HK Developers' game: Cut Prices?

Posted by OffThePeak 11 yrs ago

HK Developers' game: Cut Prices?

==============

(29 July 2013)

This thread's purpose is:

TO MONITOR CHANGES IN THE GAME, as played by Big Hong Kong property developers

(I have been saying for a long time, that HK's Property Developers would take the brunt of this correction, especially in the early stages of the present correction. And I still believe that will be true.)

THIS ARTICLE suggests that price cuts for new properties are coming - The premium over secondhand was just too large to be sustained.

== QUOTE ==

PRICES HEAD SOUTH

Overall residential property prices have jumped 120 percent since 2008 on ultra-low interest rates, tight supply and abundant liquidity. They have slipped about 3 percent from record highs in early March.

Analysts said developers would have to cut prices further to attract local buyers as mainland Chinese investors, who at one point accounted for more than 40 percent of sales, had fled overseas for better options.

"They are going to reduce the price (of new projects). They have to face the reality," said Ricky Poon, executive director of residential sales at Colliers International.

Poon expects the city's developers, including Cheung Kong and Hong Kong's largest developer, Sun Hung Kai Properties Ltd , will cut the premium - the difference between new launches and second-hand homes - of new projects by 10 to 20 percent in the second half to attract local buyers.

Analysts said upcoming big launches in the second half would attract pent-up demand, providing a potential catalyst for Cheung Kong's share price, which is trading at a 34 percent discount to its historical median forward 12-month earnings multiple, according to Thomson Reuters StarMine.

== UNQUOTE ==

Maybe, if NEW properties are a discount to secondhand, it will force secondhand prices down too. But until that happens, and even if it does happen, owners of secondhand properties (in convenient areas, where supply is constrained) may be able to just sit tight, knowing that it is cheaper to own than it is to rent, so why not just wait.

Another point which will buffer prices is: some Developers may slowdown their launches if they think prices are falling too fast.

=== ===

Google SEARCH : http://www.google.com/#bav=on.2,or.r_qf.&fp=d2d166c84f540e80&q=hong+kong+property+price+cut

+ + +

NEWS SEARCH : http://www.google.com/search?hl=en&gl=us&tbm=nws&authuser=0&q=hong+kong+property+price+cut&oq=hong+kong+property+price+cut&gs_l=news-cc.12..43j43i53.3333.3333.0.4328.1.1.0.0.0.0.53.53.1.1.0...0.0...1ac.2.g4IPTGwitGs

NEW LAUNCHES / Worth a look, if a bit dated:

http://www.squarefoot.com.hk/new-homes/

Previously Launched, new : http://eng.28hse.com/utf8/developerfront.html

OffThePeak 11 yrs ago

HONG KONG, Aug 1 — Government cooling measures to rein in Hong Kong's property market are finally taking a toll on the city's powerful developers and industry watchers forecast prices could drop by up to 15 per cent in the second half of this year.

Weak property sales at conglomerate Cheung Kong (Holdings) Ltd, controlled by Asia's richest man, Li Ka-shing, confirmed that a series of tightening steps are weighing on companies' bottom lines and taking the heat out of one of the world's most expensive real estate markets.

"IT's LIKE AN ICE AGE NOW from an agent's perspective,” said Patrick Chau, director of residential investment at property consultant Savills. “The sales volume has dropped substantially since the implementation of a series of tightening policies.”

New home transactions dropped 22 per cent in the first half of this year from a year earlier and were down 40 per cent when compared with the second half of 2012, according to Centaline Property Agency, one of the city's leading agents.

For the second quarter, overall home transactions dropped to 11,443, the lowest quarterly sales since 1996

- See more at: http://www.themalaymailonline.com/money/article/hk-developers-turning-blue-as-property-market-enters-ice-age#sthash.1fgzUeyK.dpu

(Perhaps that 15 pct price cut forecast, is how much Developers will need to cut New prices. That might put them in line with prices in the secondhand market - Then there would be more pressure on the secondhand market to cut also.)

punter 11 yrs ago

Well, we've mentioned it some time ago that these big RE developers need to have some income to report in their income statements and balance sheets. They haven't sold a lot of new flats that some have resorted to highlight income from other sources (one sold a mall, one sold parking lots in OTP's neighborhood, another highlighted income in China.). If things don't change, they have no choice but to cut prices to move new units.

OffThePeak 11 yrs ago

+ Only 7 flats were sold over the weekend in the secondary market at 10 major Estates. That's a 5 month low, and down from 12 flats last weekend.

+ But some prices were not cheap: $12,584 per sellable sf was achieved at Amoy Gardens, for a 356 sf flat, and estate record

Meantime, in the Primary market:

+ New World sold 17 flats at the Woodsville in Yuen Long at $4.48 to $9.2 million.

+ Sino Land sold most of its 734 parking lots at Central park and Park Avenue, generating more than $800 Million, or over $1.1 million per Lot. This seems like a high price, but it is walking distance from the new XRL Station, which will be completed in 2 years

punter 11 yrs ago

OTP, they need to show income. If not, the price of their shares of stocks will suffer a lot. Interestingly, it did not even with the bad RE business results (I think it's because of the window dressing they did with the selling of other assets).

OffThePeak 11 yrs ago

They may try to wean their shareholders off the idea of rising revenues, and flat to rising earnings.

To play the "growth" game at the expense of long term earnings is not fully rational.

Hang Lung, for instance, now shows rising earnings based on rising Rentals, not property sales.

This thread is:

TO MONITOR CHANGES IN THE GAME, as played by the Hong Kong property developers.

OffThePeak 11 yrs ago

If developers fail to Cut Prices,

then the substantial savings generated by HK-people is going to pour into investments like this one... TAXIS :

Allan Shek, the owner of a Hong Kong shop selling gold and jade jewellery, says he's made millions on the side by riding wild swings in the stock market and by buying into the city's property boom. No more.

Last month, he bought five Hong Kong taxis and the licences to operate them. Seven or eight of his friends have bought taxis too, he says.

"If I have the ability, I will buy another 15 taxis this year," says the 60-year-old Shek, speaking with rapid-fire enthusiasm over the latest way to make money in a city where the benchmark Hang Seng Index has fallen almost 7 per cent from the year's high and record property prices have started to decline because of government curbs.

===

Read more: http://www.theage.com.au/money/investing/investors-piling-into-hong-kong-taxis-20130806-2rb1x.html#ixzz2b9UxYnrq

Ed 11 yrs ago

OTP - it's been said before on these forums... that the world is experiencing a massive asset bubble that makes the subprime crisis in the US in 2008 look like child's play...

There are trillions of dollars floating around the globe courtesy of Central Banks that are looking for yield...

When you have too much liquidity what happens is you end up with bubbles... 'hot' investments hit the mainstream and the cash piles in...

Examples:

Property in places like HK, London, Vancouver etc...

Junk Bonds - yields are at the same levels as US treasuries were 6 years or so ago

Shale Oil - massive investment piling in creating a ponzi where the first in make money - the rest get killed.

There are many, many more...

I think HK has been wise to implement anti-bubble measures - but at the end of the day money will seek a home - if HK property is not the flavour of the day ... something else will be...

There are many dangerous side-effects of what Mr Bernanke is doing... these bubbles are just the most toxic ones...

OffThePeak 11 yrs ago

Does the GOVT want Estate Agents as allies in its efforts to push property prices lower? Probably..

.

=== QUOTE ===

.

Property agents in Hong Kong hit hard by cooling measures

.

.... (A Marching Crowd) Made up mainly of property agents and disgruntled home-buyers, they are angry at the government for doubling the stamp duty on property transactions since February to around 5.5 per cent.

Protest organiser Raymond Ho argued the cooling measures are hitting the innocent.

Ho said: "Some middle-class have a dream to live in one apartment and one for rent. They can handle their retirement if they have one flat for living and one for rent, but those stamp duty policies just freeze the volume of property market and at the same time, freeze the social mobility of Hong Kong people."

Latest official data shows in the month of June, transactions in the city have fallen by 12.5 per cent, with fewer than 3,500 transactions completed. Total value of sales is down 22 per cent.

Property agent, Angus Or, has witnessed an even more drastic drop in transactions in the new town of Tseung Kwan O, built on reclaimed land along the bay, northeast of Hong Kong island.

His commission income has dropped by 70 per cent since the new levies were introduced.

"Usually in this area, there are about 600-700 transactions per month for buying and selling in total. Nowadays, there are only around 70 transactions for buying and selling alone," said Or.

=== UNQUOTE ===

/more: http://www.channelnewsasia.com/news/business/property-agents-in-hong/759842.html

RESULT ?:

Property Agents are going to work to push prices down, so their business volumes can pick up.

OffThePeak 11 yrs ago

Punter,

Your:

"we've mentioned it some time ago that these big RE developers need to have some income to report in their income statements and balance sheets. They haven't sold a lot of new flats"

== ==

Today's SCMP shows how they are managing that - by selling Non-core assets (like Car parks), and "cheaper" residential properties for HKID card holders in NT locations like Yuen Long.

===

/see: page P2 (Property Section)

Meantime: Secondary market prices are creeping back up, with 68 flats sold from June (July?) 29 to August 4. "That compared with 51 deals recorded a week earlier."

Older, or cheaper areas, Whampoa Gardens (2 to 6) and Caribbean Coast in Tung Chung "showed strong growth".

= =

Mid-Levels remains "slumber city", it would seem

OffThePeak 11 yrs ago

Another area enjoying good sales is "lower ticket" Industrial Properties in areas like Tsuen Wan.

379 Industrial properties were sold in July, up 89 percent since 199 transactions in May, and 80 percent since 208 sales in June.

The increase is mainly due to DAN6 in Tsuen Wan, were 200 sales were made in 3 days. Lump sum prices ranged from as low as HK$1.99 million to HK$6 million - these being smaller units with prices between HK$4,600 and HK$6,600 psf.

The Stamp Tax, even when doubled, is small. A 1.5% tax when doubled is only 3.0%, and so for units costing from HK$2 to $3million, the extra cost is only HK$30,000 to $45,000.

/ DAN6 : http://eng.28hse.com/utf8/property88409.html

/ floorplan : http://ps.hket.com/content/24189/DAN%206%E7%B4%B0%E7%A2%BC%E9%8A%B7%E6%83%85%E6%97%BA%20%E6%95%B8%E6%97%A5%E6%B2%BD8%E6%88%90/

OffThePeak 11 yrs ago

PRICE CUTS ARE HERE ! ... the predicted cuts (in new properties) have arrived

Examples:

========

Park Signature : New World---- : 68 Kung Um Rd., Yuen Long : 328 flats : HK$ 9,416 psf, net

The Rise ------- : Cheung Kong : ?? --------------. , Tsuen Wan : ??? flats : HK$ 8,742 psf, net*

*(after discounts)

Park Signature ultimately has 1,620 units, and an entry price of HK$2.5 million

Note that these "discounts" are so far confined to the New Territories, in less convenient locations

There was a comment in the SCMP article:

"Some areas... will see abundant new supply and prices will fall."

Specific areas mentioned were: Tseung Kwan O and Yuen Long.

Major projects coming up for launch next are:

+ 1,419 flats in Tung Chung

+ 911-flats at Century Gateway II in Tuen Mun.

punter 11 yrs ago

There must be some kind of mistake here. Property prices are not supposed to come down.

Ed 11 yrs ago

Perhaps the Developers understand that higher interest rates in the US translate into higher interest rates in HK (due to the peg)... and are racing to push sales before the general public grasps this reality?

OffThePeak 11 yrs ago

Punter,

These are New Flats in areas of abundant supply.

The premiums to Secondhand are getting chopped so the developers can move their stock. This was a likely (and predicted) event.

