New Hong Kong property projects fail to dazzle as buyers turn to secondary market amid downbeat sentiment

By Lam Ka-sing / | November 26, 2019 11:57 AM SGT
New property projects launched on Friday failed to take off, as a relaxation of mortgage restrictions diverts homebuyers to Hong Kong's secondary property market.
In a dismal showing, by 6.45pm CK Asset Holdings had sold 65 out of 149 units on offer at its Seaside Sonata development in the protest-hit district of Sham Shui Po. Mainland Chinese developers Longfor Group and KWG Group had sold only eight out of 108 units at their Upper Riverbank development, while Great Eagle Holdings had sold 13 out of 46 units.
The secondary market has, on the other hand, witnessed a spike in turnover. For instance, 118 transactions were recorded in Tseung Kwan O, after Hong Kong leader Carrie Lam Cheng Yuet-ngor announced the relaxation in mortgage lending during her Policy Address on October 16. Only 52 transactions were reported in the first half of the month, according to Hong Kong Property (Services).
"The surprise rise in the loan-to-value ceiling to 80 per cent and 90 per cent for homes worth up to HK$10 million [US$1.3 million] and HK$8 million, respectively, may fuel short-term demand for secondary premises in these particular price brackets," said Keith Chang, senior director of realty investment at Savills.
But this is not translating into sales at new developments. Vincent Cheung, managing director of Vincorn Consulting and Appraisal, said homebuyers were turning to the secondary market thanks to its more flexible mortgage requirements, as opposed to the financing plans offered by developers.
Hong Kong has been rocked by five months of anti-government protests, and Cheung said this situation could persist for at least nine to 12 months.
"The recent social unrest is so acute. So first of all, can people come out to buy homes? Even for registering interest, you need to go in person," he added. "Do you want to buy immediately, when negative market sentiment prevails?
The Hong Kong government is also working with the Hong Kong Mortgage Corporation to provide an extra 30 per cent of loans to help first-time homebuyers secure financing through the mortgage insurance programme.
The anti-government protests as well as the US-China trade war have weighed on sentiment in Hong Kong's property market, the least affordable real-estate sector globally. And lived-in homes have not been spared either. The average price of used homes across Hong Kong fell 1.8 per cent between May and August, according to the Rating and Valuation Department, while the more current Centa-City Leading Index shows a decline of 2.9 per cent between September 1 and October 20.
And while sales of new projects have been lacklustre in the third quarter, developers will be forced to keep launching projects ahead of the expected implementation of a vacancy tax in January.
"In the coming months, there will be numerous new projects for sale. And with the overall amount of leftover stock rising, developers will need to increase discounts to promote [their projects]," said Vincent Chan, managing director of Qfang, which operates a real-estate leasing and agency platform.
Elsewhere, the average rent for a private home in September fell to a five-month low of HK$36.76 per square foot, down 1.9 per cent month on month for its largest monthly drop since February 2016, according to Ricacorp, which tracks the prices at 50 housing estates across the city.
Rents slumped by the most at Serenity Park in Tai Po, a district in northern Hong Kong that has been the scene of numerous clashes between protesters and police, down 10.9 per cent to HK$32 per square foot. At Tai Hing Gardens, in protest-hit Tuen Mun, rents fell by 7.8 per cent to HK$24 per square foot.
In Lake Silver in Ma On Shan and Nan Fung Sun Chuen in Quarry Bay, two districts far from the city's protest flash points, on the other hand, rents have increased by the most, rising 7.5 per cent and 6.2 per cent, respectively.
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.