Developers accelerate home sales amid weakening sentiment

Updated: 2011-11-26 06:51

By George Ng(HK Edition)

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 Developers accelerate home sales amid weakening sentiment

Buildings in the Mid-Levels district in Hong Kong. Home prices have fallen by around 2.7 percent from their peaks recorded earlier this year to the lowest in more than six months. Jerome Favre / Bloomberg

Firms look to cash in with rainy days ahead

Hong Kong developers are accelerating home sales to fill up their pockets in preparation for rainy days ahead as sentiment for the residential property market increasingly weakens.

As of Nov 24, developers, including Cheung Kong (Holdings) Ltd and Sun Hung Kai Properties Ltd, have put up around 1,500 units of new flats for sale in the market, more than tripling the 453 units in September, said Jeffrey Ng, senior executive director at Hong Kong Property Services (Agency) Ltd.

New flats put up for sale next month are likely to reach more than 1,000 units, Ng estimated.

The accelerated pace comes amid sour sentiment for the residential property market as indicated by a slump in transactions.

Home sales averaged only 6,197 units per month so far this year, compared with the 10,135 units last year, Wong Leung-sing, associate director of research at Centaline, said in a report released on Thursday.

The average home sales number declined further to 4,574 units during the third quarter and could fall to 3,400 units in the fourth quarter, he said, noting that the average home sales number plunged to the 3,400-level only during the fourth quarter of 2008 when the global financial tsunami hit the market.

"Under the current environment developers just want to sell enough to keep their cash flow moving," said Wong. "We still haven't reached the stage where there's a massive price cut to unload apartments."

But it may not be too long before it does reach that stage. Some developers have actually lowered the asking prices for their new project launches. For example, Cheung Kong is selling new flats in the third phase of its Festival City project in Sha Tin at prices that are about 15 percent lower than the resale prices of units in the first two phases of the same project in the secondary market, according to some real estate brokers.

Meanwhile, Sun Hung Kai Properties Ltd is offering the latest batch of flats in its new project The Wings in Tseung Kwan O at a nearly 20 percent discount to the previous batches of flats it sold just a few weeks earlier in the same project. Traditionally, developers have priced their new projects at a premium of 20 percent to 30 percent to the asking prices of comparable flats in the secondary market.

Developers' rush for sales may put further pressure on home prices, analysts suggested.

Home prices and residential rents may drop 3 percent in the fourth quarter from the three months ended September, Wong predicted in his report.

Home prices have fallen by around 2.7 percent from their peaks recorded earlier this year to the lowest in more than six months after the government raised minimum down-payment requirements, boosted mortgage rates and increased land sales since late last year to curb a housing bubble. Sentiment has also been marred by the economic woes that the Europe and the US are now facing, which are threatening Hong Kong's exports, one of the city's economic pillars.

Residential property prices could plunge as much as 30 percent by 2013, Andrew Lawrence, a Hong Kong-based analyst at Barclays Capital predicted last month, citing rising mortgage rates and a slowing economy.

Standard Chartered, the city's fourth biggest mortgage loan provider, raised its mortgage rates by as much as 50 basis points on Nov 21, a move that may signal another round of rate hikes in the city, which has seen five rounds of rate hikes since March this year.

The city's economy skirted a technical recession by snatching a 0.1 percent quarter-on-quarter growth in the three months ended September after contracting 0.4 percent in the second quarter. On an annual basis, the third quarter GDP grew 4.3 percent, significantly lower than the 5.3 percent in the previous quarter.

george@chinadailyhk.com

China Daily

(HK Edition 11/26/2011 page2)