What remains to be seen is whether these "cheap" sales will have any impact on the secondhand market in more convenient areas where supply is less abundant.

gdep 11 yrs ago

Island side and Kowloon will have some pressure as well

My take is Wanchai will be under pressure (zenith, J residence, one wanchai, oakwood etc) when the ~1.3K flats of Avenue hit the market..

similarly mid-levels with 700 units slated and

nearly 1.5K units in eastern district as well..

Kowloon side, seems more properties in West Kowloon and Ho Man tin..

http://www.gohome.com.hk/new-property/new-property-2013-table/hong-kong/en

OffThePeak 11 yrs ago

Not much coming in West Kowloon.

Unless you consider Nam Cheong as "West Kowloon" - but I think that is a stretch, though maybe technically true

Maybe you have in mind Wheelock's new project at Austin Road. I think that will be easily absorbed (given the coming XRL in two years time.)

OffThePeak 11 yrs ago

K WAH sees its own prospects as "bleak", given :

+ Weak prices, forecasting that HK prices could fall by 10 to 20 percent, and

+ Rising costs

K Wah would like to see the government offer cheaper land

gdep 11 yrs ago

Agree Austin will be absorbed with not without putting pressure on neighbouring projects..

its difficult for developers to maintain sales and profits momentum in this environment.. ppl with good China exposure will survive.. pure HK player stocks will suffer a lot in the coming months..

OffThePeak 11 yrs ago

THE FREEZE is happening in all sectors - not just residential

Volume of Property Deals Plunges in Hong Kong

Transaction volumes for offices in Hong Kong dropped 67 percent during the second quarter compared to the previous quarter, according to new data from Savills. Luxury residential transactions on Hong Kong island were 48 percent lower than the first quarter, dropping to its lowest level since 1997 and lower than the third quarter of 2008 during the global financial crisis.

Owners in residential, office, retail, and industrial markets are refusing to drop prices, in most cases leaving only end users in the market, according to Savills.

"Government measures have succeeded in freezing price appreciation across most sectors, with speculators, funds and other investors all exiting the market," Savills reported.

In the office market, there were only 282 deals during the second quarter, compared to 862 transactions during the first quarter. But prices remained relatively stable as landlords "were in strong financial positions and were unfazed by the demand shrinkage," Savills reports. -

. . .

The industrial sector had the worst performance during the second quarter, with only 25 transactions over HK$30 million, down from 72 the previous quarter, according to the report.

Similar to findings by Savills, a recent report from Jones Lang LaSalle showed a large drop in direct commercial investment in Hong Kong, caused by various government measures.

===

See Data and Charts more at: http://www.worldpropertychannel.com/asia-pacific-commercial-news/property-investment-falls-in-hong-kong-hong-kong-property-savills-property-deals-luxury-residential-office-market-industrial-space-7286.php#sthash.H3fOTlVC.dpuf

Remmy 11 yrs ago

Bear in mind that the HKD is rising, and is poised to rise more, against almost all other world currencies over the coming years, and will be an especially strong currency in comparison to other Asian country currencies. So, any "declines" in HK property (which I think are not that likely in any case) are likely to be more than offset by the comparative currency gain. Also, as I have explained many many times before, the various "cooling measures" priced into HK property now give it hugh scope for further growth as/when these measures are slowly reduced (which will happen as the Fed starts to raise rates).

OffThePeak 11 yrs ago

Do you think the HKD will rise :

+ WITH the Chinese currency, or

+ AGAINST the Chinese currency

If strong, if may be a good thing to have a secure source of HKD cash flow, and if interest rates do not rise to much, and rents are stable or strong, property in HK may remain a popular investment, if made frozen by ultra-high transaction costs

Lucane01 11 yrs ago

Trying to justify a loss in one trade by a gain in another trade is bad financial logic. If you owned HK property and its price goes down in HKD but its price goes up in Indian Rupee you don't say "it's ok, I'm still ahead." Your primary trade was to long HK property and it lost - that its value as measured in other currencies changed is irrelevant. If you wanted to make a currency trade then you should have directly done so through your brokerage account.

Similarly you don't buy shares of Citi back in 2007 and then when it has lost 80% of its value as measured in USD say "but it gained 50000% as measured in Zimbabwean dollars!"

You should not conflate two separate trades into one in order to justify a loss (if a loss is to even occur - I'm not intending to state that one has yet been made).

OffThePeak 11 yrs ago

Lurking Behind this all is a big question...

The numiere question.

How do you keep score?

Perhaps you need to keep score in the currency of the country where you most want to live (and retire)

OffThePeak 11 yrs ago

Price cuts work !

Signature sold out 82% - with many buyers attracted by the "low lump sum",

often below $3 million

Which also means smaller stamp taxes

OffThePeak 11 yrs ago

We want to go to Tsuen Wan, and so we decided to have a look at the show flat for Park Signature. We were impressed.

I think they go the design right and the pricing right too. The show flat was very busy (and buzzy too!) and we saw many people signing contracts.

The estate agents must be relieved to have a new property to show their clients which sells well. But the buyers have to want to live in Yuen Long, so it may not be suitable for most expat buyers. (That may change over time.)

On the way back, we went one stop to Tai Wo Hau, where Cheung Kong's new project, The Rise, is going up. It is a bit of a strange location, surrounded by factories, so those who buy and life there, may have limited shopping and restaurants to choose from. They may also have some transportation issues, unless there is a regular shuttle bus covering the considerable walking distance to Tai Wo Hau or Kwai Hing MTR stations.

gdep 11 yrs ago

Remmy - Why would govt take away cooling measures if prices wont drop?

HKD rising against other currencies.. this trend will soon peak isn't better to invest in economies where currencies hit rock bottom and interest rates are at an all time high (return to the mean should happen )

Loyd - Delusional on Caine road properties around Argenta.. just check the latest listing (not bella vista or casa bella) but the 30 year old properties

One wanchai sold at 37K psf price.. may be gold fittings again ..or one of those shady transactions..

Mrs. Ho dumping Arch apartments.. the Rich are fleeing from residential properties..

OffThePeak 11 yrs ago

"Mrs. Ho dumping Arch apartments..."

If so, it may be because "she" owns one which will lose its view

OffThePeak 11 yrs ago

HK's PRIMARY Market

Does this argument make sense?

Thomas Lam Ho-ma (Head of Research at Knight Frank) says:

He "does not foresee a 'price war in the primary sales market as developers are financially strong, particularly the bigger players with a portfolio of local and overseas projects.' ...

So far, developers face no significant pressure to dump their new flats at big discounts."

- LuxeHomes, from SCMP

Okay.

I see his point that they are cash rich, and have little debt.

But who is going to cut prices?

The secondary market? Not likely.

People who are deriving use (a place to live), or rental income from a flat are less likely to sell it, than those who are holding a completed new property that is sitting vacant.

I still think the primary market IS TAKING THE BRUNT of the current correction, as secondary prices remain rather stable.

punter 11 yrs ago

Corporations need to book profits. They need to sell. If they don't sell in HK, they sell somewhere else or sell other assets. We've seen this already happening.

All the CYL admin has to do is to keep on with the measures in place. In time, these "big" developers will give in (theory).

OffThePeak 11 yrs ago

Yeah.

I tend to agree.

They will run out of car parks and such to sell, and will then have to sell their empty new flats.

I think they are now sitting on a rather large inventory of empty Large flats.

On the top flow of my tower are five Duplex penthouse flats, and only one of them (the one above me, unfortunately - since I sometimes hear working being done there) is occupied

OffThePeak 11 yrs ago

Are Second Hand Buyers "distracted" by the New Launches? (Rise, Park Signature)

Appointments for house visiting on weekend is the fewest in 22 weeks.

Low Price' welcome the implementation of new legislation,first batch of the sale of 'The Rise'sold 70%

Applications for units of the Rise is 6.5 time of the quota.

===

News Headlines: http://eng.28hse.com/utf8/property77656.html

punter 11 yrs ago

There's a lot of slashed prices in red color in RE agencies' windows recently. Apparently they want to attract more people to come in. The dearth in txns is really hitting them hard.

OffThePeak 11 yrs ago

The agents are working together now, it seems:

+ They pulled their newspaper ads, from today

+ If they ALL are showing price cuts in their windows, it may be a concerted action

Despite this, the Centaline Index was up about 1% last week - so it seems to be a ploy. I wonder how many will fall for it?

I was visiting The Reach on the weekend, and I met an agent who lives in the building where I live. He told me he had sold his property a few weeks earlier, and that prices were now falling. I know there was a weak sale or two a 2-3 weeks ago, but I see no signs of a fall now, with Centaline prices still firm

punter 11 yrs ago

The trend right now is for low number of transactions. Prices haven't budged. Agents need more txns to survive, stagnant prices won't help them in the long term.

gdep 11 yrs ago

see the same trend in ML as well.. but the cuts are from levels which looked to stupid to market levels now.. the ones selling/SOLD as per the advertisements are 5-10% below the so called market values

punter 11 yrs ago

As for agents/agencies pulling their ads out from media outlets, I fail to see how doing what they're doing will attain the object of their game (which is for the gov't to stop the measures recently put in, and thus get the number of transactions back to normal levels again).

But by pulling their ads, they're affecting the income of media outlets. I'm sure news readers will not miss these ads. So, are they counting on the media to take their side and help pressure the government to rescind the property measures? I mean, their recent rally did not get any love from the public!

The market is getting interesting for an observer like me.

OffThePeak 11 yrs ago

"... So, are they counting on the media to take their side and help pressure the government to rescind the property measures?"

Yes.

They want to remind the media that more than Agents are impacted

gdep 11 yrs ago

To Loyd,

Examples of why your price expectations for caine road are overblown..

1. direct seller add on asiaxpat.. opposite to Argenta at 10K psf ..http://hongkong.asiaxpat.com/property/direct-owner-apartments-for-sale/746039.asp

2. Ad in SCMP by owner again for soho 38 for a 2008 built property at 15K psf sq ft.. asking 10.3 million for a 690 sq ft gross 500 net space..

and I can list many such examples.. but these are from today.. fresh.. and real.. rather than delusional view from fortress hill

OffThePeak 11 yrs ago

Breaking the "Mainland Barrier"

===================

SHKP has found a way, it seems.

They announced the Prices for the remaining flats at The Cullinan, at Kowloon station.

+ The list prices are somewhat BELOW the secondhand prices at perhaps $27,000 psf Net - versus over $30,000 psf for secondhand.

In addition several discounts apply:

+ Up to 9%, if you close within (150?) days, and less than if later

+ Two other discounts adding up to 5%, for being a member of the SHKP club, etc

= That's 14%, or an average of maybe $27,000 x 86% = $23,200

If you assume a 75% efficiency, then that would be equivalent to x 75%. or $17,415 psf gross. That OUGHT to be attractive for a new flat in this prime location.

(Please note: there were only 30 of the 190 flats released today. And SHKP can change the discount formulas at any time. They are asking people to go thru a lottery to get allocation, So you could say, they are using these 30 flats to test the market. They must be hoping to cut discounts if these are well-received. I also point out that this indicative price is for a flat costing about $17 million, and less than 900 sf, Net. It is less than 30 floors up, facing the garden - not the sea. Some of the long views which can be seen thru gaps in nearby buildings will disappear when The Austin rises up.)

IN ADDITION on the Stamp Duties...

SHKP will rebate 70% of the Stamp Duty taxes.

(Please double check this, since the agent I spoke to did not speak perfect English. So I may have misunderstood him.)

I understand that a mainland Chinese buyer would have to pay a 15% SSD + a 7.5% DSD, for a total of 22.5%. Assuming SHKP does "absorb" 70%, then the Net Tax paid by the mainland Chinese buyer is "only" 6.75%, which is a bit less than the DSD. I expect that many mainlander will find this attractive, especially since the List price after discount is below 2nd Had. That is a big savings !

As far as I can tell, the formula on these discounts is only for the first 30 flats, and could change for subsequent releases.

