Hong Kong developers rush to sell flats on concerns new government measures could cool demand

Hong Kong developers are rushing to unload their unsold stocks of properties as fears grow of tougher market conditions after the government announced new measures to ease the city’s long running housing problems.

Last week the city’s chief executive, Carrie Lam Cheng Yuet-ngor, announced a vacancy tax on newly built flats that remain unsold for six months, as well as cutting the price of subsidised homes under the Housing Ownership Scheme to 52 per cent of market rates from 70 per cent previously.

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“The prices of flats under the Home Ownership Scheme will look more appealing than before and will probably attract more households to apply for them,” said Raymond Cheng, head of Hong Kong and China research and property at CGS-CIMB Securities, in a research note.

He said the vacancy tax, equivalent to two years of rental income as calculated by government specialists and based on market rates, could force developers to sell faster and to set more conservative selling prices.

“Based on current rental yields of 2.5 per cent, the vacancy tax will account for 5 per cent of the property value. We believe a vacancy tax rate of 5 to 6 per cent is high enough,” Cheng said.

In the wake of the government announcement, Sun Hung Kai Properties, the largest developer in Hong Kong by market value, unveiled prices for the first batch of 128 units at its incomplete St Martin development in Tai Po on Thursday. The units, phase two of the total 640-unit development, will be offered for sale next week.

It will release the details about the sale for its 355-unit Victoria Harbour development in North Point on Friday. Separately, CK Asset Holdings will offer 10 remaining unsold units at its Seanorama development in Ma On Shan on Saturday.

Property developers blast ‘unfair’ vacancy tax, call for longer grace period

Meanwhile, Far East Consortium has pushed out the price list for its unfinished mass housing project, The Garrison, in Tai Wai. The first batch of 50 comprises one-bedroom units ranging from 201 to 268 square feet. Unit prices start at HK$4.23 million (US$539,000), or HK$21,025 per square foot.

Such developments could be hit by the government’s planned reduction in the price of subsidised housing. For example, a subsidised 383 sq ft flat at Cheung Sha Wan’s Hoi Lok Court could see its price drop from HK$2.92 million to only HK$2.17 million, cheaper than The Garrison and offering more space.

Developers have also rushed to sell luxury homes. Wing Tai Properties sold three villas at its Le Cap development in Sha Tin on Thursday for about HK$200 million in total, while Emperor International put two houses in Tuen Mun up for sale by tender on Tuesday and Sun Hung Kai sold three vacant villas on Monday for a total of HK$1.2 billion.

The Real Estate Developers Association, which represents the city’s major developers, called the vacancy tax “unreasonable” and “unfair”.