permit has been obtained for them.
A number of local developers have been promoting new properties and have started accepting reservations. And the influx of new developments is expected to lead to fierce competition in the industry, and could result in lacklustre sales, said Po.