(BTW, I did point out to the agent that a normal HK buyer would face lower taxes, and so SHKP properties will make more money when selling to a HK buyer, as compared with a mainland buyer, where SHKP has to absorb big taxes. He said; "Well maybe you should buy thru a company. SHKP will absorb a bigger tax, and you may get a higher price when you resell the company." Clever, those HK agents.)

OffThePeak 11 yrs ago

Now that I have checked the information out myself, I have to retract something I wrote in the post above:

"The list prices are somewhat BELOW the secondhand prices at perhaps $27,000 psf Net - versus over $30,000 psf for secondhand."

That is not true, I think. The most recent price in the secondary market was about $22,000- Gross and $27,000-Net (see below), and so it seems this prices are in line with the Secondary market, not below it !

In fact, the fews on these newly-launched flats may be INFERIOR to the average of prices before. So only the discounts are putting these prices at an attractive level.

Cullinan: Historical Sales Prices : Gross

'12 # : Price (psf)/ '13 Price (psf)

J : 02 : $24,110 // 00 : $23,000e /

F : 01 : $18,141 // 02 : $24,667 //

M: 01 : $25,109 // 00 : $23,000e /

A : 04 : $23,584 // 01 : $22,070 //

M: 03 : $24,189 // 00 : $23,000e /

J. : 02 : $24,650 // 02 : $24,744 //

Jl : 05 : $25,926 // 00 : $23,000e /

A : 00 : $23,000e/ 01 : $27,135 //

S : 03 : $21,515 // 01 : $22,472 //

O : 01 : $22,912 //

N : 02 : $23,990 //

D : 01 : $23,783 //

Average

Yr: 25: $23---- // Yr: 07: $24,357

Efficiency: 75.13%

Latest report: Unit Price (Centadata)

Gross Area : HK$22,472 : -17.0%

Saleable--- : HK$29,907

===

http://hk.centadata.com/DualChart/estate_info.aspx?type=2&code=EBPPWWPEWS&ci=en-us

Listing prices - Some actual Flats for sale

=== : HKD-Price : Size-Net : psf-net

20-E : $17,488K : 0,684 sf : $25,567

26-E : $18,113K : 0,684 sf : $26,481

20-A : $25,093K : 0,928 sf : $27,040

26-A : $25,990K : 0,928 sf : $28,006

57-K : $13,063K : 0,435 sf : $30,030

punter 11 yrs ago

These are tricks in the developers' books. They greatly benefit if prices remain high. They're expected to do that, that's their game.

OffThePeak 11 yrs ago

Sun Hung Kai Properties has "confused" the market with its Cullinan price cuts.

SHKP fell 2.6pc on Monday, to HK$ 102.40.

10d-chart : http://img268.imageshack.us/img268/8420/16bx.gif

"Launched... at prices which are nearly 20 per cent cheaper."

"181 units with an average selling price of HK$29,098 per sf, saleable area."

(About 311 units remain unsold: sizes from 435sf to 3,174sf)

"Market wondered... Why is the compant rushing to cash out?"

(The loss of the partial views coming from the construction of The Austin was not mentioned.)

"To draw buyers, they are offering discounts of up to 14 per cent."

"Applying discounts to the listed price, the average price of the new batch amounts to HK$25,024... (agents said) was 19 per cent below the average price of secondhand..."

"Discounts of 70 per cent ... of stamp duties for buyers ... (are expected) to tap pent-up demand for high end units and appeal to mainland buyers."

OffThePeak 11 yrs ago

Looking back...

I posted this on Aug.1st:

"(Perhaps that 15 pct price cut forecast, is how much Developers will need to cut New prices. That might put them in line with prices in the secondhand market - Then there would be more pressure on the secondhand market to cut also.)"

SHKP cuts scare off sellers - The Standard, Oct. 8th

"Owners of some luxury homes near Kowlook MTR station have decided not to sell for now to avoid going head to head with Sun Hung Kai Properties."

"Century 21 manager Angus Hau Kit expects negotiations between buyers and sellers to result in discounts of 10 to 20 percent in the Kowloon (Station) area."

"More than 300 potential buyers have shown interest in the (Cullinan) project so far, agents revealed. Most of these are mainlanders and corporate buyers."

Lucane01 11 yrs ago

"More than 300 potential buyers have shown interest in the (Cullinan) project so far, agents revealed. Most of these are mainlanders and corporate buyers."

Its still hot mainland money and levered corporate buyers. That SHK pays the stamp duties only delays the inevitable decrease in sticker prices. By doing it this way they still get to book the higher sale prices which helps keep the facade of the game going (centa index stays flat), but when they go buy new land they will know that in reality they will get ~20% less than the "sale" price so they won't be buying land at as steep of valuations as before.

I wonder how the banks, if at all, account for these pricing games in their valuation & mortgage models. A flat 20% decrease in transaction price surely would work its way through their models, but it wouldn't surprise me if the banks are too stupid to update their comparables prices down 20% since the transaction is still listed as being flat.

Bearish.

Gee Whiz 11 yrs ago

the banks are'nt stupid

they have 30% equity in the property that the buyer THINKS he own when in fact, the only thing the buyers owns in the LIABILITY

the bank OWNS the property and can withstand a 30% fall in prices on month one and still breakeven, every month after that their equity only increases

in fact, the banks probably pray that after 5 years the buyer default on the loan and they can then cash in :)

Lucane01 11 yrs ago

Gee Whiz,

You have great faith in banks. Having worked in a bank and having friends and family still working in banks, I, as well as they, have zero faith in banks.

Do not assume that once the money supply begins to contract due to the natural deleveraging cycle that there are any buyers in the market for properties that have fallen 30% in value. If we were to go back 6 years in time you'd likely say the same thing about American banks - they just cannot wait till those defaults happen after the 5 year balloon occurs because then they can flip those houses for even more profit! How did that end up for the banks? 6 years later and they still own the foreclosed houses and cannot sell them (at bottom nor even now as prices gallop higher and higher in a bull market).

Asset inflation from debt cycles is a cruel and dangerous game. You can make oodles of dollars for decades and then have it vanish into thin air in just a few months' time.

OffThePeak 11 yrs ago

I agree with Gee Whiz, that a Bank is pretty safe with a big cushion like 30%.

A big Reason is :

If property prices fall 20-30% across HK, the government with scrap all those extra stamp duties, and the growing pent-up-demand will shine through.

Although I reported this earlier:

"The list prices are somewhat BELOW the secondhand prices..."

Now that I have researched prices, I do NOT agree these new prices are cheap. I have seen the flats, and seen the views, and my feeling now is that (adjusted for views), prices of the NEW flats are maybe 5% ABOVE SECONDHAND.

Subtract the two discounts, and you get 9% below Secondhand. And the 70% Stamp Tax savings is worth maybe 5% to a HK Buyer. So saying that prices here are 20% below secondhand is an exaggeration.

If the demand is as strong as news reports have suggested, I expect SHKP to reduce the discounts on later sales, and so this will likely have somewhat less impact on secondhand prices than early reports have suggested.

Also, keep in mind that most secondhand sellers do not have to sell, they can wait. And we are coming into the Two Year window where the completion of the Express Train to China in late 2015, might help to buoy up prices.

(Note: This is all pure speculation on my part, and history may find I have this right or wrong.)

yellowtip 11 yrs ago

I too went to have a look at these units today and walked away with some interest.

Initially I just went to have a look to do my agent a favour since I have been ignoring her for so long.

Still, these numbers are not too bad...

You can buy a 676ft (saleable) unit after discounts for about 14.5M after subtracting discounts and subsidies.

Still for The Cullinan and the Kowloon Station location, that seems like a pretty good deal?

Can we expect these prices to go down significantly lower should interest rates go up?

I might just pull the trigger on one of these units. Please tell me if I'm crazy.

Gee Whiz 11 yrs ago

lucane01, if I went back 6 years I still won't be saying the same thing about American banks, why ?

simple, American banks lent money with zero down, in other words, the bank had no equity cushion when the market tanked and would have had to take the hit on their books. In fct, if the guv'ment did not step in and allow the FASB to change the accounting rules to allow banks to keep property off balance sheet, ALL US banks would have been insolvent immediately

Banks in HK are not in the same situation.

OffThePeak 11 yrs ago

yellowtip,

Maybe pull the trigger, if you can get it*.

But ponder what the view will look like when The Austin and other buildings in the area are completed. If you still like it, then probably you should be okay IMHO - if rates do not rise too much.

I continue to believe that Kowloon Station will benefit from the completion of the XRL in two years time. This will be the future Heart of the HK-SAR, not the "decaying grandeur" of Midlevels or Peak areas.

== ==

*I say "if you can get it" because:

SHKP is said to have received over 400 cheques for only 30 flats offered. So less than 10% of the people are going to get the flats they want.

In response to the huge demand, the next 30 flats offered will only be available to those with HK Residency. Of course, this is good for SHKP, since if they pay the 70% rebate on taxes, the rebate will be paid on a smaller stamp tax amount - leaving more money in SHKP's pockets.

Another new property (Yoo Residency) is also offering Tax rebates. The will refund the whole amount of DSD up to a cap of 7.5 pct of the flat price, and also for the BSD : 50 percent, capped at 11.25 pct of the property price.

punter 11 yrs ago

There are many cashed up punters waiting in the sidelines. Property stocks can be good plays still.

Loyd Grossman is Miss Venezuela 11 yrs ago

Have you seen the demand for kindergarten places? Gives you an idea about hiw much demand there is for HK property. Basically, unlimited. The 15pc SSD may stay but people will just pay it once they know prices aren't going down.

OffThePeak 11 yrs ago

"The 15pc SSD may stay but people will just pay it once they know prices aren't going down"

They just did - in Kowloon Station.

But perhaps not as much as the agents were speculating 2-3 days ago. And they may go back up again before long.

punter 11 yrs ago

It's time for HK to get real and build more homes, faster.

Or put in more measures to cool down the market.

Loyd Grossman is Miss Venezuela 11 yrs ago

They'll never be able to build enough.

Loyd Grossman is Miss Venezuela 11 yrs ago

What measures? Only people born in September can buy? Only people who wear underwear outside their clothing and speak Swedish can get a mortgage?

punter 11 yrs ago

There were suggestions moved forward already. It's time for faster implementation.

I suggest an announcement of more public housing and HOS flats construction every year. (And executing them of course, a la Tung Chee Hwa).

Loyd Grossman is Miss Venezuela 11 yrs ago

Ah, the wise Mr Tung - vindicated in his old age. It's too late now to change the market unless we have a war, a revolution or a pandemic - God forbid. Balance sheets too strong locally and too much money in China. To get prices down, the market first has to finds its true level or equilibrium. That means removing all the government measures, bringing back liquidity by letting speculators return, abolishing the peg and setting interest rates accordingly.

OffThePeak 11 yrs ago

Lloyd may be right about one thing:

Releasing more land (on its own) may not solve the Supply/Demand challenge easily.

Why not?

Because Developers will GO SLOW in taking the property to market, if they are not happy with the price. This is why the "experts" chronically underestimate how many properties will be launched every year.

punter 11 yrs ago

That is why i said "public housing" and HOS flats which are not dependent on big developers.

Lucane01 11 yrs ago

Would I wish that prices of a vital consumption asset decline so that younger generations will not be forced to work extra just to purchase the quality-depreciated asset from the older generation, even if it means that the older generation gets wiped out? You bet.

Long term housing price increases above the rate of general economic growth are purely a wealth transfer from the young to the old. High housing prices act as a gatekeeper that the elderly indirectly use to force the young to service them in order for the young to obtain the same thing that the elderly obtained long ago (but the elderly obtained at much less effort). Back in the ye'olde days the elderly, when they were young, were able to obtain a house with say ~3-4 years of their salary. But today the exact same house requires a new young person to spend ~10-20 years of their salary. If you look at it as a temporal barter trade, the youth of today must trade 10-20 years of their labor to the elderly who only gave 3-4 years of their labor - also keep in mind, the property has greatly depreciated in quality by the time the new youth purchase it from the elderly.

