Sales of new homes in Hong Kong may hit seven-year high of 16,000
Developers are rushing to bring forward project launches to make the most of positive buying sentiment amid the easing of pre-sale rules
Sales of new homes in Hong Kong could climb to a seven-year high this year as more developers bring launches forward in a bid to cash in on improved buying sentiment and shore up cash flow for land bank replenishment.
Midland Realty expects the number of registered transactions for new homes to reach 16,000 this year, the highest since 2008, with total transaction value jumping to a 19-year high to HK$132.2 billion.
Registered transactions in the primary residential market in the first eight months have more than doubled to 11,020, up from 5,171 in the same period last year.
"Developers are adopting the strategy of fast asset turnover as it will help to generate higher cash flow for land replenishment," said Vincent Cheung Kiu-cho, national director of Greater China at Cushman & Wakefield.
After the government imposed a heavier tax burden to curb investment demand, developers' investment costs increased, Cheung said, because they had been forced to subsidise stamp duties to offset the impact on buyers and drum up sales.
"They also need to recover the cost by speeding up project launches," he said.
Midland attributed the big jump in sales of new homes to the government's relaxation of pre-sale rules to increase flat supply.
In June last year, the government allowed developers to sell projects as early as 30 months before completion, up from the previous 24 months.
By last month, applications for 9,424 units were awaiting pre-sale consent from the Lands Department. Midland said 64 per cent, or 6,000 units, would not be completed in less than 20 months.
Sun Hung Kai Properties, Chinese Estates and Henderson Land Development have released projects well before expected completion dates.
A case in point was SHKP's release of its 960-flat Wings IIIA in Tseung Kwan O for pre-sale 28 months before completion. SHKP has raised HK$3.5 billion from the sale of 400 units since it was launched on August 30.
On Tuesday, Chinese Estates released its 92-unit One South Lane in Kennedy Town for pre-sale about 20 months before the completion date. The developer has sold all 40 first-batch units.
Taking advantage of positive market sentiment, Sino Land and K Wah International even submitted an application in April for pre-sale consent for their residential project at Area 66C2, in Tseung Kwan O, as early as 45 months before the completion. The project is scheduled for completion in December 2017.
"We hope to release the project about 30 months ahead of its completion in order to support the government's call to increase flat supply," said Victor Tin Sio-un, an associate director at Sino Land. He said he believed other developers would also bring forward their launches in the wake of the government's relaxation of pre-sale rules.
Midland said the developers' strategy of bringing forward their launches had also been prompted by the government's modification of its double stamp duty provision in May to help residents upgrade their flats.
The concession means buyers will no longer have to pay double stamp duty of as much as 8.5 per cent if they can sell their first home within six months of signing a formal agreement to buy the new one, rather than a provisional agreement. Buyers of pre-sale, new-build flats thus have up to 36 months to sell their first property.
"Upgraders prefer buying projects with a long completion date as it will allow them more time to sell their first home," said Buggle Lau Ka-fai, chief analyst with Midland Realty.
He said developers had accumulated huge cash piles from the success of the sales strategy.
"Flush with cash, developers will be encouraged to be more aggressive in land acquisition and will bid up land prices," he said.