Hong Kong developers hasten new home sales to clear inventory, but revival seen as limited amid high rates, supply

The market will see about 600 new homes put on sale in November, and agents expect total primary-market transactions to reach 1,300 to 1,500
Developers will need attractive prices and creativity to draw in buyers, Midland Realty residential CEO says

Hong Kong property

Salina Li

Published: 9:30am, 6 Nov 2023

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Hong Kong home builders are hastening sales launches to clear inventory amid an uptick in market sentiment after Chief Executive John Lee Ka-chiu announced the relaxation of some stamp duties in his policy address on October 25, but will need low prices to draw buyers in an overall negative environment, agents say.

Sales of many new property projects had been put on hold since late September as the market speculated that the government would soon ease the long-standing cooling measures, which add to the cost of buying a home, consultants said.

In the seven days following Lee’s announcement, the market saw 182 new home sales, according to property agents. The primary market recorded a total of 362 transactions in October, a 32 per cent increase from the 274 cases in September, which was this year’s lowest total, but still far below March, when there were 2,100 transactions, according to Midland Realty.

With developers moving to sell leftover units at already launched projects, the market will see about 600 new home units put on sale in November. And property agents expect total primary-market transactions to reach 1,300 to 1,500 in November.

“Developers will be actively selling their projects as the uncertainties on whether the government will cut the cooling measures has reduced,” said Chau Kwong-wing, chair professor and director of the Ronald Coase Centre for Property Rights Research.

The buyer’s stamp duty has been halved to 7.5 per cent from 15 per cent for non-permanent residents and residents buying a second or additional home. Eligible overseas talent are also not required to pay stamp duty on property purchases unless they fail to become permanent residents.

However, developers are not very optimistic about the overall market outlook, Chau said.

The number of first-hand private residential units that may be available in the next three to four years increased by 2,000 as of the end of September, to a record high of 107,000 units, compared with an estimate of 105,000 issued at the end of June, the Housing Bureau said on Monday.

JLL anticipates that 6,400 private residential flats will be completed in the fourth quarter.

Chief Executive John Lee Ka-chiu meets the media before a meeting at the Central Government Offices in Admiralty on October 31, 2023. Photo: Dickson Lee

Hong Kong’s monetary authority kept its key interest rate unchanged at 5.75 per cent on Thursday, in lockstep with the “dovish pivot” by the US Federal Reserve. It was the third pause since the Fed began its rate-hike cycle in March 2022. But the decision is not expected to greatly affect buyer sentiment, as mortgage rates remain at a high level.

A total of 303 units from two brand new housing projects kicked off sales on Saturday. A total of 92 units, or about 30 per cent, were sold.

KT Marina in Kai Tak, jointly developed by K. Wah International, Wheelock Properties and China Overseas, sold 60 of the 218 units in phase I on Saturday. The project, in two phases, is one of the largest residential developments located at the former airport site, providing a total of 2,138 units.

It includes one-bedroom to three-bedroom flats with areas ranging from 306 sq ft to 586 sq ft. The discounted prices between HK$5.75 million and HK$15.46 million translate to HK$17,987 to HK$26,384 per square foot.

“The slow sales were in line with expectation,” said Tony Wan, director of sales and marketing for Hong Kong Properties at K Wah International. “More than half of the buyers are new Hongkongers, some of them have obtained permanent resident identity.”

Hong Kong sees sluggish weekend property sales in Kai Tak and Aberdeen

The developer is adopting a strategy of clearing inventory, Wan said.

Emperor International Holdings’ residential project SouthSky in Aberdeen sold 32 of its first 85 units on Saturday. The project is a 23-storey residential building with 110 units, ranging from 245 sq ft to 881 sq ft, including one to three bedrooms.

Another massive new residential project, Yoho West, jointly developed by Sun Hung Kai Properties and MTR Corp, will launch sales in mid-November. Situated atop Tin Shui Wai’s Tin Wing MTR stop, Yoho West is the first of two phases, providing 1,393 of the 1,976 total units.

As evidenced by the recent sales of discounted new flats, there is still a strong demand for housing, and the market is still receptive, said Victor Lui Ting, deputy managing director at Sun Hung Kai Properties (SHKP).

Yet if developers want to sell more units, they need to set very attractive prices, said Sammy Po Siu-ming, CEO of Midland Realty’s residential division for Hong Kong and Macau.

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In addition, developers need to think of new ways to attract homebuyers, he added.

For example, on Wednesday, in the latest batch of 93 units at SHKP’s Novo Land project in Tuen Mun, the developer promised to return up to 5 per cent of the deal price to buyers if overall home prices in the city fall in the period ending in May 2024. Specifically, buyers will get paid back if the average monthly home price index compiled by the Rating and Valuation Department falls below its level when the purchase is made.

The 93 units will be put up for sale next week at the earliest, the developer said.

“Developers recently adopted attractive pricing strategies and creative payment packages to push sales,” said Norry Lee, senior director of projects strategy and consultancy at JLL. We foresee that market demand would be drawn to the first-hand market. Sales volume in November will bounce back, yet prices in the secondary market will face further downward pressure.”