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Cheung Kong Property’s Yuccie Square project in Yuen Long. Photo: Edward Wong

Hong Kong developers under pressure to cut prices after lukewarm weekend sales

Instead of slashing prices, developers have preferred to offer array of incentives

Hong Kong developers are likely to have to cut selling prices as a last resort in order to offload projects in non-core areas next year, with home seekers tipped to stay out of the market following an expected US interest rate increase next week.

Instead of slashing prices, developers have been offering an array of incentives such as aggressive home financing schemes, tax rebates and pricing new flats close to the level being achieved in the secondary residential market to drum up sales.

But those promotional strategies appear to have lost their appeal to prospective buyers in a market clouded by increasingly negative news and the prospect of the US raising interest rates for the first time in the 10 years.

Nicole Wong, regional head of property research at CLSA, said she expected developers would cut prices directly when they discovered incentives and home financing schemes were no longer drumming up sales.

Home sales will be hit further as sentiment could turn even worse next year
Alvin Cheung Chi-wai, Prudential Brokerage

“The price cut may occur within six months,” Wong said.

She said moves by developers to provide home loans of 80 per cent to 95 per cent to buyers as a way to boost sales highlighted the drop off in demand.

On Saturday, the city’s two biggest developers, Cheung Kong Property and Sun Hung Kai Properties, recorded poor sales at projects in Yuen Long.

Sun Hung Kai Properties' Park Vista project in Yuen Long. Photo: Edward Wong
Cheung Kong said it sold around 141 of the 238 homes on offer at Yuccie Square in Yuen Long, while SHKP said it sold 123 units, or 45 per cent of the first batch of 269 units at Park Vista.

That contrasts with the previous week, when 80 per cent of Yuccie Square flats on offer were sold at the development’s launch.

Both developers are offering home loans of up to 80 per cent of flat value at the Yuen Long projects. Cheung Kong’s housing loan will charge a fixed rate as low as 1.98 per cent in the first year, compared with the 2.2 per cent being offered by banks.

Last week, Swire Properties announced it would offer part of its luxury villa project Whitesands on Lantau Island for lease at an indicative monthly rent of more than HK$70,000.

The developer has only sold one 2,586 sq ft house for HK$66 million since releasing the 28-house development for tender sale in September.

“Chances for the US to increase interest rates will be 99 per cent per cent next week ... home sales will be hit further as sentiment could turn even worse next year,” said Alvin Cheung Chi-wai, associate director at Prudential Brokerage.

He said price cuts by developers could also adversely affect buying sentiment.

“Home seekers then will defer their purchases to wait for prices to fall further,” he said.

In the secondary residential market, home sales continue to slump with only four deals done at the weekend in 10 housing estates tracked by Midland Realty.

“Seven out of the 10 housing estates recorded zero transactions,” said Sammy Po, chief executive at Midland Realty’s residential department.

He said it was the fifth straight week of single digit transactions.

“The high likelihood the US will increase interest rates, coupled with government data showing the end of property boom, means more home seekers will prefer to stay on the sidelines until the market become clearer,” Po said.