Developers could defer project launches as sentiment sours

New flats likely to stay off market as stamp-duty increase and imminent rise in borrowing costs keep homebuyers on sidelines

PUBLISHED : Tuesday, 06 December, 2016, 3:53pm
UPDATED : Tuesday, 06 December, 2016, 7:59pm

Hong Kong developers are expected to defer the marketing launches of an estimated 3,500 flats as buying sentiment is souring quickly on concerns over the stamp-duty increase, applied to curb price growth, and an imminent rise in United States interest rates, industry experts warn.

Prospective buyers stayed on the sidelines over the weekend, cutting the number of secondary-market transactions to single digits among the city’s four leading agents over the weekend, the sixth consecutive month of declines.

Bocom property analyst Alfred Lau said the new stamp duty had a significant impact on primary market sales volume last month, which saw just 570 transactions, a drastic 75 per cent fall.

“We believe developers will postpone new launches to [next year] unless they sell at a discount like Hang Lung’s Long Beach development [in Tai Kok Tsui],” he said.

Hang Lung managed to sell all 62 units at Long Beach on Saturday after the project relaunched at a 23 per cent discount. The developer will release a further 80 units with prices 1.5 per cent higher.,114.1547091,16z/data=!3m1!4b1!4m5!3m4!1s0x340400ba2e1d83c9:0xd0cc516784dd940e!8m2!3d22.31975!4d114.1632571

The upcoming sales of five residential projects offered 3,477 flats, most at the former airport site at Kai Tak and West Rail’s Tsuen Wan West station, agents said.

“Developers are not in a hurry to offer new projects for sale as most of them had strong cash flow,” Lau said. With Christmas just two weeks away developers may opt to observe how the month-old stamp duty increase affected home sales.

But developers are likely taking wait-and-see attitude as all of these are large-scale projects
Midland Realty residential chief executive Sammy Po

Hong Kong home sales tumbled after the stamp duty on all residential transactions, except by first-time buyers, was raised to 15 per cent from 8.5 per cent from November 5.

Projects pending for pre-sale include the 624 -unit One Kai Tak phase two development by China Overseas Land & Investment; the 900-unit K City by K Wah International, also in Kai Tak; the 983-unit The Pavilia Bay in Tsuen Wan by a joint venture between New World Development and Vanke Property (Overseas) and a 970-unit at The Ocean Pride next to Tsuen Wan West Station.

Midland Realty’s residential department chief executive Sammy Po said One Kai Tak phase two development and K City had secured pre-sale consent, while applications for the others were awaiting approval.

“But developers are likely taking wait-and-see attitude as all of these are large-scale projects,” he said.

Most developers needed two to three weeks to prepare sales brochures and arrangements, he said, adding that there was no rush to release projects for sales in the slow market.

He expected developers would continue releasing first batches of projects at lower prices to drum up sales.

“It is hard to draw buyers, who mostly are end-users, unless the new projects to be released at attractive prices,” said Po.

Incentives included developers covering the increased stamp duty or subsidising part of total amount of the levy, he said.

Secondary-market sales fell to a nine-month low of 37 deals at the 35 housing estates tracked by Midland Realty for the week to December 4.

Hong Kong one-month interbank borrowing rates jumped to a six-year high of 0.5 per cent yesterday as the market anticipated the US Federal Reserve would raise interest rates 25 basis points next week.

The ratio of new mortgage loans priced with reference to the Hong Kong interbank offered rate increased to 94.8 per cent, according to Hong Kong Monetary Authority.

Hibor-based mortgage plans are usually priced at one-month Hibor plus 1.7 percentage points. That meant an effective rate of 2.2 per cent for a home loan taken out yesterday.