One easy conclusion that we can draw now about Hong Kong’s residential property market is this: buyers are shying away because they feel that prices are still not right.
From luxury units in Ho Man Tin to mass-housing in Yuen Long area, property developers have met with lukewarm response after trying to dump the flats at last year’s prices.
Tepid sales figures during the past two long weekends tell the story.
On Tuesday, we had more evidence of the buyer wariness — this time involving even subsidized housing units of the Urban Renewal Authority (URA) in Kai Tak.
De Novo, the URA’s first subsidized housing project, managed to sign up only 19 buyers on the first day of sales for an initial batch comprising 68 units.
About 70 percent of the invited buyers did not even show up for selecting their homes although the units were offered at 14 percent discount to the market price.
The De Novo units were priced in the range of HK$3.4 million to HK$6.6 million, or about HK$9,700 and HK$12,400 per square feet.
But many buyers got cold feet as they felt that the discount was not enough, given the recent correction in property prices in the city.
Tuesday marked the first-day of a four-day sale which will see a total of 264 eligible applicants invited to select their apartments.
De Novo will offer 338 units in total, for which the URA had earlier received more than 12,500 applications.
But many of the invited applicants are now backing out, judging by the dismal response Tuesday.
The situation is not much better when you look at other residential projects in the city.
Of the dozen available-for-sale private residential projects in the past month, only Sun Hung Kai Properties managed to sell 90 percent of its units — at the Ocean Wings development in Tseung Kwan O.
But it is just an exception. As a Tseung Kwan O resident, I can tell that people like the SHKP brand and are thus more willing to take up their high quality homes.
The first-hand property market is facing a dilemma because developers are trying all other means to boost sales, except price cuts.
As buyers hesitate, companies are facing a challenge in clearing their inventories.
In the end, the developers have no choice but to accept a variant of Newton’s third law – what goes up, must go down.
This is especially true given the increasingly volatile global markets and the economic slowdown in China.
One may say that the second-hand property market is even worse as the segment has seen more substantial price cuts.
According to research by Hong Kong Economic Times, there were over 500 residential units for sale in the range of HK$3 million and HK$4 million in the market, or about triple the amount available for sale six months ago.
Most of the units priced below HK$3 million were in Tuen Mun, while the below-HK$4 million units were in Sha Tin. Their average prices were down about 20 percent from the peak last year, the report suggested.
Small residential units, which led the residential market rally since 2010, may need to take a break.
That is because there will be more than 12,000 units coming to the market in the next two years. In 2017, over 7,000 units would be completed, the most in a year since Hong Kong returned to Chinese rule.
In 2016, there will be more than 5,000 units available for sale in Yuen Long.
That will put potential buyers on hold as they’ll wait for further price discounts, giving jitters to developers.
Expect some fire-sales in the coming months!
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