Cheung Kong Holdings Ltd. and Henderson Land Development Co. are among Hong Kong developers seeking Easter weekend buyers amid rising mortgage rates and concerns a two-year price surge may be ending.
Cheung Kong, controlled by Hong Kong’s richest man, Li Ka-shing, has sold about 40 percent of the units at its Uptown project in the Yuen Long district since sales began April 15, company spokeswoman Anita Tsui said. The HK$5,000 ($643) per square foot average prices at those units is almost 30 percent lower than that of a project in the same area sold by rival Sun Hung Kai Properties Ltd. since January, according to Wong Leung-sing, research director at Centaline Property Agency Ltd, Hong Kong’s biggest closely-held realtor.
Home prices may fall as much as 30 percent between 2012 and 2013 on rising mortgage rates, Barclays Capital analyst Andrew Lawrence said in an April 4 report. A more than 65 percent surge in home prices since early 2009, fuelled by record low interest rates and an influx of mainland Chinese buyers, has prompted the government to impose additional taxes and pledge more land supply to curb real estate value.
“Buyer sentiment has taken another turn for the worse,” said Lee Wee Liat, a Hong Kong-based analyst at Samsung Securities Ltd. “We remain cautious on primary launches that are aggressively priced and expect a decline in overall transaction volume.”
Cheung Kong will release about 90 percent of the units at the Uptown project for sale over the Easter holiday weekend that begins tomorrow, Tsui said.
Henderson Land, the developer controlled by billionaire Lee Shau-kee, is selling apartments at its Hill Paramount project near the Sha Tin district at average prices close to the level when the project first began selling a year ago, Centaline’s Wong said.
Other projects that are releasing new apartments for sale during the holiday include the 18 Upper East on the Island East by Emperor International Holdings Ltd. and Kowloon Development Co.’s Mount East in the North Point district.
“We’re seeing much less aggressive pricing of new projects,” said Centaline’s Wong. “Developers are clearly trying to unload their stocks as they need to haul in more cash to get ready for sites the government will put up for auction later this year.”
Hong Kong may auction as many as 52 plots of land that can yield 16,000 units this year, almost 80 percent more than from land sold last year, Financial Secretary John Tsang said in his Feb. 23 budget speech.
The Hang Seng Property Index, which tracks the city’s seven biggest developers including Sun Hung Kai and Cheung Kong, has declined 3.5 percent since the government announced the additional property tax in November. The Hang Seng Index has risen 2.2 percent over that period.
“For investors that don’t need to be in the Hong Kong property developer sector, we recommend avoiding the sector,” wrote Barclay’s Lawrence.
Hong Kong banks including HSBC Holdings Plc and Bank of East Asia Ltd. have been raising mortgage rates since the last quarter of 2010. Hong Kong Monetary Authority, the city’s de facto central bank, tightened rules on mortgage lending three times since October 2009 on concerns “rapid” credit growth will curb liquidity and reduce loan quality.
Mortgage rates offered by HSBC and BOC Hong Kong (Holdings) Ltd., the city’s two largest banks by customers, have since November increased by as much as 70 basis points to 1.5 percent above the Hong Kong Interbank Offered Rate this month.
Home prices in the city declined for a third straight week in the week ended April 10, according to an index compiled by Centaline Property Agency Ltd., the city’s biggest privately-held realtor.
The number of home transactions in Hong Kong fell from a year earlier for a third month in March, according to Land Registry figures.