Housing is a consumption asset and like all other consumption assets in the world, prices should decrease over time, not increase 50x. One of the major problems with housing across the world is the invention of the mortgage - a loan against a consumption asset. Even though most of us have lived our entire lives with mortgages being in existence, it was not that long ago that mortgages were generally not around (except to only the super rich and only on short >5 year duration). Financially speaking, a mortgage is one of the more idiotic things a banker could do - would you loan money to someone so that they could purchase a jacket? No, of course not. Loans should not be made against consumption assets because the consumption asset produces no new capital which can be used to repay the loan with interest. If you are thinking "but I can rent out a house to get new capital" well I can rent out a jacket to cold people - the act of renting out an existing good is not creating new capital like how a factory creates new capital.

So in the grand scheme of things do I wish that property prices crash and banks stop lending to people to purchase consumption assets? You bet. I don't care who or how many people it wipes out in this process - it is the long term benefit of a return to healthy economics... far better than perpetuating what amounts to little more than a ponzi scheme through which the elderly perpetually fleece the youth for increasing amounts of their labor.

And just for background, this is coming from a person who owns property (albeit not in HK).

OffThePeak 11 yrs ago

L.,

Bricks and mortar last a long time.

And governments like to see some level of inflation (maybe 2-4%).

Put these two together, and assuming a rising population, and you have a formula for property prices which rise, at least as fast as inflation.

In a country like HK, with limited land suitable for building (and with the Top-paying jobs concentrated in one area : Central), and you can logically expect prices for properties with easy access to those jobs to rise faster than inflation.

== ==

I do not like the way that the Press, some Agents and the Government are conspiring to talk prices lower. They are jaw-boning and using misinformation IMHO - So let's expose this:

Example from today's SCMP:

"SHKP announced the relaunch of its luxury housing project Cullinan in West Kowloon at nearly 20 percent lower than prevailing transaction prices in the secondary market in the area."

I think this is untrue. I have visited the showflats and made my own assessment, and it comes out different that that.

I think that the SCMP quoted an agent who said that prices were 19% lower than secondhand, and that may be where the "almost 20%" comes from.

Here are my own calculations based on my assessment of the property:

Category======= : Discount/Premium

List Prices ............. : +5.0 %

Buy w/in 150 days.. : - 9.0 %

Other discounts...... : - 5.0 %

===================

Basic Price discount : - 9.0 %

Tax Rebates

DSD: 7.5% x 70%.. : - 5.3 %

BSD: 15 % x 70%.. : -10.5 %

Discounts non-Perm : -15.8 %

===================

Overall Discount..... : -24.8 % : Mainlanders

Overall Discount..... : -14.3 % : Local, 2nd property

Overall Discount..... : -11.7 % : Local, 1st property

Only Mainland buyers were seeing Cullinan as 20-25% cheaper than secondhand. Buyers with Permanent residency in HK are seeing prices which look 12-14% cheaper than secondhand (by my calculations.) And this only applies as long as the full discounts provided in the initial launch of 30 flats.

Already, SHKP has limited sales on the second batch of 30 flats, to only HK residents, removing for SHKP, the need to pay that big rebate on the BSD. Going forward, the developer may cut some of the other discounts shown above for the next few batches.

SHKP has done something clever. By releasing new properties (in a prime location) with big discounts, they have generated big demand. For a 30 flat launch, they collected 500 cheques. HK people are like lemmings, when they see something is popular, they jump in and buy. So now a feeding frenzy has started. Many people are out seeking those "20% below market bargains." But by the time they buy, they may find the discounts have been whittled back, and the actual discounts they get are 10% or less.

HK Developers are very good at these sorts of "tricks," and they have shown us once again how creative they can be.

Loyd Grossman is Miss Venezuela 11 yrs ago

Lucane01. Very student cafeteria. Would love to hear yor views in a couple of decades time. Meanwhile, back in the real world. High property prices are a reflection of the value of the location and how well it functions. They are linked to locals' salaries but the correlation is not as strong as many think. There is plenty of cheap land in the northern English cities such as Burnley and Hull - but most want to buy in London, Cambridge and Oxford. Why? Opportunity. Don't forget, prices in HK were very cheap for over a decade as there was nothing going on.

Lucane01 11 yrs ago

I wrote a much longer reply to Loyd but decided to delete it, wasn't worth re-hashing my point. Some cannot see the forest for the trees.

OTP,

http://www.scmp.com/property/hong-kong-china/article/1330572/5000-jostle-cut-price-luxury-flats-cullinan-west-kowloon

Not a bubble at all, just thousands of strong balance sheet end users mobbing around for shoebox apartments.

Seen it all before.

OffThePeak 11 yrs ago

Shoebox or not, they want the location

=====

I remember the DEAD YEARS that I experienced growing up in the suburbs, and am glad that even Car-addicted Americans have begun to wake up to that:

WHY THE SUBURBS are dying... not why they might die

Show 154: Leigh Gallagher

THURSDAY, OCTOBER 3, 2013

Author of The End of the Suburbs: Where the American Dream is Moving, Leigh Gallagher, joins Chuck Marohn this week to talk about her book, her research and the reaction to her insights on America's post World War II development pattern.

MP3: http://www.strongtowns.org/storage/podcasts/2013/100313_Gallagher_mixdown.mp3

Haha.

She talks about a city woman who moved to the suburbs, and "was surprised about how much time she spent in her car."

Duh !

I suppose that no one every told her that the life of a suburban housewife = being a chauffeur

"Living in the suburbs means DE-prioritizing the family, in favor of the Big House and the Car."

(And guess what, the people who make that bad choice may well lose money on the big house.

Do they "deserve" the loss as a reward for a dumb choice? Maybe. What do you think?)

She says: THE HOMEBUILDERS are adjusting to the new trends : and "are doing a great job"

Trends: New shops in surprising locations, and big corporations moving back into cities

OffThePeak 11 yrs ago

5,000 jostle for cut-price luxury flats at The Cullinan in West Kowloon

About 5,000 people queued, pushed and jostled as 60 luxury flats went on sale at The Cullinan development in West Kowloon. The throng - comprising both would-be buyers and agents hoping to strike a deal - started queuing in the morning and occupied several floors of the sales venue at the International Commerce Centre, including the ground floor and car park.

=== ===

Later in the article, it talks about how SHKP is raising prices by 5-10%

No surprise there !

Has THE AUSTIN announced its prices yet?

yellowtip 11 yrs ago

I decided not to buy at The Cullinan. Key reason was (very much like Lucane's comment) that when I went to visit for the second time, the amount of idiots running around there, actually dressing up for the occasion, really gave me a overhyped bubble feeling.

To register, SHKP makes you stand in a single queue for hours in the lobby of the W hotel, prominently positioned like animals in a zoo. Frankly speaking, I came there with a check, and walked away when I saw the spectacle.

Just my 2 cents....

OffThePeak 11 yrs ago

Good one.

The early bargains are gone anyway.

Has The Austin launched yet?

OffThePeak 11 yrs ago

VOILA !

The trick worked !

From above:

Latest report: Unit Price (Centadata)

Gross Area : HK$22,472 : -17.0%

Saleable--- : HK$29,907

List prices now??

Latest launch: is $32,000 - almost 10% higher.

So even with the discounts, it is not far different from secondhand

punter 11 yrs ago

Of course, many are walking away. I wonder how many units they've atually sold. Tricks are known to work on some, but not all.

OffThePeak 11 yrs ago

I think they will easily sell all (except maybe the very most expensive flats.)

But it is not quite the bargain that the press and the agents are telling them it is.

OffThePeak 11 yrs ago

THE AUSTIN : Wheelock, New World Development

Considering Price Cut = 80% of total DSD (paid by buyers of 2nd flats)

+ + +

7.0 discount : For those who start mtg. pmts., immediately

3.0 discount : To Club Wheelock, and New World Club members

========

One-third of 576 flats will be put up for sale this month

(I think they are announcing this, so that all the potential buyers will not get sucked into buying at The Cullinan.)

Small developers are also offering rebates:

+ Circle Property at Regent Hill (Happy Valley): 70% discount on DSD

OffThePeak 11 yrs ago

THE AUSTIN LAUNCHES... with "play it safe" price

Headline price: HK$22,671 psf, NET

"That is 21 percent below the average price of the first batch of 181 flats at a nearby project the Cullinan."

(Calculation: $22,671 / .79 = $29,000 )

"The luxury residential market improved recently after the Cullinan launched for sale," said Benny Yu of HK Properties in Kowloon.

"Agents had previous;y forecast a price for the Austin of about HK$26,000 psf"

Note: $22,671, Net x 75% = Approx. $17,000, Gross)

"The lower asking price is their marketing strategy. They want to create some noise in the market... Their profit margin would be less than 20 per cent. They have to raise prices."

(ALfred Lau, at Bocom Int'l)

OffThePeak 11 yrs ago

At The Austin...

The price rises have begun already.

As announced in the SCMP today:

They will "raise the asking price by 5.6 per cent"

The second batch will be at an average of $24,149 versus previous $22,871.

Sizes range from: 418 sf to 1,002 sf.

The first batch was described as:

"very competitive... 21 per cent below the first batch at nearby Cullinan"

Nearby developments such as The Victoria Towers, The Coronation,

and The Cullinan ranged from HK $20,000 to $31,000 psf"

"Analysts expect strong sales at The Austin"

===========

Let's compare the prices in this SCMP, to the historical record.

At: http://www.greenenergyinvestors.com/index.php?showtopic=17597

=== : e-CCLI : Sorrent : Hermit. - Rents : yield / VictoriaTw - Rents : yield :

2013

Jan. : 119.13 : $16,685 : $13,500 - 34.6 : 3.08% / $12,788 - 29.8 : 2.79% :

Feb : 121.64 : $16,227 : $13,197 - 33.8 : 3.07% / $17,847 - 31.7 : 2.13% :

Mar : 123.01 : $16,329 : $13,879 - 33.6 : 2.91% / $13,404 - 29.0 : 2.60% :

Apr : 118.84 : $15,024 : $12,885 - 35.0 : 3.26% / $14,500 - 28.7 : 2.38% :

May: 119.06 : $15,031 : $13,650 - 37.4 : 3.29% / $15,778 - 29.0 : 2.21%

Jun : 121.88 : $16,152 : $13,634 - 31.8 : 2.80% / $16,000 - 28.3 : 2.12%

July : 120.95 : $15,186 : $12,233 - 32.0 : 3.14% / $16,048 - 28.3 : 2.11%

Aug : 119.85 : $17,179 : $14,518 - 34.3 : 2.84% / $15,000 - 30.9 : 2.47%

Sep : 120.00 : $17,043 : $14,563 - 35.7 : 2.94% / $14,000 - 30.7 : 2.63%

Oct. :

=== : e-CCLI : Sorrent : Hermit. - === : ==== / VictoriaTw === : ====

/75%: psfNet : $22,724 : $19,417 : === : ==== / $18,667 NET

/75%: psfNet : $22,724 : $19,417 : === : ==== / $21,333*NET

===

No transactions at those low prices for Victoria Tower, so

on the second line, I have used $16,000, Gross.

Conclusion: "The Press has been snookered"

=======

The SCMP article "INFLATES" prices in the secondary market,

and the "discounts to secondhand" are nowehere are large as reported.

So people will do their own research, and realise this is the case.

Dolphan 11 yrs ago

OTP, just wanna add my two cents... visited friends at victoria towers recently & whilst waiting in their mall did a quick calculation of gross/net sf based on figures provided in the ads pasted on the window of the agents. On average, victoria towers gross to net ratio was a disgustingly low 62-64%...

ie 750 gsf listed flat is actually 465 net.

