Developers use tenders to their advantage as they seek to control falling property prices
- Builders are using tenders to avoid flooding the market with unsold property and openly reducing prices as market cools
The recent spike in the number of relatively cheap flats offered through tender is a clever strategy by builders as it helps them to achieve higher prices without harming the reputation of their project in the event of poor sales and also prevents them from openly cutting prices, say market observers.
Figures from the Sales of First-hand Residential Properties Authority show that the proportion of new homes put out for tender has risen to 15.6 per cent from 220 in September to 346 in October.
In late June, Chief Executive Carrie Lam Cheng Yuet-ngor announced a series of measures to bring more affordable housing to the market amid runaway property prices.
One of the measures requires developers to release at least 20 per cent of total units in each launch either through public sale or tender. Builders also have to release the price list at least three days ahead of the official sales launch.
But as the property market cools down, builders are reducing the impact of the regulation by offering most of their flats through tender, which also prevents them from flooding the market with unsold flats, said Lawrence Poon Wing-cheung, senior lecturer at City University of Hong Kong.