Small home sales in New Territories secondary market outperform on steeper discounts

While the recent price correction offers some hope for Hong Kong’s struggling secondary residential market, the number of transactions have yet to return to normal levels, indicating that most home seekers are sitting on their hands waiting for better bargains.

For the three months to March 23, the northern New Territories was the first area to see flat sales exceed transaction volumes recorded in the previous quarter, according to Midland Reality data.

The northern New Territories saw 220 deals completed in the latest quarter, 2.8 per cent higher than the 214 deals seen in the previous quarter, Midland said. Sales in Kowloon and Hong Kong Island are still 21 per cent and 30 per cent below the previous quarter, respectively.

Owners in the New Territories were offering steeper discounts after Chinese New Year, agents said, with Kingswood Villas in Tin Shui Wai and Tai Hing Gardens in Tuen Mun the most active housing estates.

“Although sales have improved, overall secondary transactions are still low as most home seekers prefer to wait for prices to drop a further five to 10 per cent. Buying opportunities have not come yet,” said Derek Chan, head of research at Ricacorp Properties.

Chan expects overall buying interest would return once transactions rebounded to a normal level of about 5,000 a month, as seen in 2012.

The number of second-hand home transactions recorded last month was 1,777 – the lowest since 1996 – as a slowing economy and ample new supply dents buyer demand. Sales of second hand homes have been declining ever since the government imposed a slew of cooling measures four years ago, including higher property taxes and a lower bank loan-to-value ratio.

Sammy Po Siu-ming, chief executive of Midland Realty’s residential department, said prices for mass homes have fallen 20 to 25 per cent from their peak last September.

“Previously, a two-bedroom flat in Kingswood Villas cost HK$4 million and now is HK$1 million less. There were a few units that changed hands at HK$2.8 million but that only lasted for a short time. Prices have rebounded to above HK$3 million now,” he said.

A similar trend was seen in Tsuen Wan Centre, where he said some apartments sold for below HK$3 million, but prices moved back up above HK$3 million after the substantially lower price units had been snapped up.

From the end user point of view, Po said buyers could consider purchasing as long as they can afford the initial down payment and monthly mortgage instalments. “No one has a crystal ball to see when prices will drop to the bottom,” he said.

While the majority of home seekers are staying on the sidelines for now, some newlyweds and end users have decided to buy instead of renting.

Perry Fong, sales director at Centaline Property Agency’s Tuen Mun, Yuen Long and Tin Shui Wai branch saw increasing sales of small flats at older single-block buildings with prices under HK$3 million in Tuen Mun after the Chinese New Year.

He said these buildings were 30 years old and owners decided to cash in their flats now rather than hold onto them. “Deals in the area concluded faster after owners cut their asking prices by HK$600,000 to HK$800,000,” he said