OffThePeak 11 yrs ago

That's terrible.

I will check what the records say...

(From Centadata): This is a bit better:

===

Saleable Area : $22,257 psf

Gross Area--- : $15,634 psf / Pct: 70.24%

===

> http://hk.centadata.com/pih09/pih09/estate.aspx?type=2&code=ESPPWPPEPS&lang=eng

Maybeyour friend should double check his/her calculations

OffThePeak 11 yrs ago

AUSTIN - We saw it yesterday

Queueing up time: about 40 minutes. Pretty busy.

Flats look okay, and they are trying to make the best of some limited views in most flats. The East side will be pretty noisey. But the location - in terms of connectedness is great.

The Austin, will have good connections to:

+ West Kowloon Cultural center - very short walk

+ XRL : Express train to China

+ Westrail

+ MTR-Tung Chung line

+ MTR-TST station : a shortish walk

+ Various bus lines

So if transport links is your thing, this is ideal

Prices:

+ Started at $22,871 psf, net x 75% = $17,153

That's for the first 185 flats.

They have already collected over 600 registrations,

and raised prices:

+ Now at $24,140 psf, net x 75% = $18,105, + 5.55%

Registrations will be open until Thursday, with the lottery due on Saturday.

========

SUBSIDY:

Developers are finding that the 70% (or 80% in some case) rebate on Stamp Duties has been crucial to stimulating demand. This is especially important for Mainland Chinese, and other non HK Residents. But SHKP has limited their release for these buyers to only 20% of the total launch. HK Residents have happily snapped up the 80%, though their subsidies were less.

Developers seem to be experimenting with these rebates, so they can harvest demand at the best possible prices, while appearing (through the media) to be offering big discounts.

OffThePeak 11 yrs ago

Developers LURE Buyers into paying more with tricks

SCMP article - by Sandy Li

"SHKP's offer to subsidize stamp duty for buyers of The Cullinan was a slick manoevre"

She goes on to chronicle the steps used by SHKP to materialise strong demand in a once-quiet market.

Stamp Duty subsidy "instantly made headlines... was widely reported that the incentives plus the discount effectively translated a 20 per cent to 40 per cent discount... Result: more than 2,000 buyers signed up for the first 60 units."

She goes on to report that actual listed prices rose to a premium, then the incentives and rebates were cut.

Does it sound at all familiar? Of course it does.

Sandy Li wrote a good story, reporting a neat bit of clever marketing by SHKP.

I sent her an email recently, and suggested she take a look at this thread. If that helped her to track the complex figures involved in SHKP's strategy - then: Great.

WE need plenty of eyes on this market, and good reporting - to understand how a once simple market now operates in a time of government-imposed manipulations.

Good on you, Sandy Li!

OffThePeak 11 yrs ago

Hang Lung has launched its price list and discounts for the first 40 flats in The Long Beach, and it looks like a bargain.

There were be a discount of 10%, plus maybe another 8% for those who can pay cash within a few days.

List prices look attractive for the "existing stock" in Towers 3, 5, and 6 - and a bit high for the new Tower 7.

It is interesting to see that HL wants to get more than $1 million per flat extra for the new Tower, for some pretty minor cosmetic changes.

I reckon that buyers will see through this ploy, and "bite hands off" to get the cheaper older stock, especially with discounts of that size.

Don't forget, one of the big plus factors of living at TLB is the fine clubhouse, and both new and old buyers will be getting exactly the same clubhouse. The cosmetic changes that they have made in the bathrooms and kitchen are worth far, far less than the differential that HL is asking. I see this as an attempt by HL to "educate" the market. Let's see if it will work.

Loyd Grossman is Miss Venezuela 11 yrs ago

If these flats have been lying empty for a while, will they have been well-maintained?

OffThePeak 11 yrs ago

"If these flats have been lying empty for a while, will they have been well-maintained?"

I think the answer is : Probably, they are fine.

What can go wrong?

The Air Conditioners, and washing machines, may be unused, but after 8-9 years, or whatever, they may not last as long as totally new. But the rest of what is in the flats is pretty resilient.

LB prices are already way cheaper than next door's Imperial Cullinan. You could argue that LB has a better clubhouse than IC. IC has better landscaping, some spiffy design, and special F&B - but the clubhouse is smaller, and some of the facilities (pools etc) are less spacious. Both are really top-notch IMHO.

OffThePeak 11 yrs ago

PUZZLEMENT in the extreme... was my reaction upon visiting the Showflat of Park Metropolitan today

Prices are pretty similar to The Long Beach.

Most would agree that the Sino-like interiors at PS are somewhat nicer than the older looks that TLB has. But the locations are not comparable, by any stretch of the imagination.

+ Kwun Tong, is not:

+ Olympic Station, a prime location in Kowloon

If property was about Interiors, Interiors, Interiors, rather than

Location, Location, Location - then it might make sense.

But as it stands, I am puzzled by Sino's pricing strategy.

(Having said that, they have pulled off some near miracles in the past.)

OffThePeak 11 yrs ago

POLICE CHASE AGENTS AWAY at The Long Beach

40 properties will be sold at TLB at bargain prices tomorrow. Prices were about 20% below market, and the sales are planned on a "first come, first served basis" to buyers who have qualified by lodging cheques for HK$300,000 per flat.

Demand was so strong, that there were rumors that some individual buyers were poised to lodge up to 40 cheques. Hang Lung changed the rules so that each buyer and each agent could only apply for one flat (I was told.)

Some of the agents had planned to queue up over night, to improve their chances of getting the flat that their clients wanted. But these plans have been disturbed.

About 45 minutes ago, three police vans arrived, and dispersed several dozen property agents who were waiting outside the building.

I expect a real scrum at about 10:00 am tomorrow morning when the doors open officially. And probably the queues will start re-forming at 6am or 7 am.

It will be interesting to see what, if anything, gets reported in tomorrow's newspapers.

Lucane01 11 yrs ago

Nothing to see here folks, just brilliant businessmen millionaires lining up like cattle to purchase their shoebox apartments.

Clearly not a bubble.

OffThePeak 11 yrs ago

Actually, it has nothing to do with a bubble,

and everything to do with how cheap the first 40 flats are,

plus very hungry agents struggling to hold onto their jobs.

(Most agents have used a lottery system. Only HangLung

so far, has used "first across the line.")

Some lucky buyers will be $1 million ahead of the market,

and if I was flatless, I would be in the queue myself now.

Lucane01 11 yrs ago

Whatever the last transaction was is the new market price.

Article says some guy was prepared to purchase all 40 apartments. Not a bubble at all.

Does anyone know if Centaindex is factoring in developer discounts such as these tax rebates when they refresh their data?

I think the taxes have shown us a few things:

- speculators do not value properties to be great value. If, for example, there was an asset for sale that I, as a buyer, personally valued to be worth $150 but the sale price was $100, then I would surely purchase it. If the sale had a 20% stamp duty on top of it and my final price paid was $120 then I would still transact because in my opinion I have gained $30 of value. To not transact would be to leave value on the table.

- the speculative herd mentality is well in full swing. When prices dropped in 2008 by 20% did 5,000 people line up to purchase at the Cullinan (or something similar)? Honest question since I do not know. My suspicion is that they did not. Today when prices drop by 20% because of a "tax rebate" the hive leaps into a flurry with their checkbooks out. And to directly compare apples to apples, is it not the case that The Arch and other borg-cube properties suffered a steep 20% price fall back in '11-'12? Did ICC get swarmed with 5,000 buyers when that happened?

All signs continue to point to your classic momentum / herd bubble. I'd also like to note that property was generally not considered an investment asset before ~1970, "coincidentally" when the entire world went onto a fiat monetary system and governments began introducing moral-hazard inducing regulations to create the home mortgage market (which prior to then did not exist). It should be no shock that when money became infinite in volume and people were given the power to frontload 30 years of purchasing capability all into one transaction today that property prices across the globe began their unyielding march upwards.

I am not stating that prior to 1970 that no one purchased property for investment nor that no one obtained a mortgage to buy property, but rather that by and large the public did not treat property like a trade-able investable asset like they do today. Was that simply because for the previous thousands of years that humanity was too stupid to realize what an amazing asset property is, or is it because for thousands of years people realized that consumable assets are not investment assets? Investment requires production (you invest your capital into a project that will produce more capital than it took in) whereas speculation simply requires one to believe that someone else will come along later and offer you more capital for the same good than you initially purchased it for. It's not as simple as that but the general concept still holds true.

OffThePeak 11 yrs ago

It is quieter than expected around the Long Beach this morning.

Perhaps there have been too many changes, too much confusion.

Or maybe some of the sales arrangements were changed at the last minute.

Some of the agents do not like selling HL units, because HL does an ineffective

job at managing expectations.

Cheung Kong and SHKP seem to be the masters at managing the sales process.

Lucane,

Have you not noticed "the trick" where the developers sell the first 40 or 80 units are very cheap prices to stimulate demand? (and then quickly raise prices aftertwards.) That's what has been done at The Cullinan, and at The Austin, and it seems to have worked well.

Hang Lung's approach has been a bit different (not using the auction process), but they have shown some very cheap prices (after discounts) on some of the units.

Lucane01 11 yrs ago

OTP,

Right, they have an excellent sales strategy to milk fool's out of their money. You know the old saying about a fool and his money.

Drop prices, offer big cash back rebates to draw in giant crowds, then slowly start raising the prices after people have waited in line for hours. Those who finally get a seat with at the buyer's table are told that the rebate is now only 5% instead of 20%. The buyer has been waiting for hours and see's a throng of anxious buyers sitting behind him ready to snap it up, so he thinks "wow there is such strong demand, I can buy now still at a discount and then later sell it to those other 5,000 guys who really want to buy at the Cullinan !!11"

Cattle to the slaughter, I have no sympathy for those who are about to lose their savings because they thought 15M for a shoebox was a wise purchase.

This all counters Loyd's notion that the buyers are end users. What sort of rich savvy businessman drops 10M for a 300 squarefoot studio? No one. It's a bunch of dumb money chasing around momentum assets. The problem is that unlike tulips or beanie baby bubbles, this asset is one that is affect's everyone's quality of living - and it seems like the entire world has forgotten that increases in the cost of living does not make you wealthier but poorer! No one cheers when the prices of food or clothing increase but we all cheer when the price of housing and rents increase - madness.

OffThePeak 11 yrs ago

Well, that's YOUR opinion.

I think if you read my comments here, and on other threads, you may realise that I have an "informed" opinion about the HK property market, and a reasonable track record.

I don't see much of a fall coming in HK property prices, unless and until interest rates rise significantly. The except may be that some developers will sell a few units at cheap prices, to get the excitement going.

I now know what happened at TLB.

The sale was delayed until next saturday. There was too much disorder last night, so they had to change the sales arrangement away from First-come, First-served to a lottery system, as other developers are using.

One agent told me that there was very strong interest in 4-5 units in particular, and that these were prices far below market, and there will be many people seeking these units in the lottery.

Lots of savvy people will pay as much as $8-10 million for a 2BR unit, if it is in the right location, and the genuine secondhand market price is 15-20% higher. And it is worth queueing up for a long time, even over night, if you can make that kind of savings.

Have you owned any HK properties?

Over my years in HK, my partner and I have owned 12 units between us, though we presently have only two. I have made money, on every one, and "owned" one of them for less than 10 days.

Lucane01 11 yrs ago

OTP,

No, I have been here for one year and own no HK properties. I will wait until prices inevitably come back down as all asset classes eventually have their downturn (at which point I will likely pile in). If they never come down for the rest of eternity then I will be happy paying 3% rental yield for as long as I reside here.

