Families in Hong Kong confidently defy red flags about a housing downturn at the biggest flat sales in more than five years
About 68 per cent of Nan Fung Development’s 707 flats at its LP6 development in Tseung Kwan O were sold by 9.15pm. ‘Usually prices will rise again after correcting a little,’ one buyer said.
Hong Kong families bought 505 flats on the holiday Tuesday in the city’s biggest home sale in more than five years, confidently defying the latest red flags about a coming downturn in the property market.
Two developers offered a total of 857 flats. At the larger sale of the day, Nan Fung Development had by 9.15pm sold 67.9 per cent of 707 flats available at its LP6 development in Tseung Kwan O. For those 480 flats, the developer pulled in about HK$4.62 billion (US$591.6 million) on Tuesday.
Sales at the LP6 have gathered momentum because the first batch, at HK$15,304 per square foot on average, was offered at about 3 per cent below the overall average price at the Malibu, the previous sold phase of the massive Lohas Park development.
More than 4,100 buyers entered into the developer’s latest LP6 lottery, which means there were more than five potential buyers competing for each of the 707 flats.
“One buyer splashed out about HK$14 million for two flats,” said Sammy Po, chief executive of the residential division at Midland Realty. “Ninety per cent of the potential buyers this time had failed to get a flat in the previous [two] rounds.”
The buying rush occurred soon after Financial Secretary Paul Chan Mo-po’s latest warning that the city’s housing market – the least affordable in the world – is about to experience a painful downturn.
“Home prices have far exceeded the affordability,” he wrote in his blog on Sunday. “The housing market has shown signs of cooling in the past few weeks, with drops in price and transaction volume,” Chan wrote.
A number of analysts have predicted prices could drop 10 per cent – or even more – over the next year. Interests rates have already begun creeping up, and Chan said the prime rate of local banks is “very likely” to rise after the expected rate increase by US Federal Reserve on Thursday.
But the warnings haven’t dampened the enthusiasm of many buyers, as the two developers rushed out a total of 857 flats on the holiday, the day after the Mid-Autumn Festival, considered by some to be a lucky time to buy.
Sun Hung Kai Properties offered 150 units at its completed Park Yoho Napoli development in Yuen Long on Tuesday, among which 100 were for tender, or bidding.
Half of the 50 flats offered for regular sale at preset prices were sold, which was less impressive than the sales at LP6. Flats at Napoli sold for about HK$8 million on average, so the 25 flats likely sold for a total of roughly HK$200 million.
Long queues formed at the developer’s office of LP6 as the sales got under way. A number of prospective buyers interviewed said they were not worried about talk of a price downturn, predicting prices over the long haul would confirm their investment decision.
One woman said she and her family were pitching in to buy a flat for “about HK$5 million” for her younger brother. She expressed confidence about the housing market.
“There should be no problem,” said the woman, who gave her surname as Wong and said she was in her 30s. Her family holds a number of properties on Hong Kong Island. “[The interest rate rise] has been in the talks for so many years.”
The Wongs are resolute property investors, and registered several times for new projects before getting a priority number to be able to get a chance to select a flat this time.
“We often buy homes on major festivals, such as birthdays and Father’s Day,” said Wong’s mother. “We are buying a gift on the Mid-Autumn Festival and will buy again on October 1 [National Day].”
Another buyer – Mr. Chim, in his 40s and accompanied by three members of his family – said he was hoping to pay HK$10 million for a three-bedroom flat at LP6 to live in, paying a 50 per cent down payment.
“[We are] catching the opportunity to buy at a low price now,” said Chim, who spent Monday night studying details of the price list to prepare for buying the flat he wanted instead of just enjoying the Mid-Autumn Festival. “[Home prices] will not drop by a large extent. Usually prices will rise again after correcting a little.”
A couple – Mr. Chan and his fiancée Ms. Man, who are bank workers in their twenties – bought a one-bedroom flat for HK$5 million at LP6 for their wedding home after saving for five years. Their parents were helping pay part of the down payment, which was about 20 per cent of the flat’s value.
“The [interest rate] rise will be only about 0.25 per cent with not much impact in short term,” said Chan.
Another Mr. Chan, a financial worker in his 30s living in Kowloon, bought a one-bedroom LP6 flat for about HK$5 million as an investment.
“I am paying in full,” said Chan, who said he was not worried about the imminent interest rate rise and believed the housing market would continue to be healthy. “I bought it because I have spare cash.”
In 2013, Nan Fung Developed launched 768 flats of The Visionary development in Tsing Yi.