Record number of homebuyers walk away from Hong Kong property purchases amid rising jobless rate, pay cuts due to Covid-19
- Buyers have walked away from 47 deals this month, taking the total this year to 380, the highest since record-keeping started in 2013
- Buyers have forfeited around HK$6.8 million on 13 units at The Pavilia Farm and HK$16 million on 13 units at the Grand Yoho
They have walked away from 47 deals this month alone, taking the total so far this year to 380, the highest since 2013 when record-keeping first started. Last year’s cancellations stood at 335 versus 160 seven years ago.
“The changing economic fortunes of new buyers due to the Covid-induced recession, could mean the number of reneged purchases continues to increase,” said Will Robertson, executive director at Nest Property.
The number of cancellations in November alone could reach anywhere between 60 and 70, said Derek Chan, head of research at Ricacorp Properties, who attributed it to the pandemic and recession. Some may have even walked away from the purchases because of the pessimistic market outlook, he added.
Buyers can also choose “stage payment plans” offered by developers, which require only a 5 to 10 per cent down payment until construction is finished, while allowing them to benefit from the higher mortgage cap reserved for completed units.
“The risk is that in the time it takes for construction to complete, the banks’ valuations are susceptible to change, particularly in such an uncertain market, leading buyers to potentially renege and forfeit their deposits to avoid being left short,” said Robertson.
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Although buyers who opt to start their mortgage instalments immediately may receive a higher discount from developers, many of them find the stage payment plan to be the more attractive option as they lack funds upfront.
About 65 per cent of the buyers in the second phase of The Pavilia Farm project either went for the stage payment plan or opted for a plan that requires them to finish their mortgage applications within 420 days, according to market sources. New World Development has sold some 1,440 flats since its launch last month, making it the year’s best-selling project.
Homebuyers taking high loan-to-value ratio of over 60 per cent jumped to 34 per cent in September, up from just 18 per cent last year, according to the latest available data from mReferral Mortgage Brokerage Services.