Not that I am intending to diminish your success but property prices are up 4x in 10 years, so it'd be hard not to make money on it. HK property isn't even like stocks where some go up some go down and you gotta make sure you don't buy yourself a lemon. Even the worst housing in HK has gone up in price. I doubt anyone in recent HK history has lost money on property - wouldn't that be a bad sign when an entire market's participants all lack the experience of losing money on an investment over the past 10 years?

Also owning 12 properties, one of which was held for 10 days, is yet another strike against Loyd's notion that the buyers are all end users. Unless of course you just moved from place to place many times, which is possible.

Anyhoooo, back to the topic of the developers' games - does anyone know how these discounts get factored into the centaindex? It seems like a black box to me.

Once these Long Beach properties are sold I'd be interested if there is any data available as to what total final prices (including taxes less rebates) these people paid and compare it to the total price paid by recent comparable secondhand market TLB properties (preferably secondhand transactions both before and after these sales, so we might have to wait awhile).

Recent transaction history for TLB on Centadata is interesting: http://hk.centadata.com/eptest.aspx?type=2&code=EGPPWPPJPW&info=tr&code2=&page=0

Of apartments of the same size ~750sqft (starting with most recent):

10.5k 29F [late october]

12.5k 7F

13.9k 17F

14.1k 5F

15k 37F

12.9k 21F [july]

Now I know that not all apartments are the same, some might have "great" views of the typhoon shelter and others lousy views staring into other people's windows, but it seems like the general trend is down from ~14k to ~10k per sqft in just three months. What are the new sale prices transacting at?

OffThePeak 11 yrs ago

The bargains may be in the 2BR flats (550sf net)

Example:

51st floor - excellent view - is about $8.4 million.

I think market value should be above that (given the view, maybe $8.5-9.0 mn)

There's now an exceptional 18% discount for a cash buyer, able to close within about one week.

$8.4 mn x 82% = $6.888 Million

That's one of the 4-5 bargains.

Less desirable flats in (the "new") Tower 7 might be $9.5 million, and I think those 18% discounts will quickly get cut.

Do you see why I think it is a bargain?

(An agent said he thought there might be "50 cheques" for this flat, and that is one one the things that got so many agents wanting to queue up all night. There were 3-4 other ones on the "hot" list, with open views.)

Loyd Grossman is Miss Venezuela 11 yrs ago

Lucane01. Go ahead and rent. I bet you will be hammered by inflation over the next decade.

OffThePeak 11 yrs ago

GOOD SALES? Raise Prices

We have seen it yet again - and an article in today's The Standard says:

Prices Leap after Austin sells out

HK$2.1 Billion was generated in revenues

185 flats sold out within 7 hours of launch at The Austin,

and so the Developers (Wheelock and New World),

have raised prices by 11 percent on the newest batch

- and they have been priced at an average of HK$25,323

THe way the game is being played now:

"The early Birds are getting the bargains."

That was/is the plan at The Long Beach too.

At The Cullinan, SHKP has raised prices by 15-29 percent, and cut the rebate on taxes from 70 percent to just 30 percent.

Lucane01 11 yrs ago

Loyd,

Why would that financially matter as long as my net worth is not being held in the currency being inflated away? If my investments in assets other than currency rise at a rate higher than inflation then I am protected.

The danger is that the real rental prices rise at a rate greater than my investments. For example if the rental yield exploded 3x because a bunch of Sheiks decided to rent all of HK's apartments then I'd be in trouble. Another threat is that property prices rise at a greater rate than my investments while the rental yield holds tight.

Though I believe that rental rates have a tighter ceiling than do property prices. Those who rent are forced to make their books balance everyday via both income and expenses and cashflow-in and cashflow-out methodologies. People who purchase property have the option (not saying they all do) to ignore cashflow-in cashflow-out methods because they are granted a large 50%+ upfront slug of cash to purchase the property, with the belief that one day down the line they will magically have enough money to repay that back (via by selling the property at more than its worth today, or with their new future high paying iBanking job).

Point is I suspect that there are more constraints on the rise of rents than there is on the rise of property prices. For example, property prices have generally doubled since '09 while rents have only gone up by half as much. Rent increases must be supported by income increases but property price increases can be supported only with credit expansion or balance sheet increases.

Also there is the political angle to all of this - financially housing costs are costs, whether it is via the form of a purchase or the form of a rent, they are all costs of living. But people's perspective is that ownership is an asset and rent is a cost - this causes people to be happy with property price increases but angry with rental increases. The political pressure is to push property prices up to make the landlords happy while keeping rental prices low to keep the non-owner happy. Furthermore, as I mentioned above, the renter must make his books balance every single day, so if rents shoot up but his income does not, he is immediately in trouble. There will be tremendous political pressure to push rents back down if they shoot up at a rate far above income growth.

Overall, at this pricing level and rental yield, I think that renting is a very safe proposition.

Lucane01 11 yrs ago

OTP,

Can you help me make sense of TLB pricing?

http://hk.centadata.com/eptest.aspx?type=2&code=EGPPWPPJPW&info=&page=0 shows recent transaction prices at ~12k per squarefoot, but SCMP says the new properties being sold are at $16k?

http://www.scmp.com/property/hong-kong-china/article/1341487/hang-lung-offers-more-units-long-beach

I think I'm reading this information incorrectly.

Loyd Grossman is Miss Venezuela 11 yrs ago

Lucane01. Don't be confused by the doubling of property prices argument. That was just prices returning to where they over 15 years ago - only with much stronger balance sheets.

OffThePeak 11 yrs ago

Gross versus Net

yellowtip 11 yrs ago

Ironic to see how OTP and LGMV are persistently and blindly talking up the markets. Could they have a vested interest? ....go ahead and flame me

As the saying goes, past performance is no guarantee for future performance, so please don't use your past calls to justify you'll continue to be right about this highly complex market.

The reality is that it's an extremely difficult market to predict at the moment. So it could be any fool's guess...

My strategy is to not be a blind bull, nor a blind bear, but I keep on eveluating the market and individual projects on risk levels and future potential.

I sold my main property in mid 2011 and started renting, so my call and strategy was wrong. Luckilly I still own some small units in TP that have continued to rise in value. I might be selling those early next year to capture that profit.

As for the price cuts by developers, my POV is as follows:

SHKP, as always, had perfect timing and executed their strategy perfectly. Still, one has to wonder why they did it with The Cullinan. They could have just as easilly done it with Riva or Imperial Kennedy. I sense they're taking a bearish view on the market.

The Austin: I went to look at the showflats and wasn't impressed. More importantlly, everything about the presentation looked rushed. It looked like a panic reaction to SHKP's move. For such an iconic location, I would have expected a much grander presentation and no special discounts.

TLB: A typical "me too" reaction to take advantage of those buyers/suckers that missed out on the other two projects. While the location of TLB is pretty good, I was never impressed with the quality of this development (especially the low ceilings). At the end of the of the day, buyers will look at this factor and will not base it on how pretty the clubhouse is. Perhaps in early 2000 buyers were fooled by this. Nowadays I think buyers are much more educated to look past that.

I can't ignore the fact that articles like these are popping up with increasing frequency:

http://www.bloomberg.com/news/2013-10-28/hong-kong-home-prices-to-drop-30-by-2015-end-barclays-says.html

Based on what I can see now, chances are we are indeed looking at a 20-30% correction, especially in the 10M+ market.

Alot of it will depend on how fast things will deteriorate in the US. Contrary to popular belief, what happens with the US economy, USD, QE, etc. can have MAJOR impacts on HK property prices.

Anyway, my 2 cents...

Loyd Grossman is Miss Venezuela 11 yrs ago

No problem. Each to their own. But I don't think anyone is really looking at inflation or the huge demand for HK property in China - even with the 15pc penalty.

OffThePeak 11 yrs ago

Yellow Tip,

Look at track records, and quit spouting nonsense

Postings on AX are not going to have any sort of impact on the market.

How many people on AX have bought properties in the last 12 months?

(I might be the only one... At least the only one who admitted it.)

You are welcome to your own opinions about the various properties, as anyone is, but I must have missed out on your analysis.

You can find plenty of facts and figures supporting my opinions on this thread and others, and you are free to embrace them, or ignore them, as you see fit.

You should ask people who live in the various projects and locations, about how they like living there. And I think people here could be much more sharing with the information they have than most are.

I am one who believes that we all should "be the change we are looking for", and take a positive action: leading instead of complaining, I am setting an example (both here and elsewhere.) et I understand that only a few kind folks will be willing to follow the example. (It has to do with sharing information wit others.)

I have been bearish on Large Luxury flats (over $10-15 million) in price, and also on New property prices - for some time.

I was bullish on the small flats (below $4 million), but it is justify that from currency price levels.

Mostly, I am neutral on the market now, and I do not expect much price change unless and until we see a significant rise in rates, then I think we will see a more meaningful price correction, even in the "stable" secondhand market for flats prices at $4 - 10 million.

If you spending money every month on rent, and you have enough cash, you may want to consider buying early in a launch in certain "strategic" locations. But I would not recommend spending more than $8 -10million, since there may be better bargains in 2-3 years.

gdep 11 yrs ago

Next up is Imperial Kennedy by SHK..

Expect them to price around 25K psf (net) for the first 20 flats , drum up interest and unload the next 150 at 30K psf (net) basis.. for where it is what rents it can get seem expensive.. hey but this is HK.. where ppl are super rich and nowhere else to invest..

yellowtip 11 yrs ago

As expected, the flame came. Thanks OTP ;)

I'm not spouting non-sense, but simply stating my opinion. Is this allowed for a select group of members on this forum only?

Please re-read your postings on The Long Beach and notice how they always include some tag line on how fantastic the club-house is. It sometimes reads more like an ad from a property website.

Liking or disliking a property is often subjective (regardless of location, price, developer, etc). I was simply stating that, in my opinion, I am not a fan of The Long Beach. I don't have to ask other people for that, that's my opinion. I did see several appartments there and didn't like them. They have low ceilings, awkward partial sea views, and both times I was there (during the summer), I could smell the bad smell (I guess from the nearby polluted seawater) in the hallways. This was my experience, granted, only during a visit with an agent. I have not lived there.

Just to clarify, I in no way believe that what is discussed on this forum affects the property market. Yes Y_and_H, I also hope that my owned properties (a few small units in Tai Po) will tripple in value tomorrow, but I will not let that affect my view of where I believe markets will be going. My key point was that I like to take a more balanced view on the markets, rather than constantly restating that prices are cheap, or that they will crash tomorrow together with the rest of the world. This is a complicated game with many variables that can affect HK property to the upside and downside.

Anyway, I don't want to make this into a flame war, so OTP please accept my appologies for my personal remark / stab. I do agree that you include analysis and data in many of your posts, so thanks for that. While I don't always agree with everybody's statements here, I have learned a great deal from the discussion here, so please don't take offence from my earlier post (I must have been in a bad mood).

To continue the discussion on gdep's latest post, I scouted the neighborhood around Imperial Kennedy. I personally believe it has potential with the new MTR line and some other high-end properties nearby. Since it's SHKP, the quality will no doubt be very good. But sorry, 30K psf in that location, I don't see any room for a profit in the next 3-5 years?

OffThePeak 11 yrs ago

What a nice friendly post, Yellow-Tip!

(What kind of person are you?)

Why don't you post some helpful details of the place where you live and own property, so that I can hurl abuse on it, while insulting you at the same time?

(no good and useful info goes unpunished it seems.)

The ceiling heights at Long Beach* are no different from Island Harborview, a building of similar vintage and price per sf. Ceilings are lower than Imperial Cullinan and One SilverSea, but those buildings carry much high prices tags.

I don't favor the partial sea views, and my own flat (which is very nice to live in), has a very nice open view on two sides - the usual reaction when people see it is: "Wow!"

