Sino Land has launched the first batch of 205 units of its Grand Central development in Kwun Tong at an average price of HK$17,388 per square foot. That represents a notable discount from second-hand flats in the neighborhood.
The discount has stunned the market given that company executives indicated earlier it would make reference to new projects in the former Hong Kong airport site Kai Tak, implying that per square foot price would be at least HK$20,000.
There are three possible factors behind Sino Land’s pricing decision.
First, buyers of Grand Central development would not be able to move in until the end of April 2021, a wait of nearly two and a half years. Things could change dramatically over that period amid rising geopolitical risks.
Meanwhile, Sino Land aggressively snapped up eight land plots last year for a total of nearly HK$40 billion. That means it is keen to speed up sales to fund upcoming projects.
The developer learned a bitter lesson in the last housing boom in 1997. It acquired the site for its Island Resort development at the peak price in March 1997, but the market quickly collapsed and it was forced to sell at a loss in 2000.
Grand Central has a total of 1,999 units, mostly medium-sized flats. The smallest apartment is 452 square feet. The first batch of 205 units represent around a tenth of the total, and a lackluster sale performance would not bode well for future sales.
Understandably, the developer wants to lure as many buyers as possible and have a good start.
The lack of demand from buyers in the district is another problem that Sino Land may have considered.
Kwun Tong is one of the poorest districts in Hong Kong, with a median household income of around HK$20,400 per month, far below the city’s overall median level of HK$26,500.
The size and price point of Grand Central cannot be attractive enough for first-time buyers in Kwun Tong.
To potential buyers from outside the district, Kwun Tong is known for having lots of old residential buildings, which is a minus. The quality of nearby schools is also seen as unattractive.
Grand Central’s pricing strategy is set to weigh on the overall housing market, including upcoming developments in Tseung Kwan O and the western New Territories.
However, despite short-term pressure from redevelopment projects coming online, as well as the development of the commercial district in Kowloon East, the long-term prospects of Kwun Tong properties are not so bad.
This article appeared in the Hong Kong Economic Journal on Dec 7
Translation by Julie Zhu
[Chinese version 中文版]
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