Luxury homes taken off the market as big-ticket buyers refuse to pay top prices

Prices expected to come under pressure after SHKP and New World withdraw from sale units at their top-end projects amid low bids

PUBLISHED : Monday, 04 August, 2014, 3:38am
UPDATED : Monday, 04 August, 2014, 5:29pm

The withdrawal last week by two leading developers of the tender sale for their luxury homes, including one on the Peak, shows new signs of cooling in the top end of the market despite buoyant sentiment in the mass sector.

Property consultants believe the disappointing results would deter potential buyers, putting pressure on luxury home prices.

"Buyers in such big-ticket transactions are becoming more cautious," said Charles Chan, the managing director of valuation and professional services at Savills.

On Thursday, Sun Hung Kai Properties and New World Development separately announced they had withdrawn from sale seven luxury homes in two projects after the tender bids fell short of their asking prices.

On offer from SHKP were two houses, No 11 and No 12, at Twelve Peaks on 12 Mount Kellett Road, with a saleable area of 3,759 and 3,771 sqft respectively. The tender closed on Tuesday.

Although SHKP did not disclose the asking prices, consultants expected the developer to sell for more than HK$100,000 per square foot, equivalent to more than HK$370 million for each house.

Last year, Hutchison Whampoa sold four houses at HK$90,000 to more than HK$100,000 per square foot.

On the same day SHKP announced the withdrawal of its tender, New World also dropped the tender for the sale of five units at the Masterpiece in Tsim Sha Tsui.

The developer offered the units at an indicated range of HK$88 million to HK$225 million each, or HK$49,000 to HK$58,200 per square foot. The tender closed on Thursday.

New World said the bids did not reflect the true value of the Masterpiece and the units were withdrawn from the sale.

"The outcome shows developers are pricing the projects out of the market and need to lower the selling prices," said a property agent.

Last month, Swire Pacific offered three units for sale by tender at the super deluxe Opus Hong Kong development on Stubbs Road. Only one unit, with an area of 5,409 sqft occupying the entire 11th floor, sold for HK$430 million, about 8 per cent lower than its asking price in December, when it failed to attract a single bid.

"More developers are offering sales by tender, particularly super deluxe homes, as it gives them more flexibility in negotiations with potential buyers," Chan said.

Developers offering projects for public sale were required to publish the price list three days ahead of the official sale date, with the procedure repeated whenever the selling price was changed, he said.

Vincent Cheung Kiu-cho, the national director for Greater China at property consultant Cushman & Wakefield, said investor interest in luxury homes had been dampened by low yields.

"There is ample liquidity but it is not targeting the luxury residential market," Cheung said.

With declining rentals, he said yields for residential properties were below 2 per cent.

Rents at luxury homes dropped to a three-year low in June, Ricacorp Properties said. Its rental index, which tracks 35 luxury housing estates, saw a 1.8 per cent drop to 118.87 points from May.

"It was the lowest since May 2011," said David Chan, a director at Ricacorp.

In the first half of this year, the total transaction value in the primary and secondary residential markets was HK$6.9 billion, 47 per cent lower than last year, said Centaline Property Agency.

The number of deals done also dropped, by 6.3 per cent to 193, it said.

The decline was mainly because of the government's cooling measures to dampen investment demand, largely from the mainland, in the high-end sector, said Wong Leung-sing, an associate director of research at Centaline.