This thread has loads of info on several properties, not just TLB. And the clubhouse was voted one of the top ten in all of HK (according to staff from JLW), so that is not my opinion.

Where do you live, Yellow-Tip? I really think fairness would compell you to let me have a good shot at you now?

=====

*I have the plans in from of me now, and am checking:

Ceiling Heights

========= : mm's--- : /304.8

+ 5-/fl - 48/f : 2800mm : 9.186 ft :

+ 49th floor- : 2800mm : 9.186 ft :

+ 50th floor- : 3150mm : 10.33 ft : + 315mm : +11.3%

+ 51st floor- : 3100mm : 10.17 ft : + 300mm : +10.7%

+ 52nd floor : 3100mm : 10.17 ft

clemhkg 11 yrs ago

Hi We used to live in Tak Kok Tsui in one of the property mentioned above. Kids got constantly sick and I caught pneumonia that sent me to hospital for a week.

I always found that it sometime smell funny but blamed it on low tide or on usual HKG smell. The water in the toilets also often had a brownish color..

This until I met on the contractor who built part of the waste water plant located on stone cutter Island. He admitted he would never live in the area as it is an open air waste water treatment plant and that it is apparently very often over loaded (you may read articles about water pollution getting worst in the harbor and officials scratching their heads about it).

So now you know what it is and you have been warned. Next time on your way to the airport just roll down your window while on the bridge next to Stone cutter island and you will see (or rather smell) what I am talking about.

gdep 11 yrs ago

Back to HK side

Imperial Kennedy pricing more aggressive than I suggested above.. its basically 30K psf (net) for first 50 flats. at 75% load rate .. That's about 22.5K psf on gross area.. and with 30% max discount its about 15.75K psf.. the article on SCMP says its close to Belchers rate..

Guess effect on secondary market will be less...

But this pricing will most likely affect The Avenue in Wanchai which was nearly 10 times more units as Imperial Kennedy.. less attractive views..

gdep 11 yrs ago

On second thoughts ..most of the units are on the higher floor.. so second batch should be lower than the first batch..

avg discount look like half of the articled 30%.. so price comes to around 19K psf.. gross .. location not so great as Merton... would be interesting to see the sales level

OffThePeak 11 yrs ago

Thanks, Clem for your post:

"Hi We used to live in Tak Kok Tsui in one of the property mentioned above. Kids got constantly sick and I caught pneumonia that sent me to hospital for a week.

I always found that it sometime smell funny but blamed it on low tide or on usual HKG smell. The water in the toilets also often had a brownish color.."

I think it should make sense to correct possible misinformation:

+ I live in the LB on a high floor, in a flat facing mostly away from the water. I have never smelled any bad smell when in my flat,

+ I go jogging along the seaside several times a week. Occasionally, I do smell something bad, and once in a blue moon it is very bad. But it is something I smell much less frequently than before,

+ I had lunch today with a neighbor who also lives in TLB, in a seaview flat between the 20th and 30th floor. I asked him about the smell. He said he used to smell something more frequently before. I asked him how often it comes now. He said: "Rarely." I asked: "once a month?" He said, Less than that.

I wonder when you lived in the area?

High floor, or Low floor?

Direction facing?

OffThePeak 11 yrs ago

THE BRUNT, and innovation

Since developers are now taking the Brunt of the Tax Increases, and their profit margins are falling, they are looking elsewhere...

"For Hong Kong developers, the growth at home is starting to fade as property curbs start to take effect. Home prices in the city may fall as much as 25 percent from their peak in March, while a price war between developers will intensify, Raymond Ngai, a Hong Kong-based analyst at Bank of America Corp.’s Merrill Lynch unit, said at a Oct. 16 briefing.

Developers sold about 4,300 new units in the first half, the lowest since the second half of 2008, and below the 7,200 in the second half of 2012, according to Centaline Property Agency Ltd.

“In a market like Hong Kong right now, how many properties can you sell?” said Lee Wee Liat, Hong Kong-based analyst at BNP Paribas SA. “It’s no surprise some developers are thinking of deploying their cash elsewhere.”

===

> http://www.bloomberg.com/news/2013-10-22/hong-kong-builders-looking-abroad-as-property-sales-slow-at-home.html

Will they innovate new ways of selling overseas properties in HK?

Ed 11 yrs ago

Hong Kong luxury home buyers queue amid talk of last hurrah

HONG KONG (Reuters) - In a shopping mall in one of Hong Kong's prime retail districts, more than 100 people wait patiently to take a lift to the sales floors - not to buy luxury bags or clothes, but high-end apartments with price tags of up to $4.4 million.

Foster Lee, a 30-year-old banker, was among the lucky ones who won the chance to buy a unit after a ballot in which more than 1,600 people signed up for just 80 luxury units on offer.

"I was expecting home prices to fall four years ago and they keep increasing. It really hurts," said Lee, who plans to buy one of the flats offered by New World Development and Wheelock & Company Ltd in the prime location near Kowloon West for his family.

Signs on the ground point to a clear pick-up in demand from local and Chinese buyers, thanks in part to steep discounts offered by developers to offset higher stamp duties imposed a year ago to cool prices that have jumped 120 percent since 2008.

The boom was fuelled in large measure by the Federal Reserve's dollar printing campaign, or quantitative easing, to drag the U.S. economy out of the global financial crisis.

It became easy to borrow cheaply, and with Hong Kong's currency pegged to the U.S. dollar the effects of the policy were easily transmitted to the property market.

But now some analysts expect property prices to fall as the Fed is expected to start withdrawing its monetary stimulus some time during coming months.

Regardless, many home buyers, like Lee, have shrugged off recent forecasts of a drop of up to 50 percent in prices over the next 12 months and decided to take a chance.

"They (buyers) are concerned that the banks will further tighten up credit," said Jennifer Wong, tax partner at global accounting firm KPMG in Hong Kong. "This is one of the reasons they don't mind to pay a little bit more - they can secure the mortgage loan at a low interest."

Almost everything hangs on when the Fed decides to taper, as a rise in U.S. interest rates would drive up borrowing costs in Hong Kong, where home prices have risen 4 percent over the past year on ultra-low interest rates, tight supply and abundant liquidity since cooling measures were imposed.

More http://www.chicagotribune.com/business/sns-rt-us-hongkong-property-20131103,0,7145861.story

Lucane01 11 yrs ago

The buyers are allegedly rushing to buy because credit will tighten in the future? That makes no sense at all. 1) tight credit = decreasing money supply = lower prices. 2) Future tight credit = higher interest rates = mortgages payments adjust up (unless they got fixed).

traineeinvestor 11 yrs ago

I agree with Lucane01 - buying because you expect tighter credit with the implication that there will be higher interest rates makes no sense in Hong Kong where the overwhelming majority of mortgages are set at floating rates (and the very small minority that are fixed are only fixed for a few years). This is not like the US where you can fix for 30 years if you want. It might make sense to some people if they thought that the gearing ratio would be cut so they wold not be able to get financing but even that is very questionable logic.

Ed 11 yrs ago

Option 1: buy a 10m property now at 2.5% interest (floating)

Option 2: buy the same property 12 months later for 7m at 4% floating.

The 2.5% will morph into 4% so it would seem the only reason to buy now is because one thinks prices are on the way up

OffThePeak 11 yrs ago

Ed, your:

Option 1: buy a 10m property now at 2.5% interest (floating)

Option 2: buy the same property 12 months later for 7m at 4% floating.

======

There might be no change in property prices for 1-2 year, and then a 3-4 year drop.

If the low is 5 years from now, and you save 4% per annum by owning, then you can sustain a 20% drop in prices, which may be all we get in secondary market prices in some well-chosen areas.

If you can nab a new property at 15-20% "below market", you might actually be better off in 4-5 years, depending on how this correction plays out.

A safer way, might have been to downsize (when I started threads about it, 1-2 years ago), selling that over-prized midlevels flat at 10% above current market a year ago, and buying something at a lower price in an up-and-coming area, in Kowloon or maybe the NT. There would also be a savings on loan payments, or you might have been able to eliminate them entirely.

Go back and look at one of those "downsizing" threads, and you might get some idea how far you would now be ahead using that strategy.

Can it still work?

Maybe, if you can find an especially keen buyer, but it may not be so easy now.

Remember: the government wants to look after locals, not expats living in a bubble.

OffThePeak 11 yrs ago

As usual, the reporting is superficial and idiotic - The reporters probably listen to Estate Agents, who are programmed to think that way:

===

"Many home buyers, like Lee, have shrugged off recent forecasts of a drop of up to 50 percent in prices over the next 12 months and decided to take a chance.

"They (buyers) are concerned that the banks will further tighten up credit," said Jennifer Wong, tax partner at global accounting firm KPMG in Hong Kong. "This is one of the reasons they don't mind to pay a little bit more - they can secure the mortgage loan at a low interest."

== ==

Didn't they find any intelligent buyers to talk to?

The location of THE AUSTIN, the property they are writing about is superb.

Do any of these reporters mention the fact that the new XRL train station will be opening in less than two years, and having a new property in easy walk to the station may actually be a good move. Professional property investors that I know, say that property prices will often firm up near new train stations in the least two years before launch.

The fat discounts (on early batches) offered by the developers are an added inducement, and a nice "cushion" against a possible fall in prices.

Does anyone seriously believe there will be a 50% drop in 12 months? If so, can you put me in touch with such person, so I can arrange a bet.

traineeinvestor 11 yrs ago

In a sense it is bad reporting - they seemed to have latched on to the Deutshe Bank 50% decline and Barclays 30% without saying anything meaningful about the basis on which those forecasts have been made (or the banks' track record) and I really struggle to believe that the have quoted a KPMG partner in context. But they have gone to a number of sources - including the highly respected Nicole Wong from CLSA.

The real issue is that it's a short article trying to cram in as many view points as possible but at the cost of not doing any real analysis.

While a 50% fall in 12 months (starting from October) is possible, I would also be willing to bet a meaningful amoungt of money that it wont happen.

OffThePeak 11 yrs ago

Peggy Sito's article on page 1 of the SCMP is better, with more detail:

"At the Austin... the headline price was HK$22,875 psf (Net), but analysts said effective prices averaged below $19,000 after discounts and rebates..."

. . .

"The developers had sold 372 flats at The Austin by yesterday, when the headline price for the latest batch of 107 was raised to an average HK$25,326 per sf."

(At those levels, the discounts bring prices back to near the original headline prices.)

At the beginning of the article, she says:

"Analysts... agree on one thing: developers' profit margins are being squeezed."

And at the end of the article, she says:

"Developers profit margins had fallen to 30 percent from 35 percent at the beginning of the year... Barclays said some major developers profit margin for their Hong Kong projects was below 20 per cent based on current prices."

== ==

But as prices get pushed back up for later stages of popular projects - the market dip is seen temporary. And secondhand sellers may find they do not need to adjust their prices downwards at all.

And the elimination of "overhang" of new projects coming on stream might conceivably allow some prices rises later on. This could be especially possible in areas like Kowloon Station, where the completion of the XRL might add something to demand in the months to come.

Of course, if the overall market is falling, then Kowloon Station may fall too, but perhaps much less, or it may even allow the area to hold stability whilst, the rest of HK falls. (However, I cannot rule out the possibility that there could a downwards shock, as there was in 2008/9, because so many vacant properties are held by mainlanders. But I do not expect that now.)

gdep 11 yrs ago

How come there is no news on Imperial Kennedy anywhere?? is it deliberate supression?? anyone knows how the sales went at that crazy price?? ( higher than Argenta, Azura by Swire in mid levels)

gdep 11 yrs ago

Or is the the sales open only this week for Imperial Kennedy

gdep 11 yrs ago

SCMP says .. there will be 9K flats that will be put on sale in the last two months of the year.. without giving out the list .. sounds highly ridiculous..

Anyone has any idea on the upcoming launches list?and where it can be found?

