Hong Kong developers dangle discounts to whet appetite in market cratering from coronavirus outbreak, protests

Lam Ka-sing
·4-min read

Some Hong Kong developers are dangling more discounts to attract buyers in the first few home launches since the coronavirus outbreak. The reception in the coming weeks could signal if the market has further room to slide.

China Evergrande widened the discount at its Emerald Bay project in Tuen Mun on Saturday to 14 per cent from its list price, plus a HK$20,000 rebate. That is up from 11 per cent at the launch of the same project last year. Buyers took up only 49 of the 141 flats on offer.

Wheelock Properties is reducing the prices for 101 flats at Ocean Marini Phase 9C in Lohas Park it plans to put on the market in near future, based on its disclosure. The developer is cutting them by 2 to 3 per cent from the levels on units at Marini and Grand Marini projects it launched in the third quarter last year.

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“Given the [dismal] market outlook, developers may have to lower listed prices when the bulk of stock comes up for sale in the second half,” said Nelson Wong, head of research for Greater China and Hong Kong at JLL. “A deeper cut in prices is possible, depending on the duration and severity of the coronavirus outbreak.”

Henderson Land Development is giving out a larger discount at its Eden Manor project in Sheung Shui on Thursday. The 28 flats will be cost 16 per cent below the list price, making them cheaper than the level at its September launch, the company said.

Sun Hung Kai Properties will launch the second phase of its Wetland Seasons Park in Tin Shui Wai later this month, making these four developers among the earliest to wade into the market since the coronavirus outbreak from January cast a pall on the global economy and triggered a stock market sell-off.

Hong Kong’s economy, already reeling from social unrest in 2019, could contract again in 2020, the government warned when unveiling a record expansionary budget last month. It shrank 1.2 per cent last year.

Average new home prices fell by a quarter in 2019, the most since 2006, according to Ricacorp Properties. JLL sees a 10 to 15 per cent drop in mass residential prices this year.

Against this backdrop, Wheelock, New World Development and Fullsun International have quietly initiated a price war by giving as much as HK$290,000 in extra commissions to property agents to help push unsold flats from their previous launches, according to some industry players.

Sales agents could pass on some of their commissions to homebuyers as an incentive to close their deals, subject to private negotiations between them.

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About 40 flats from two new residential projects have been launched a month after the Lunar New Year, according to JLL, typically a prolific time for property agents. In the past three years, an average of 530 flats were put up for sale during that window, JLL said.

More supply could overwhelm the market in the coming months, after developers last month applied for consent to pre-sell 2,814 flats in six projects. That is the highest volume in 19 months. The biggest of the lot is 893 flats from Nan Fung Group’s Lohas Park Phase 10 project.

With developers gradually adding momentum to new launches, sales of homes could triple this month from about 350 in February, according to Sammy Po, chief executive of the residential division at Midland Realty. That remains to be seen.

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For one, a surprise interest-rate cut last week to counter the coronavirus risks is not going to help the industry that much, said Ryan Ip, head of land and housing research at Our Hong Kong Foundation.

Lenders, having already eased their prime rates last year amid the social unrest, are not budging this time to protect their loan margins.

For another, prices in the secondary market suggest a recovery is nowhere near the horizon. The Centa-City Leading Index fell 1.8 per cent, the most in four years, dragging prices back to near a one-year low.

“Now, with additional downside risk caused by the outbreak, there is further pressure on the weakening market,” JLL’s Wong said.

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