Hong Kong property

Hong Kong property sales leap 35 per cent as investors join buying frenzy

Midland Realty predicts overall property deals will surpass 8,000 this month, the highest monthly figure since February, 2015

PUBLISHED : Friday, 16 September, 2016, 7:58pm
UPDATED : Saturday, 17 September, 2016, 2:17am

Hong Kong’s property market continued to gather pace as investors joining a mad scramble for new flats pushed overall transactions up by 35 per cent in the first two weeks of this month, according to industry experts.

Led by a sharp surge in sales of new apartments, other types of real estate also benefited from an overall improvement in sentiment and recorded brisk sales for the period September 1 to 14, data from Midland Realty shows.

It said the number of transactions in the primary market was 1,139, up 74.2 per cent from the same period in August, while sales of second-hand homes rose 19.5 per cent to 2,144 and sales of non-residential properties climbed 13.8 per cent to 462.

Midland expects overall property deals, including apartments, shops and car parks, to surpass 8,000 this month. That would be the highest monthly figure since February, 2015.

“The recent buying mania is partly driven by the easing of interest rate expectation last month and investment demand,” said Sammy Po, chief executive at Midland Realty’s residential department.

Investors accounted for about 30 per cent of purchases at new project launches in the past two weeks compared with 20 per cent earlier in the year, he said.

In one case, an investor bought eight units at the new project Papillons in Tseung Kwan O for a total HK$80 million, he said.

“Some developments comprising small flats even attracted 50 per cent investors,” he said. “Studio units could generate higher rental income, or investment return of 3 per cent to 4 per cent a year, compared with 2 per cent for large size flats.”

The soaring home sales are also down to the fact more parents are buying flats for their children, who can’t afford to put down the initial deposit.

One new project at 93 Pau Chung Street in Ma Tau Kok, jointly developed by Urban Renewal Authority and Lai Sun Development, offering 118 units, has attracted 100 prospective buyers, most of them buying for their children, according to Po. The cheapest unit is a 316 sq ft flat which will cost HK$4.6 million after factoring in as much as 12 per cent in discounts.

Thomas Lam, head of valuation and consultancy at Knight Frank, believes the recent upturn in sales may not mark the end of the market correction but sees it lasting several months.

“The sentiment only improved in the past two months as there are limited investment alternatives,” he said.

The large percentage growth mainly reflects the far lower sales in the previous month, he said, pointing out that property sales are still far below the 9,000 to 10,000 deals per month regularly seen before the government introduced cooling measures in early 2012.

Sun Hung Kai Properties (SHKP)’s low -price strategy for its Grand Yoho project in Yuen Long stirred up the latest round of property fever with more than 16,700 prospective buyers expressing an interest in the first batch of 308 units.

As other developers also began offering steeper discounts and flexible financing schemes, home seekers bought more than 2,300 new flats - with some in Grand Yoho’s third batch even marked up by more than HK$1.6 million - 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.

As there is usually a lag of a few weeks between a transaction and its registration at the Land Registry, flats being sold this month will be reflected in October figures.

“Units being offered in the price range of HK$3 million to $5 million have been selling like hot cakes but sales for those flats costing above HK$10 million remained slow as there were fewer buyers,” said Po.

Home seekers still snapped up more than 1,000 units last weekend despite fears that a US Federal Reserve rate rise may come sooner than expected. The Fed is set to hold a two-day policy meeting next Tuesday to discuss whether to raise interest rates, with the result emerging on Thursday (HK time).

Lam said banks in Hong Kong are locked in a mortgage price war, which could diminish the impact of a possible interest rate hike on the housing market.

Banks in Hong Kong have been following the Bank of China (Hong Kong)’s lead after it cut its mortgage rate by 10 basis points two weeks ago, offering the cheapest loan in the city to attract buyers.

Today, most banks are offering mortgage rates of 140 basis points above the Hong Kong Interbank Offered Rate, or Hibor, for loans of up to HK$3 million in view of strong buying demand for small flats.

Based on a one-month interbank rate of 0.27 per cent yesterday, that means the effective mortgage rate would be 1.67 per cent per annum, compared with a standard home loan of around 2.15 per cent.

Lam said the market did not expect the government to relax its market-cooling measures, at least before the Chief Executive election scheduled for March next year.

Developers are expected to take advantage of improving sentiment by speeding up their new project launches. More than 12,000 units in 21 new projects are expected to be launched between now and December, pending developer applications for pre-sale consent from the government. Among them, Cheung Kong Property Holdings’ 2,400-unit project adjacent to Tsuen Wan West Station is expected to come on the market later the year.