Hong Kong home buyers shun developers' sales overtures as economic slump deters families from capital commitments

By Lam Ka-sing kasing.lam@scmp.com

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April 28, 2020 12:09 PM SGT

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Hong Kong's weekend home sales flopped for the fourth time in six weeks, in another sign that the residential property industry's worst slump in a decade has some ways to go before recovering.

CK Asset Holdings sold 11 of the 170 Seaside Sonata flats on offer in Sham Shui Po at 7pm, as buyers shrugged aside the 29 per cent average discount offered by one of Hong Kong's biggest developers. Sun Hung Kai Properties (SHKP), the city's biggest builder by market value, sold 12 of 20 Mount Regency II apartments in Tuen Mun, and found buyers for 12 out of 14 units at St Martin in Tai Po.

The sales flop underscores how rising unemployment amid Hong Kong's first recession in a decade is deterring households from making large financial commitments, adding weight to a property slump that is struggling to find a bottom. Last weekend, one of mainland China's biggest developers sold a mere 7 per cent of its Emerald Bay flats in Tuen Mun, its maiden Hong Kong project.

"As the unemployment rate is picking up, purchasing sentiment in the mass residential market has been further eroded," said Martin Wong, associate director of research and consultancy of Greater China at Knight Frank.

The cold shoulder by homebuyers come even as Hong Kong's coronavirus outbreak appears to be under control, with new confirmed cases rising by single digits every day. The infectious disease has sickened 1,035 people and claimed four lives in Hong Kong at last count.

The latest batch of Seaside Sonata on offer, measuring between 484 square feet and 736 sq ft (68 square metres), were priced from HK$11.7 million to HK$18.4 million (US$2.37 million), or an average of HK$24,984 per sq ft.

Few potential buyers were seen queuing CK Asset's Seaside Sonata in Sham Shui Po on 25 April 2020. Photo: Edmond So alt=Few potential buyers were seen queuing CK Asset's Seaside Sonata in Sham Shui Po on 25 April 2020. Photo: Edmond So

The slump in the primary market of new abodes has also spilled over to the secondary market, where desperate owners are letting go of their property with discounts, and losses in some cases.

An unidentified homeowner sold two houses at the Casa Marina community in Tai Po this week for a combined loss of HK$6.18 million, according to data by Centaline Property Agency, one of the biggest network of agents in Hong Kong. One of them, measuring 1,896 sq ft, was bought in 2015 for HK$23.44 million and recently sold at HK$18.88 million.

Another flat at Meridian Hill in Kowloon Tong that measures 1,542 sq ft changed hands at HK$22.8 million this week, landing the owner with an estimated HK$4.9 million loss after taxes and fees, agents said.

"Some property owners were desperate to cash in by selling their units, so prices continued to be under pressure," Wong said. "With demand shrinking, the luxury residential market has turned quiet, with low transaction volume" while mass residential prices are expected to be more "volatile" in short term, he said.

Declining home prices is also spilling over to lower rental charges. Two out of five homes, or 42.1 per cent, are leasing in Hong Kong for less than HK$15,000 per month, recording the highest proportion below that threshold, used as a rule of thumb for measuring affordability, according to data by Midland Realty.

Recovery in the housing market will take another three to six months after the global coronavirus pandemic subsides, said Ricky Wong, managing director at Wheelock Properties, which will sell 101 flats at its Ocean Marini project in Lohas Park on Sunday.

Government measures to contain the pandemic's spread, such as closing Hong Kong's border with mainland China, putting all visitors under 14 days quarantine and deterring large public gatherings, have dealt the tourism and retail industries a heavy blow, Wong said. Home prices will decline by another 2 to 3 per cent in the next two to three months, he said.

"The pandemic has not fully passed, so the market is still facing some headwinds," he said. "Even if the pandemic really fades, the housing market cannot rebound immediately. It's like a patient who needs a long time to recover."

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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.

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