Liquidity crunch forces mainlanders to cash out of Hong Kong luxury homes

Cash-strapped mainlanders are scrambling to sell their luxury homes in Hong Kong, and some are cutting prices by up to a fifth for a quick sale, as a liquidity crunch looms on the mainland.

Wealthy Chinese were blamed for pushing up property prices in the city, where they accounted for 43 per cent of new luxury home sales in the third quarter of 2012, before an increase in stamp duty on non-resident buyers was announced.

The rush to sell coincides with a forecast 10 per cent drop in property prices this year as the increase in duty and rising borrowing costs cool demand.

At the same time, credit conditions on the mainland have tightened. Earlier this week, the looming bankruptcy of a Chinese property developer owing 3.5 billion yuan (HK$4.4 billion) heightened concerns that financial risk was spreading.

"Some of the mainland sellers have liquidity issues say, their companies in China have some difficulties so they sold the houses to get cash," said Norton Ng, account manager at a Centaline Property Agency office close to the border, where luxury houses costing up to HK$30 million have been popular with mainland buyers.

Property agents said that mainlanders own close to a third of the existing homes that are now for sale in Hong Kong - up 20 per cent from a year ago. Many are offering discounts of 5-10 per cent below the market average - and in some cases as much as 20 per cent - to make a quick sale, property agents and analysts said.

In a Hong Kong housing development called Valais, about 10 minutes drive from the border, real estate agents said between a quarter and a half of the 330 houses are now on sale.

At the development's frenzied debut in 2010, a third of the HK$30 million to HK$66 million units were sold on the first day, with nearly half going to mainland buyers.

Dubbed a "ghost town" by local media, the development, built by Sun Hung Kai Properties (SHKP), is one of many estates where agents are seeing an increasing number of mainlanders eager to sell.

"Many mainland buyers bought lots of properties in Hong Kong when the market was red-hot three years ago," said Joseph Tsang, managing director at JLL. "But now they want to cash in, as liquidity is quite tight on the mainland."

A spokesman for SHKP said the occupancy rate at Valais was 75 per cent, and most of the second-hand units for sale were "looking for a good selling price and not eager to sell at deep discounts".

In a nearby development called The Green about a fifth of the houses delivered at the start of this year are up for sale. More than half of the units, bought for between HK$18 million and HK$60 million, were snapped up by mainlanders in 2012.