Hong Kong's homebuyers snap up every flat on offer during sales launch after banks cut rates for the first time in 11 years

Property buyers lining up for The Grand Marine project at the sales office in Railway Plaza, Tsim Sha Tsui. Photo: Edmond So
Hong Kong's homebuyers are back, as hundreds of customers packed a sales office to snap up the very first property launch after the city's banks cut their lending rates for the first time in 11 years.
Buyers bought all 375 flats on offer at The Grand Marine in Tsing Yi as of 8:15pm yesterday, according to sales agents, after the developer Grand Ming Group, priced them at discounts of between 15 and 20 per cent to comparable projects in the neighbourhood.
The first batch of the flats were priced at an average of HK$14,813 (US$1,890) per square foot, cheaper than nearby developments such as Tierra Verde and Villa Esplanada, according to Centaline Property Agency.
ADVERTISEMENT
"The market is active in the first round of sale at this project," said Centaline's vice-chairman for Asia-Pacific and chief executive of residential division Louis Chan, who has clients evaluating two purchases worth HK$13 million.
The Hong Kong Monetary Authority has lowered its base lending rates three times this year to support the economy: File photo
The Tsing Yi project in the New Territories is the first to be offered after the city's biggest lenders agreed this week to cut their prime rates to help revive a city economy that has slipped into a technical recession. HSBC, Standard Chartered and Bank of China (Hong Kong), the city's three currency-issuing banks, cut their best lending rates for the first time since the aftermath of global financial crisis in 2008.
Response to The Grand Marine can be attributed to low pricing, this week's reduction in lending rates among local banks and the government's move last month to ease mortgage financing rules. These are among the measures taken to rejuvenate the housing market, where declines in prices have accelerated in four months through September amid anti-government protests. The economy shrank more than expected last quarter and into its first technical recession in a decade.
Developers are also preparing for five property launches this weekend. They include Seaside Sonata by CK Asset, The Regent by China Overseas and Investment, and One Eighty by the family of late architect Lam Woo. The five launches will offer a combined 435 homes by open sale and 187 by tender on Saturday.
ADVERTISEMENT
Still, Friday's response to The Grand Marine project does not mask the gloom in the industry ahead, according to Chan. Sales of new flats in October fell 10 per cent to about 1,250 units from a month earlier, he estimated.
"Hong Kong is still affected by the two major headwinds, the social unrest and the US-China trade war," he added. "So that will not reverse the downtrend in home prices" any time soon. Secondary market home prices could still fall by 3 to 5 per cent towards the year end."
Easier mortgage financing rules, announced by Chief Executive Carrie Lam Cheng Yuet-ngor in her policy address on October 16, may have a counter-effect on the market as "negative equity cases" increase, according to Ivy Wong, managing director at Centaline Mortgage Broker. Negative equity occurs when the underlying property values drop below the outstanding mortgage loans.
ADVERTISEMENT
Such cases jumped to 53 in the third quarter from a solitary case in the second quarter, according to data published by the Hong Kong Monetary Authority (HKMA), the highest since 262 in the fourth quarter of 2018. They may reach 100 this quarter, Wong said. Newly approved mortgage applications plunged 25.3 per cent to 8,181 in September, HKMA data shows.
"Using mortgages with high loan-to-value ratio will inevitably have the risk of negative equity if home price drops further," she said.
About seven in 10 Hongkongers said relaxing mortgage restrictions would increase the risk of negative equity for first-time homebuyers, according to Hong Kong Research Association, which surveyed 1,070 people in late October over the phone.
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 © 2019 South China Morning Post Publishers Ltd. All rights reserved.
Copyright (c) 2019. South China Morning Post Publishers Ltd. All rights reserved.
Read also: