HK buyers queue for new homes after price drop

HONG KONG — On a Saturday morning last month, thousands of people waited, crammed into Hong Kong’s Fortune Metropolis mall across Victoria Harbour from the main business district, their eyes locked on large elevated screens.

Cheers erupted when numbers flashed, indicating lucky ticket holders in the crowd. They had paid HK$150,000 (S$24,000) to enter a lottery that prioritised buyers of apartments at City Point, a seven-tower development where prices for the first batch of units to be launched were more than 10 per cent cheaper than recent transactions at nearby developments.

More than 5,000 hopefuls vied for 442 units, or about 11 for every home that went on sale that weekend, in a further sign that Hong Kong’s property market may be starting to pick up steam again: Housing sales are rising after government efforts to cool soaring prices led transactions to plunge last year to the lowest since at least 2002.

But a drop in mortgage rates and discounts from builders are helping to win back buyers of new homes after prices fell as much as 20 per cent since last October.

In February last year, the government doubled the sales tax on properties valued at more than HK$2 million, its harshest measure in its bid to reel in prices and speculation. Prices had almost quadrupled over the past decade, spurred by a shortage of apartments and an influx of Chinese from the mainland.

“Six months ago, I was certainly more cautious than I am now in terms of pricing,” said Mr Peter Churchouse, founder of property investment firm Portwood Capital. “You can understand why people are coming back into the fray. You’ve had 12 months or more of suppressed demand.”

Mortgage rates have also been falling since 2011 when they hit an average high of 2.45 per cent in October.

Rates were averaging about 1.96 per cent in May this year, said mReferral Mortgage Brokerage Services. This helped new and existing home sales last month to reach 5,960 units, the highest since February last year, government data showed.

While the number of existing-home transactions has not recovered, the downward price pressure may be over, said Mr Jonas Kan, an analyst at Daiwa Securities Group, in a report. “There have not been that many units asking for notably lower prices over the past 15 months, and many of them have been taken up in the past few weeks,” he said.

Hong Kong’s existing home prices have bottomed after falling as much as 5 per cent from a peak in March last year, said Citigroup. New home prices have dropped by 15 to 20 per cent since last October, said JPMorgan Chase.

“Transaction volume has picked up and take-up remains keen for new launches, so we expect developers should have room to gradually narrow discounts,” said Mr Alfred Lau, an analyst at Bocom International.

Hong Kong developers, which sell new apartments in phases before completion, may put 15,000 units up for sale this year, said Centaline Property Agency. This would be a 54 per cent increase from 9,753 units last year, an 18-year low.

“Developers have, one after another, positioned themselves for launches, especially the larger projects,” said Mr Thomas Lam, head of valuation and consultancy at Knight Frank in Hong Kong.

There are also signs that the positive sentiment is spreading to other parts of the market: Prices of existing homes have risen 1.9 per cent so far this year, an index compiled by Centaline showed.

However, volume has yet to recover in the same way, which may be clouding the true picture of that part of the property sector.

“The second-hand market is dry, so it’s very hard to rely on it as an accurate indicator,” said Ms Eva Lee, a Hong Kong-based analyst at UBS. “The price right now is not a real market price. The primary market is the one with movement, and if developers want to sell today, they have to price (units) 10 per cent below market.”

This was reflected at City Point, which drew big crowds after its offerings were priced attractively.

Inside Fortune Metropolis mall, buyers in a snaking queue waited to pick a home from a display board after their tickets were drawn. Red stickers on the board revealed a dwindling number of apartments available. People jostled, pointed and shouted for the unit they wanted.

Ms Hayley Kam, a 24-year-old teacher, was in the line with her father as they made their third attempt to buy a City Point home. “There aren’t many first-hand apartments for us to choose from,” she said. BLOOMBERG