Some 1,000 units offered by developers last month after they sold 1,114, the most since March, in November
HONG KONG dwellings from one-bedroom apartments to 5,000-square-foot houses are on offer at discounts of as much as 20 per cent as developers brace themselves for a plunge in prices, which have more than doubled since 2009.
Builders, including the city's two biggest - Sun Hung Kai Properties Ltd and Cheung Kong Holdings Ltd - offered about 1,000 housing units in December, after selling 1,114, the most since March, in November, according to estimates from Centaline Property Agency Ltd.
New home sales in 2014 will almost double to 15,000 from an estimated 8,500 in 2013, the lowest since data were first collected in 1996, said Wong Leung-sing, an associate research director at the city's biggest closely held realtor.
Analysts at Barclays plc, UBS AG and Jefferies Group LLC are predicting that prices will drop by as much as 30 per cent by 2016 amid an increase in the supply of properties and after the government introduced measures to curb price growth such as higher stamp duties and downpayment requirements. Li Ka-shing, who controls Cheung Kong, said he is slowing land acquisitions because values are too high, and the central bank has repeatedly warned the property market is still in danger of overheating.
Buyers have backed away since the government imposed its toughest price curbs yet in February. About 46,000 homes changed hands in the city in the first 11 months of 2013, down from 78,000 deals over the same period a year earlier, according to Land Registry data.
That hasn't dented prices. They rose 2.8 per cent in 2013 even as policymakers in February doubled stamp duties on all property transactions above HK$2 million (S$326,640) to as much as 8.5 per cent. In October 2012, it slapped a 15 per cent extra tax on home purchases by all non-Hong Kong residents.
Given the penalties, developers are now offering sweeteners to entice buyers. At The Avenue, an apartment complex co-developed by Sino Land Co, Hopewell Holdings Ltd and the government about 1.5km from the city's financial district, apartments were sold at an average of HK$20,000 per square foot after the discounts were applied, said Joseph Tsang, Hong Kong-based managing director at broker Jones Lang LaSalle Inc.
The developers have sold all of the more than 900 units they put on the market at the development in Wan Chai, a residential and commercial area, since sales began in November, according to transaction records posted on the project's website.
"Before the curbs, this project could've easily sold for HK$25,000 per square foot," said Tsang of Chicago-based Jones Lang LaSalle. "Many people would be attracted to buy because they think it's a good price, but the market is a long way from getting heated again."
Builders New World Development Ltd and Wheelock & Co sold 576 units at The Austin, a luxury apartment project in the Kowloon West district between October and November at a discount of as much as 20.5 per cent, according to its website. Sun Hung Kai, the city's second-biggest developer by market value, sold about 300 units at The Cullinan, a luxury high-rise in the same area, with discounts of about 20 per cent, according to the website.
"This is quite unusual," said Centaline's Mr Wong. "Normally developers would have their sales plan mapped out quite evenly over the course of the year, but the curbs in February really threw them off. So now they're trying to accelerate sales to make up numbers."
Calls to developers about sales records were referred to the projects' websites. The Hong Kong government requires developers to post transaction records of new units on the Internet within 24 hours of them being sold. Record-low mortgage rates, a shortage of new supply and an influx of mainland Chinese buyers have propelled prices above levels reached in 1997, which marked the start of the city's last major property crash. The former British colony is the most expensive city to buy a home, according to a Savills survey published in September that included New York, London and Tokyo.
The affordability ratio, which measures the proportion a homebuyer has to pay monthly on a mortgage relative to income, stands at just over 60 per cent, close to a 14-year high, according to calculations by London-based property broker Knight Frank LLP.
Hong Kong Chief Executive Leung Chun-ying and other government officials have repeatedly warned of an asset bubble and said the government won't withdraw the measures until there is a steady supply of new housing. Norman Chan, the head of the Hong Kong Monetary Authority, said on Nov 15 the city's property market is still in danger of overheating.
"The few months after the last measures have been a period of adjustment for both buyers and sellers," said Ricky Poon, Hong Kong-based director of residential sales at Colliers International. "Developers now realise they can't be as aggressive as before and have adjusted accordingly."
Hong Kong home prices will fall at least 30 per cent by the end of 2015 as income growth stalls and supply increases, Barclays's Hong Kong-based analysts Paul Louie and Zita Qin wrote in an Oct 28 report, following predictions of a 25 per cent decline by UBS's Eva Lee. Venant Chiang, an analyst at Jefferies, said in a Dec 3 report he expects prices to fall 20 per cent in 2014.
Developers are also rushing sales of luxury properties, which have been hit hardest by the government curbs because many buyers were wealthy mainland Chinese who now face the extra 15 per cent tax, while tighter mortgage rules imposed by the central bank raised downpayment requirements for more expensive homes.
Prices of luxury homes, or those valued at more than HK$10 million, have fallen about 6 per cent this year, while those selling for less have been little changed, according to property broker Cushman & Wakefield Inc.
Hutchison Whampoa Ltd, a unit of Cheung Kong, the city's biggest developer, has sold three houses with areas of over 5,700 square feet each in the upmarket Victoria Peak area since November for a combined HK$1.8 billion, according to its website. The other four houses in the project have also been put up for sale.
"The luxury market has been quiet for a while, but the developers see what's been going on with sales in the mass market lately so they want to test the water," said Thomas Lam, Hong Kong-based director of research at Knight Frank. Bloomberg
Source from Business Times