22 October 2016
Easyknit International's Paxton housing project in Ho Man Tin allows buyers to pay for their units in stages. Photo: HKEJ
Easyknit International's Paxton housing project in Ho Man Tin allows buyers to pay for their units in stages. Photo: HKEJ

‘Live now, pay later’: What does it mean for the housing market?

Tax rebate. Eighty percent mortgage. Pricing below secondary market levels.

These have been some of the marketing pitches of property developers in 2015 as they sought to unload inventory amid an expected US rate hike and fears of fresh global economic uncertainties.

The tricks seemed to work for CK Property (01113.HK), which has reaped HK$3 billion from sale of 450 flats at Yuccie Square, a housing project near the West Rail station in Yuen Long.

The property flagship of tycoon Li Ka-shing sold close to HK$30 billion worth of residential units this year, a four-year high in a market that is close to historic peak.

Now, what about the rest of the developers?

Besides a second batch of Yuccie Square units, there will be another 5,000 apartments available for sale in December. The supply boost will mean more price bargains and more sales incentives.

The situation has prompted Chinese language newspaper Wen Wei Po to predict that developers will bring back the “live now, pay later” sales strategy to lure potential buyers.

Since the second half of this year, when we saw a collapse in China’s A-share market, some developers have already started pushing the extended credit idea, albeit on a small scale.

According to Wen Wei Po, Henderson Land tried “live now, pay later” for the High Park project in Cheung Sha Wan and also at “The Reach”, a joint venture in Yuen Long with New World Development.

Such sales gambit is believed to work not only for mass housing units, but also for some high-end projects such as Chinachem’s Eden Gate in Kowloon Tong and Easyknit International’s Paxton in Ho Man Tin.

The whole idea is to lure buyers into paying a high market price and allow them to make the payment in stages, especially if buyers need a longer time to sell their old place to finance the new one.

We are not sure how popular this route has become among buyers, as developers have been quite coy about divulging the information. But we know that some of the firms are yet to complete their sales – probably because the asking prices were still not deemed attractive.

The “live now, pay later” method marks a turnaround of the existing “pay now, live later” ecology where developers were launching pre-sale of flats as much as 36 months ahead of completion.

Given the strong property market for most of the past decade, the new strategy wouldn’t have come unless the developers were convinced that it would be “mission impossible” to sell the units through normal practices.

Of course one can argue there is no “mission impossible” in Hong Kong, a tiny city where immigrants have been historically coming than leaving.

The “live now, pay later” gimmick was used in the past for Skytower, a joint venture of CK Property, New World Development and Shanghai Industrial in To Kwa Wan, in the aftermath of the SARS crisis in 2003.

As a matter of fact, the sales trick brought happy result for the developers as well as the buyers.

People who availed of that offer a decade ago are now sitting on two or three-fold gain in the value of their properties.

Will history repeat itself with the current crop of “live now, pay later” buyers, or are they taking an undue risk?

Given the warning of some analysts recently that Hong Kong’s residential market could witness a significant correction, only time will tell whether the buyers are foolish or if they’ll get lucky.

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EJ Insight writer

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