The coronavirus outbreak is telling on Hong Kong’s property market. As the economic downturn dampens appetites for new homes, property developers are adopting a cautious approach, slowing down the construction of new projects and launching fewer new flats.
The building of new homes fell 77 per cent in the first quarter of the year from the previous three-month period to just 900 units, the lowest since the third quarter of 2017, data from the Transport and Housing Bureau shows.
“The entire construction cycle has slowed down,” said Ryan Ip, head of land and housing research at think tank Our Hong Kong Foundation. He added that since the pandemic has hit sentiment, developers will be reworking their strategy, which may include rejigging the progress of their construction schedule and slowing down launches as buyers stay on the sidelines.
Thomas Lam, executive director at Knight Frank, said that a reduced supply of new flats will not necessarily push prices higher as purchasing power will remain depressed in this economic climate.
Signs of buying weakness were on display at Longfor Group and KWG Group’s Upper Riverbank project in Kai Tak on Friday. The partners sold only eight out of 72 flats on offer as of 5.30pm. The flats, ranging from 332 sq ft to 1,072 sq ft, were available at an average price of HK$27,087 (US$3,494.8) per sq ft after a discount of 18 per cent.
Louis Chan, Asia-Pacific vice-chairman and chief executive of Centaline Property Agency’s residential division, said that the poor response to the Upper Bank project was because of the developers’s reluctance to offer sizeable discounts.
The first units in Upper Riverbank were sold in September 2019 at HK$24,677 per sq ft, then the most expensive project at Kai Tak, the site of Hong Kong’s former international airport.
New flat sales have also been interrupted by the government’s rule, which bans the gathering of more than four people in the same place, Chan said. He added that developers were releasing flats in small batches because the rule was interrupting the normal, enthusiastic response from homebuyers.
Sun Hung Kai Properties has adopted this new approach of drip-feeding a small supply of flats anticipating a tepid response. On Saturday, Hong Kong’s largest developer by market value plans to release only 14 flats at its St Martin project in Tai Po in the New Territories. It will also launch 20 flats at Mount Regency II in Tuen Mun.
“[Because of] the ban on gathering, they will only sell about a dozen units. Selling 140 flats would have been a small number in the past,” Chan said.
The number of new homes sold in the first 23 days of this month fell 45.1 per cent month on month to just 434 units, while sales for the first quarter were 57 per cent lower at 2,414 units, according to data from Centaline and Qfang.
“Recent sales of new projects focus on leftover stock,” said Vincent Chan, managing director of Qfang.
Meanwhile, a small residential site in Soy Street, Mong Kok, attracted 27 bids, the most since July 2017, as small developers hope to snap up a bargain. Property consultants have slashed its valuation by 20 per cent from mid-2019 to a range between HK$420 million and HK$640 million.
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