Hong Kong’s home sales flop as market rout, higher mortgages deter residential property buyers
Sales of newly completed flats flopped for a second consecutive weekend in Hong Kong, as a stock market rout, rising mortgages and the worsening US-China trade war deterred buyers from two newly completed apartment projects in the city.
Nan Fung managed to sell only 100 units, or 20 per cent of the 491 flats offered, at its LP6 project at Lohas Park in Tseung Kwan O as of 5:30pm on Saturday, even after discounting the offers by 19.5 per cent, for an average price of HK$16,006 per square foot. At the One East Coast project at Yau Tong in Kowloon, only 43 of the 130 condominium units on offer were sold, agents said,
The weekend’s “sales results cannot be compared with those a couple of months ago,” said Sammy Po, the chief executive at Midland Realty’s residential department. “The market has been hit by headwinds such as the US-China trade war, rising interest rates and launch of the heavily discounted Home Ownership Scheme,” which provided more affordable prices for first-time buyers, he said.
During the previous weekend, buyers took up 181 of 310 flats offered at Le Pont, a project by Vanke Property (Hong Kong) in Tuen Mun, despite incentives that included discounted mortgage rates and cash rebates.
This past weekend’s lacklustre performance in Hong Kong is further evidence that the world’s most expensive residential property market has cooled, after rising for 28 consecutive months through August.
Median home prices may declined by between 3 per cent and 5 per cent by December, from the June quarter, agents said.
The city’s Rating and Valuation Index, which tracks prices of used homes, dropped by 0.3 percentage point to 393.9 in August, the first monthly decline in more than two years.
Nan Fung’s LP6 project - comprising a total of 2,392 flats - was developed for first-time homebuyers, with more than 70 per cent of the 491 apartments being single, or two-bedroom designs, with prices starting at HK$4.46 million (US$569,300).
The developer has already generated more than HK$10 billion from selling 1,433 units in three batches since the LP6 project’s sales launch in September.
The developer priced its latest batch of units nearly 2 per cent cheaper than an earlier lot in the same complex that were offered on September 25. That is a reversal of the usual practice by Hong Kong developers, which used to raise prices by as much as 10 per cent within weeks of selling different batches of units.
Hong Kong’s stocks fell last week for the third consecutive week of losses, amid jitters over rising US bond yields, while the global bloodbath in equity markets caused panic among local investors. The 50-stock Hang Seng Index is already down 7.2 per cent so far in October.
Still, the result at Nan Fung’s launch was “within expectations,” said Midland’s Po, who said 70 per cent of registered buyers showed up, while some well-heeled customers kept buying multiple units.
Another factor that deterred investors was the land reclamation project announced last week by the government, which would create several artificial islands that can provide up to 400,000 residential units to house an estimated 1.1 million people, 70 per cent of which are reserved for public housing.
“This would particularly impact potential buyers looking at small sized provide flats. Now more of them may would like to wait for the government’s subsidised flats that are at similar size, but much cheaper,” said Derek Chan, head of research at Ricacorp Properties.