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Hong Kong property

As homebuyers wait on the sidelines, builders tempt them with special mortgage rates, cash discounts

The incentives come after residential property transactions in Hong Kong fall to a 20-month low in September

PUBLISHED : Thursday, 04 October, 2018, 8:01am
UPDATED : Thursday, 04 October, 2018, 8:01am

Hong Kong developers are offering cash rebates and lower mortgage rates to drum up sales after residential transactions hit a 20-month low, as rising interest rates, volatile stock market and worsening US-China trade war keep buyers on the sidelines.

Vanke Property (Hong Kong), a wholly owned unit of China Vanke, on Wednesday started offering buyers of its LePont project in Tuen Mun a lower mortgage rate, just a week after banks raised lending costs for the first time in 12 years.

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Kowloon Development also said it was considering bigger mortgage loans for its soon-to-be launched One East Coast residential project, in Yau Tong.

“It shows developers want to sell fast before the market sentiment sours further,” said Lung Siu-fung, analyst at China Merchants Securities International.

Analysts also said that developers were keenly awaiting Hong Kong Chief Executive Carrie Lam Cheng Yuet-ngor’s annual policy address due this month, as she is likely to announce land reclamation plans, which might hit immediate demand.

Vanke Property (Hong Kong) has teamed up with Centaline Mortgage Broker to offer Le Pont buyers a mortgage rate of 2.275 per cent, 10 basis points lower than the standard mortgage rate of 2.375 per cent. Last Thursday 11 banks raised the prime rate by 12.5 basis points, effectively pushing up the monthly repayments on home loans.

Centaline Mortgage attributed the “exclusive” discounts to “fierce competition among banks”.

On top of the lower borrowing rate, buyers of Le Pont will also receive a cash rebate of 1.95 per cent of the loan amount.

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“This is attractive to new homebuyers and can help young couples get on the property ladder,” said Thomas Lam, executive director at Knight Frank.

The incentives came after residential property transactions in September fell to a 20-month low of 3,500, 27.4 per cent lower compared to August, while the value declined 20.7 per cent to a 13-month low at HK$37 billion (US$4.7 billion).

Overall residential home sales transactions in the third quarter reached 14,413, the lowest in the past four quarters, generating HK$149 billion.

Since the government announced housing policies on June 29 to cool runaway home prices, home seekers have delayed their decisions and homeowners have been selling their used flats at a discount.

The measures include a vacancy tax on unsold new flats; unlinking the pricing of subsidised housing from private market rates; and building affordable housing on at least nine prime sites originally reserved for private developers to construct luxury homes.

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“The six housing policies have significantly cooled the housing market with the number of transactions sliding for the third consecutive month,” said Wong Leung-sing, senior associate director at Centaline Property Agency.

“The wait-and-see attitude is increasingly dominating the market.”

More than 110 flats, or 35 per cent of the 310 units at Le Pont, were priced under HK$6 million each, which means buyers are eligible for 80 per cent in loan-to-value ratio, with a mortgage insurance policy from the Hong Kong Mortgage Corporation.

With an effective rate of 2.275 per cent on a 25-year loan of HK$4.8 million, the monthly payment works out to HK$21,223, allowing savings of HK$239 a month compared to a mortgage rate of 2.375 per cent.

The overall saving amounts to HK$71,679, or 4.6 per cent of the total interest cost.

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