Hong Kong developers could come under pressure to reduce prices amid a spate of new project launches, according to market observers.
Centaline Property Agency said on Monday that six developers who hold 5,120 unsold flats since 2016 are likely to speed up sales to avoid the soon-to-be introduced vacancy tax.
Combined with Midland Realty's forecast two weeks ago of 27,000 new flats likely to go on sale in 2020, the overall supply would rise to 32,120 units.
Sammy Po, chief executive of Midland Realty, said that since it is such a large pipeline of new flats "developers will be under pressure to launch projects at lower prices".
"Larger flats will see developers offering deeper discounts," Po said.
He added that the final tally of flats that go on sale will, however, depend on developers' applications for presale consent.
According to Midland Realty, Yuen Long and Tuen Mun will see some 7,400 new flat launches this year, while Tseung Kwan O and Sai Kung will account for around 4,600 units.
The forecast of abundant supply comes as homebuyers stay on the sidelines. Seven months of anti-government protests have dented consumer confidence that has hurt key sectors of the economy such as retail and tourism and pushed the economy into a technical recession.
To drum up buying interest, China Vanke last week released the first batch of 50 units at 15 Western Street in Sai Ying Pun at an average price of HK$27,919 (US$3,592) per square foot, about 7 per cent lower than One ArtLane nearby. Henderson Land Development released One ArtLane at an average discounted price of HK$29,988 per sq ft in September 2018.
On Saturday, Sun Hung Kai Properties priced its Wetland Seasons Park in Tin Shui Wai at an average of HK$11,388 per sq ft, the first new project in the past 10 years in the area. The launch price is just 9 per cent more than the 27-year-old Kingswood Villa in the same district.
The developer, the largest in Hong Kong by market value, managed to sell 97 per cent of the 375 units it put on sale. The project, to be developed in three phases, will have a total 1,727 units. Phase one will have 710 units.
According to Centaline, SHKP has the largest number of unsold units, accounting for 2,298 (45 per cent) of the 5,120 unsold units, while Henderson has 984 (19 per cent) unsold flats.
Some 2,083 (40 per cent) of unsold flats range between 430 sq ft to 752 sq ft, followed by 1,751 units (34 per cent) with areas ranging from 753 sq ft to 1,700 sq ft or more. 1,286 units (25 per cent) are smaller than 430 sq ft.
"Luxury units will be affected the most as buyers are likely to delay their purchases amid a sour market sentiment, [so] developers may release flats for rent instead of selling," said Wong Leung-sing, senior associate director of research at Centaline.
Centaline said the number of unsold units has fallen 17 per cent from 6,192 in January 2019 because of because of the proposed vacancy tax. The government proposes to impose a tax of 5 per cent of a flat's value if a unit is left empty for six months after receiving an occupation permit, to stop developers from hoarding completed but unsold property, and to ease the city's housing shortage.
Midland's Po said developers have adopted all sorts of marketing tools, including delayed payments, to boost sales of units worth more than HK$20 million.
For instance, SHKP allows buyers up to five years to complete their purchase of flats at St Barths in Ma On Shan. After paying a deposit of 17 per cent of the property's value, buyers can move in and pay the balance 83 per cent from the fifth year onwards.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2020 South China Morning Post Publishers Ltd. All rights reserved.
Copyright (c) 2020. South China Morning Post Publishers Ltd. All rights reserved.