Hong Kong developers may have to accelerate sales of new housing projects even as buying sentiment wanes amid the global equity rout and as the city intensifies efforts to curb property prices.
Builders including Cheung Kong (Holdings) Ltd. and Sun Hung Kai Properties Ltd. may begin selling new projects including the La Splendeur and The Wings in the Tseung Kwan O district in the city’s northeast this month, according to Wong Leung-sing, a research director at Centaline Property Agency Ltd. The developers, along with others in the city, are expected to offer as many as 2,700 apartments this month, he said.
Hong Kong’s home sales have slowed on concern the city will slip into a recession. Real estate prices fell for the first time in seven months in July after the government introduced new housing curbs in June, while banks accelerated the increase in mortgage rates last week to the highest in 28 months.
“Developers are facing a dilemma here,” Wong said. “On one hand, if they don’t sell now, things may get even worse. On the other hand, rushing all those units out won’t guarantee them good prices.”
Cheung Kong, the developer controlled by Li Ka-shing, Hong Kong’s richest man, has received more than 1,100 bids for the 590 apartments it plans to start selling this week at the La Splendeur, a joint development with MTR Corp. and Nan Fung Development Ltd., according to Anita Tsui, a Hong Kong-based spokeswoman for Cheung Kong. The project will have a total of 1,168 units when it’s completed.
The Hang Seng Property Index, which tracks the city’s seven biggest developers including Cheung Kong and Sun Hung Kai, fell 1.5 percent at 10:18 a.m. local time, bringing its loss this year to 23 percent. The benchmark Hang Seng Index has fallen 18 percent over the same period.
Sun Hung Kai hasn’t said when it will start sales at The Wings, a luxury apartment project with 1,028 units. Nan Fung may begin sales of Winfield, a redevelopment project with 84 units in the Happy Valley district, Centaline’s Wong said.
Sun Hung Kai and Cheung Kong, the city’s two biggest developers, have spent a combined HK$33 billion ($4.2 billion) buying sites from the government in Hong Kong this year, according to Lands Department record.
“Developers who have spent a lot of money buying land over the last year now need to replenish their cash reserves,” said Simon Lo, executive director for research and advisory at Colliers International. “To bring in cash, the choice is either offloading apartments or borrowing from banks, and borrowing from banks is not cheap these days.”
HSBC Holdings Plc and BOC Hong Kong Holdings Ltd., the city’s two biggest mortgage lenders, said Sept. 16 they are raising mortgage rates linked to the city’s interbank rate.
The latest increase is the fifth this year and mortgage rates have risen about 2 percentage points in the last six months, according to Andrew Lawrence, an analyst at Barclays Capital Plc. Hong Kong’s home prices may fall as much as 30 percent over the next two years, he said in a report this week.
The city’s home prices have risen more than 70 percent since the beginning of 2009 on record low mortgage rates, an influx of buyers from other parts of China and a lack of new supply. That prompted the government to introduce measures including higher mortgage down-payment requirements and accelerate public land sales.
Lower Than Estimates
Three sites were sold at prices lower than analysts’ estimates at government auctions in the past two months, while the number of home transactions fell for an eighth straight month in August.
The government plans to sell at least seven more sites from October through December by tender, Carrie Lam, the city’s secretary for development, told reporters last week.
Sales of existing homes at the city’s 10 biggest private developments fell 50 percent to 15 deals over the weekend ended Sept. 18, compared with a week earlier, according to Midland Holdings Ltd., Hong Kong’s biggest publicly traded realtor.
“The impending launch of new projects drew attention away from the second-hand market,” said Sammy Po, a director at Midland. “Potential buyers are also deterred by the higher mortgage rates and the uncertain economic environment.”