Developers offer discounts to lure scarce homebuyers

With purchasers becoming more cautious, developers are resorting to price cutting to make new projects more financially appealing

PUBLISHED : Wednesday, 28 August, 2013, 12:00am
UPDATED : Wednesday, 28 August, 2013, 5:29am

Developers have begun competing for homebuyers by offering steep price discounts on new property releases, raising the prospect of intensifying price competition as new projects come onto the market.

In the circumstances, say analysts, homebuyers may adopt a "wait-and-see" attitude to entering the market in the hope that prices may fall further.

New World released a price list for its Park Signature development at 68 Kung Um Road in Yuen Long on Friday last week, offering 328 flats for sale at an average price of HK$9,416 per square foot of saleable area.

And on Monday this week Cheung Kong announced that buyers of its soon-to-be launched The Rise project in Tsuen Wan who signed up as club members and purchased flats under a cash payment plan would be offered 10 per cent discounts.

Cheung Kong said it would also pay the stamp duty on sales of three-bedroom flats, and claimed the inducements would result in an average price after discounts of about HK$8,792 per sq ft of saleable area - which would price the new flats at the same price as flats being sold nearby in the secondary market.

Sales will start next week.

The Park Signature prices are 6 per cent and 14 per cent below the prices at which the latest batch of flats at The Reach and Residence 88 are being sold, BNP Paribas property analyst Patrick Wong Chi-leung said in a report.

"Park Signature's aggressive pricing is an obvious sign of developers grabbing market share with price cuts. We expect the market to see further pressure as developers sell more proactively," said investment bank Jefferies in its recent research report.

The 1,620-unit Park Signature's entry price of HK$2.5 million per unit is lower than entry prices at both The Reach and The Woodsville, said Jefferies.

Thomas Lam, head of research and consultancy for Greater China at property consultancy Knight Frank, said developers were now pitching their new releases at just a small premium over prices in the secondary market. Prior to the government's cooling measures, developers were asking for price premiums above sales in the secondary market of 40 to 100 per cent, he said.

Since October, the government has introduced a 15 per cent additional stamp duty, called buyer's stamp duty, on property purchases by non-permanent-resident and company buyers; increased from two to three years the period during which additional stamp duty, called special stamp duty, is payable on quick resales of property, and raised the rates of those duties; and doubled the stamp duty payable on purchases of all property worth HK$2 million or more.

In addition, the Residential Properties (First-hand Sales) Ordinance, which imposes stricter rules on the marketing of new homes, took effect in April.

While developers of the two projects now being released had not yet slashed prices, further cuts would definitely come, Lam said. "Some areas, such as Tseung Kwan O and Yuen Long, will see abundant new supply and prices will accordingly fall sharper in future," he said.

Projects to be sold in the next few months include a 1,419-flat development in Tung Chung and a 911-flat development in Century Gateway II in Tuen Mun.

Alfred Lau, a property analyst at Bocom International, said he did not expect to see a severe price war. "When prices fall 10 per cent, you should be quick to prepare the cheque for the purchase," he said.