Hong Kong developers to push sales after record land purchases by mainland rivals
Experts expect this year’s land market to remain hot – driven by aggressive bidding by Chinese companies – unless Beijing further tightens capital controls
Hong Kong developers will be the major beneficiary of recent government land sold for shockingly high prices to mainland rivals as they take advantage of positive market sentiment to cash in on the sales upswing.
Sales of new homes saw a week-on-week increase of 70 per cent over March 4-5 after two residential sites in Ap Lei Chau and Wong Chuk Hang were sold to mainland developers at record prices.
Major developers including Cheung Kong Property and Sun Hung Kai Properties (SHKP) raised prices for unsold units by 1.3 per cent to 30 per cent on Friday after strong land sales boosted buying confidence.
“Hong Kong developers will certainly benefit as they have new projects ready to put on sale,” said Alfred Lau, a property analyst at Bocom International.
“The news has created a window for [Hong Kong developers] to cash out in the face of increasing uncertainties about rising flat supply and an imminent rate rise in the US,” Lau said.
He expected this year’s land market would remain hot – driven by aggressive bidding from Chinese companies, especially in the Kai Tak area – unless the Chinese government further tightens capital controls.
“In the short term, we believe it will benefit Hong Kong developers while the higher and higher land prices will stimulate market sentiment and boost primary market sales,” he said.
CK Property announced on Friday that prices for three projects would be raised by 3 per cent to 5 per cent from March 16, while SHKP has increased prices for two projects in Yuen Long – at Grand Yoho and Park Yoho – by 1.3 per cent to 7 per cent.
Prices for the upcoming sale of 61 units at Alto Residences in Tseung Kwan O – jointly developed by Empire Group Holdings and Lai Sun Development – have risen 30 per cent to an average of HK$20,700 per square foot after factoring in a 12.75 per cent discount.
Sammy Po, the chief executive of Midland Realty’s residential department, said that compared with last year Hong Kong developers’ pricing strategy would become more aggressive in marketing their project launches in a bid to maximise profits.
“Both primary and secondary residential sales have turned hot since February. But the emerging ‘land kings’ are adding fuel to the fire,” Po said.
More prospective buyers have not only quickened their buying decisions but were also willing to accede to owners raising prices by 3 per cent to 5 per cent, he said.
“Prospective buyers don’t want to miss an opportunity. They are worried about paying more for the same units once prices continue to grow,” he said.
On February 24, Shenzhen-based Logan Property Holdings and Guangzhou’s KWG Property Holding won a residential site in Ap Lei Chau for a record HK$16.86 billion, or HK$22,118 per square foot. Three days later, MTR Corp awarded a residential project in Wong Chuk Hang Station, valued at HK$8 billion to HK$9.8 billion, to Pingan Real Estate Capital and Road King Infrastructure.
Victor Lai Kin-fai, the chief executive of consultancy Centaline Professionals said Hong Kong developers would grab this opportunity to dispose of their projects.
“Previously, developers would kick off their project launches in an orderly fashion to avoid price competition. But they won’t be observing this unofficial rule now as they will want to generate sales before more flats come on to the market,” Lai said.
At least seven new projects comprising nearly 5,300 units are expected to be available for launch this month after strong land sales boosted buying confidence.
Major projects in the sales pipeline include SHKP’s 1,050-unit Cullinan West, atop West Rail’s Nam Cheong Station; CK Property’s Ocean Price in Tsuen Wan; the 454-unit Seanorama in Ma On Shan and the 378-unit Harbour Glory in North Point.
In a move away from the focus on small flats in the past 12 months, developers are now offering larger apartments which involve bigger lump sum payments, Po said.