Something must be going on between the top property developers and the government.
Every tycoon in town is expecting further downside in real estate prices, but look at their new residential units — they are still fetching sky-high prices.
Before the Easter holiday, Cheung Kong Property called a halt to The Zumurud, its luxury project on Argyle Street, which it is trying to sell at an average of over HK$22,000 per square foot.
The joint venture with former Sun Hung Kai Properties chairman Walter Kwok Ping-sheung was originally scheduled to launch before Easter, but Cheung Kong said it had to readjust its strategy to cater for some big customers who want to buy more.
Whatever the reason, it is one of the few residential projects whose sales got suspended in recent years, and it was a rare move for Li Ka-shing, who said last week he foresees the worst economy in two decades this year.
However, many other developers are eager to clear their stock during this period, which coincides with a two-month high in global markets.
For example, Sun Hung Kai Properties launched Ocean Wings, the last batch of The Wings series, in Tseung Kwan O.
It priced the units at HK$12,800 per square foot and offered a rebate of over 13 percent, bringing it close to the second-hand price.
The developer also brought back the 5 percent down-payment offer, which it rarely uses, to provide a lower entry level for buyers.
My question is, how come I still don’t feel the prices declining?
If you are like me, we should perhaps ask the government why it is giving us false hopes of a price drop in the residential market while developers are still trying to sell homes at last year’s price levels.
The government has put in place measures to curb property prices in the face of growing frustration among the youth who can’t afford to rent decent accommodation, let alone acquire their own homes.
One theory I heard is that the big developers have decided to keep prices high as long as the government chooses to maintain its home price curbs.
Well, this doesn’t make any sense if we believe the basic law of supply and demand in our economics textbook, but who really owns the pricing power in Hong Kong?
Why is it that the Singapore property market fell more than 20 percent in the past two years, but that didn’t happen in Hong Kong?
From the land supply side, we noticed that major property developers have been shying away from recent land auctions, whether the site is big or not.
The last few transactions this month – with the exception of Nan Fung winning the 10th tender at Lohas Park in Tseung Kwan O for a land premium of HK$1.66 billion — were clinched by small or private developers.
On the other hand, the big shots had been active in land acquisitions in the past two years.
This, to me, means the government is eager to have greater pricing power with regard to the supply of flats in the medium term because it has not been able to control prices in the short term.
The struggle goes on, and it will probably become more apparent as we get closer to the chief executive election next year.
All of us know that lower home prices will give incumbent Leung Chun-ying better chances of grabbing a second term.
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