Cash no longer king as home buying frenzy hits Hong Kong

It’s often said that cash is king, but for Hongkongers gripped by a home buying frenzy this month, that would appear to no longer be the case.

Home seekers snapped up 2,300 new units in the first 11 days of September, according to collated figures from property agents, compared with 2,500 flats sold in the primary market in the whole of August. This month’s home sales, worth an estimated HK$19 billion, come despite developers marking up their prices by as much as 20 per cent.

Lured by incentives such as attractive payment plans being offered by developers, buyers pounced on about 1,000 new units last weekend alone.)

Henry Mok, a regional director of capital markets at JLL, said the surge in sales was driven largely by “an overall improvement in sentiment” and investors buying up several properties at once.

“People do not want to hold cash now. Some new projects saw their sales dominated by investors buying several units in one go,” he said.

Sales figures show that 37 out of the latest batch of 38 units released at Lime Gala in Shau Kei Wan sold to buyers who purchased two or more units within two hours on Friday.

The Morgan, an uncompleted project at Conduit Road, Mid-Levels, has attracted veteran investors such as the family of Simon Kwok Siu-ming, chairman of Sa Sa International, who forked out HK$72 million for two units. Francis Yuen Tin-fan, a former deputy chairman of PCCW and former chief executive of Hong Kong Exchanges and Clearing, paid HK$37 million for a four-bedroom unit.

Over all, investors have accounted for about 30 per cent of sales at new project launches this month.

Louis Chan Wing-kit, Centaline Property Agency’s managing director for residential, said one of his clients bought five units at The Papillons in Tsueng Kwan O on Saturday.

“Together with his three units bought previously (on September 3), he spent HK$80 million for a total of eight units at Papillons so far,” he said.

In another project, Grand Yoho in Yuen Long, Chan believes 30 per cent of units sold at the weekend went to investors.

The recent buying mania suggests that Hong Kong residents are increasingly keen to park their cash in property rather than in bank deposits or in the unpredictable equity market. In the first two weekends this month, Sun Hung Kai Properties sold 760 flats at Grand Yoho; Chinachem sold 750 units at Papillons in Tsueng Kwan O; and China Overseas Land & Investment offloaded 520 units at One Kai Tak, the site of the former Kai Tak airport.

The mad scramble for flats came despite Federal Reserve Bank of Boston President Eric Rosengren on Friday spurring bets on an interest-rate hike by year-end, saying the US economy could overheat should policy makers wait too long to tighten policy.

Eve Lee, executive director and head of Hong Kong and China property research at UBS, said the recent strong sales would encourage developers to raise prices slightly and provide a good incentive for them to speed up their project launches. Buying desire had returned to the market after the US decided against raising the interest rate last month.

“But the recent sales momentum was also partly driven by herd mentality,” she added. “No one knows how long the positive sentiment will last.”

Lee warned that those buyers opting for Hibor-based mortgage plans - loans based on the interest rates in the Hong Kong interbank offered rate market - could be hit first in the event of a Fed rate increase as the interbank rate would immediately follow any movement in the US.

Mok said the price rises seen recently would not last long, as the supply of new flats is set to increase over the next two years.

JLL said the projected private supply in 2018 will jump to 20,000, from 16,000 next year.

“Developers will need to offer units at competitive prices if they need to generate sales volume,” he said.