Hong Kong homebuyers snapped up the first batch of 347 flats offered by mainland developer Vanke in its first major residential development in Tuen Mun in one day. This despite negative factors like a recent hike in prime rates, the escalating US-China trade war, and increasing supply in the market.
The strong response indicates Hongkongers are still very much interested in buying properties and they still have a strong purchasing power.
The average price at Vanke’s Le Pont project came at HK$11,075 per square foot, lower than the level in the secondary market in the neighborhood.
The development targets first-time buyers, with flat sizes ranging from small to medium. Each unit costs between HK$4 million to HK$6 million.
Le Pont is 20 minutes away from the downtown area of Tuen Mun. Despite the less desirable location, all 347 flats were sold out on the first day of offering on Oct. 1.
Vanke received 4,300 orders, more than 11 times the number of units offered.
Taking advantage of the strong momentum, the developer quickly announced that it would offer another 310 flats on Oct. 6.
Local developers may have mixed feelings about the pricing of Le Pont.
The relatively low prices have put pressure on similar new developments, such as Sun Hung Kai Properties’ Park Yoho Napoli in Yuen Long and the third batch of flats at Nan Fung’s LP6 development in Tseung Kwan O.
On the other hand, strong interest in Le Pont shows that the demand is still strong. As long as the lump sum is affordable and the unit price is attractive, there will be enough buyers to snap up the flats, which is good news to the real estate industry.
The question is that whether the recent price correction is just a blip, like we’ve seen in 2016.
I believe rising prime rates, the US-China trade tensions and increasing supply are medium-term trends, and their negative impact on the property market will gradually kick in.
Still, any correction is likely to be moderate, as Hong Kong’s economy is expected to stay sound, and the city’s allure for mainland capital and talent will continue to underpin demand for properties.
This article appeared in the Hong Kong Economic Journal on Oct 3
Translation by Julie Zhu
[Chinese version 中文版]
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