OffThePeak 11 yrs ago

Check Papers like:

The Apple Daily (Cantonese)

The Standard: http://paper.thestandard.com.hk/

gdep 11 yrs ago

OTP acutally gohome is better and updated compared to squarefoot.. but not sufficient as there are no dates on it..

http://www.gohome.com.hk/new-property/new-property-2013-table/hong-kong/en?source=newhome

OffThePeak 11 yrs ago

thanks.

I will add it to the Original Post

gdep 11 yrs ago

The Avenue in Wanchai has got sales consent.. 1200 units .. this will set the benchmark for the area. Guess discounts have to be steep given higher number of units compared to avg 150 unit blocks recently launched on HK side (imperial cullinan, hemisphere, argenta, azura etc)..

OffThePeak 11 yrs ago

A Neat Trick: LB is now selling at a PREMIUM to 2nd Hand

(I suppose the agents aren't telling their clients this,

because of the greater commissions they get from New Properties.

The crazy thing is:

Now the agent must "Sell" the property, and

then Hope the client wins the lucky draw to make a sale):

Not long ago, The Long Beach had 1,000 vacant flats to sell.

+ 80 are gone at 18% discounts to List prices

+ 60 are now on offer* at 16% discounts to List.

Most of the Remaining flats have "List" prices well above secondhand,

and the premium of List to secondhand is MORE than the discount.

=====

*HL has planned a great "trick" for property buyers.

They are getting investors to focus on the discount, not the actual list prices, or prices net of discount.

This trick will work, if people keep buying thinking they are getting a bargain because of the big discount.

But guess what: the LIST prices in Towers 7 and 8 are so high, even after a big discount, they will be paying

something ABOVE the second hand prices in the other "older" Towers.

Here's the back-up for this statement:

"older" towers (Towers 3,5,6): Originally launched in Oct. 2007, and later

THESE ARE LIST PRICES:

Flat.No: BkOfChina: List.Price / Net = Per SFnet = Premium to Bank Valuation

======

(T3,5,6)

t3.30b: $7.440m : $8.401m / 550 = $15,275

t5.31c: $7.720m : $8.834m / 569 = $15,525

= Aver: $7.580m : $8.618m / 560 = $15,389 : 13.7% to 2nd Hand ($13,535 BofC)

====

(Tw.8)

t8.29b: ======= : $9.056m / 550 = $16,465

t8.29e: ======= : $8,761m / 550 = $15,929

t8.29f : ====== : $10.456m / 566 = $18,473

t8.32b: ======= : $9.110m / 550 = $16,564

t8.32e: ======= : $8.814m / 550 = $16,025

= Aver: ======= : $9.239m / 553 = $16,707 : 23.4% to 2nd Hand ($13,535 BofC)

(Tw.7)

t7.30b: ======= : $9.518m / 562 = $16,935

t7.30c: ======= : $8.943m / 569 = $15,717

t7.30e: ======= : $9.787m / 567 = $17,261

= Aver: ======= : $9.416m / 566 = $16,636 : 22.9% to 2nd Hand ($13,535 BofC)

punter 11 yrs ago

They should just keep it OTP. There's no need for them to sell.

OffThePeak 11 yrs ago

Yeah.

They have plenty of cash, and not many landholdings in HK

(Apart from their large rental portfolio.)

I am pretty sure, they will keep selling, as long as the market will absorb higher and higher prices. Let's see if they get to steps 3, 4, ... and so on.

The big advantage they have now, is TLB is one of the last "new" projects in the Kowloon Station and Olympic Station area.

(The next West Kowloon "hotspot" might be Nam Cheong station, when SHKP's new project comes on stream there.)

OffThePeak 11 yrs ago

REMARKABLE:

"Hang Lung raised prices by 2.5 percent for 60 flats for sale next week at the Long Beach, TKT"

That's ABOVE secondhand for Towers 7 and 8.

Are these "new" towers really worth a premium?

Comments welcomed here

Loyd Grossman is Miss Venezuela 11 yrs ago

Too much money chasing too few flats. The money will increase faster than the supply - even with the govt increasing supply. Who would want to live in China when you can live in HK?

OffThePeak 11 yrs ago

Also:

As owner-occupiers repay loans, they have more equity that they may be willing to risk on buying a new property.

Thus, you may see someone SELL in Tung Chung, or Tsing Yi (for example) and buy a newer property in a better location like The Long Beach in Olympic Station.

And they may sell out to someone getting on the ladder in a cheaper property, or moving from an older and cheaper place in Sham Shui Po, or wherever.

It is these types of sub-$10 Million transactions that are keeping the HK property market alive right now. And developers are trying to get their piece by pricing their new launches with large apparent discounts.

gdep 11 yrs ago

Certainly SHKP pricing imperial Kennedy out of market.. and that's reflected in the dismal sales.. only 1 flat sold.. good luck SHK.. now there will be more marketing tactics from them.. bet their sales people will be calling their mainland clients offering goodies.. like a merc or something :)

OffThePeak 11 yrs ago

People learned from "Imperial" Cullinan, that the word "imperial" in a projects name may not be worth paying a premium.

If it had worked in Kennedy Road, then how long before SHKP springs "Imperial" Sham Shui Po, or "Imperial" Tin Shui Wai on us?

The punters are seeing through the sham branding.

gdep 11 yrs ago

Agree .. totally..and the real estate agents also try to mislead buyers by substantiating it as a Brand premium .. total crap..

punter 11 yrs ago

Local and China buyers however are easily led/misled. A new trick will bring them in again. Just like a snoopy toy in McDonalds. How about that fiasco in Austin regarding the credit card deposit?

punter 11 yrs ago

Some news says 17 were sold in Imperial Kennedy, and 20% of that has corporate buyers. Corporate buyers get about 29% discount, while individual buyers get about 23%. I wonder how accurate that is.

OffThePeak 11 yrs ago

"How about that fiasco in Austin regarding the credit card deposit?"

I haven't heard that story yet. Do you want to tell it?

punter 11 yrs ago

Agent forked tongue, apparently.

http://www.scmp.com/news/hong-kong/article/1352792/would-be-buyers-say-they-were-misled-agent-over-deposits

gdep 11 yrs ago

Looks Like Hemispheres is doing well at similar price levels.. guess its the smaller size and hence the smaller total price tag which is working for it as against imperial kennedy which have bigger units..

people are also waiting for the Avenue which might be prices similar to the Austin as it has to sell close to 1200 units.. and it will not be easy..

traineeinvestor 11 yrs ago

"Just like a snoopy toy in McDonalds. "

Well, the early punters in the McSnoopy craze actually did quite well (if you ignore the lost productivity).

All this discounting not only makes it difficult to figure out where the market is but must be distorting the statistics to some extent. Right now, it isn't hard to imagine both the Centaline Index and future HKSAR Govt stats as both overstating property prices in Hong Kong. Does this mean that the effective LTV is higher than current HKMA guidelines? I don't know, but if banks are basing the "value" component off the pre-rebate price then the answer may be yes. I also have to wonder to what extent the HKSAR Govt will be relying on potentially misleading data in evaluating when/if to relax the cooling measures?

gdep 11 yrs ago

Bank valuations are totally whacko.. postings in ML are 10% lower than Bank valuations currently..

punter 11 yrs ago

It's not out of whack, banks just want people/buyers to borrow more (the higher the valuation, the bigger the amount that can be borrowed).

Loyd Grossman is Miss Venezuela 11 yrs ago

Taking a one bedroom Barbican flat in Central London (90 year lease) with price of 800,000 pounds as a guide, Mid-levels valuations are about 100pc lower than they should be at HSBC. This is why no one is selling. Perhaps the government should consider revaluing the HKD to about 4 to the USD?

Lucane01 11 yrs ago

Comparing one property bubble to another property bubble and declaring that both are normal.

Well Facebook is valued at 100bn so Twitter at 30bn is clearly a great bargain.

Loyd Grossman is Miss Venezuela 11 yrs ago

Lucane01. Doesn't it rather suggest that there is no bubble in HK?

punter 11 yrs ago

If you bet on prices to come down, then it's time to sell. But reality on the ground is, people are still buying even in the levels prices are at today.

As I have argued in the past, you can only be sure that there was a bubble after the fact. No need to argue it now.

Lucane01 11 yrs ago

Loyd,

No, that is faulty logic. It'd be like comparing a 9 foot guy to a 8'6'' guy and saying that the smaller one is not a giant. You need to compare price levels to a "normal" market or historic averages, not just to an even bigger bubble market.

punter,

If it is not worth arguing for the bubble's existence before it pops, then it's also not worth arguing that the market is fairly valued until after it eventually enters a bubble and pops.

But in general I agree that we all just have to wait around and see what happens, whatever it is that happens.

OffThePeak 11 yrs ago

The abnormal thing is interest rates.

If there's a bubble in HK property prices, that is the 80% causal factor

Loyd Grossman is Miss Venezuela 11 yrs ago

Lucane01. The one thing you cannot use in HK is historical prices. There have been too many changes in the housing market. Firstly a price after the special stamp duty is an illiquid price. Secondly, the HKMA's requirement for credit checking etc have taken all the froth out.

gdep 11 yrs ago

Loyd in the same way, price in a low interest environment and QE is a unreal price as well..

Janet Yellen supports printing so the QE can go further beyond March 2014.. until Q3 2014 possibly..

with so many restrictions on property, stocks are the place to be.. (US markets )

I feel that post CNY there will be moderate pick up in pricing in HK property.. and will be brisk sales for primary market .. think some of the key properties in the market will be launched then .. (but would be a seasonal effect)

gdep 11 yrs ago

I really do not understand the new Housing authority priority list http://www.thestandard.com.hk/news_detail.asp?we_cat=2&art_id=139651&sid=40893974&con_type=1&d_str=20131115&fc=8

and the price signalling by top SHKP people after poor start of sales in Imperial Kennedy.. good way to drum up demand ..

http://www.thestandard.com.hk/news_detail.asp?we_cat=2&art_id=139650&sid=40893409&con_type=1&d_str=20131115&fc=8

The Avenue will be launched in 2 weeks.. will be the most interesting launch of this year.. large HK island project..

gdep 11 yrs ago

SHKP finally pricing reasonably at Imperial Kennedy

http://www.imperialkennedy.com.hk/upload/news/79/PL_2221_2_20131115.pdf

with avg 15% discount a 400 sqft net with balcony at ~6million sounds worth buying ..

looks like the new launches have sucked out the excess cash in the market ..and now it will be harder for the primary market again.

gdep 11 yrs ago

Harmony place from Housing society..

http://www.harmonyplace.com.hk/files/download/20131116093516_348.pdf

selling at 10.1 K gross, if 75% efficiency is assumed... wow thats almost all secondary old properties on island side now a days..

and look at the payment flexibility and discounts. phew for both this and imperial kennedy

e.g Imperial Kennedy offering 10% discount if payment is settled if 250 days..

A 400 sqft net apartment with balcony (size of my current apartment in ML) is selling at ~7million. With 10% discount 6.3million. Assuming K Town with new MTR is similar to ML .. if I am an investor why bother paying 7.3million to a 25 year old apartment from the same builder.. certainly secondary markets will be under immense pressure in 2014.. unles post CNY there is a dramatic rise in people's bonuses.

Lucane01 11 yrs ago

Only 1 million USD to live in a house the size of a college dormitory room? Now that is true imperial luxury. Nothing says you have "arrived" like living in the king's linen closet.

gdep 11 yrs ago

Lucane,

I think its absurd as well on a standalone basis. But everything exists in relation to others.. so under current market circumstances compared to existing secondary market rates for apartments on mid-levels west / Kennedy town this is quite decent.. given deferred payment and discount level

OffThePeak 11 yrs ago

UPDATE on The Long Beach

Hang Lung had the "lucky draw" for the Round #4 (60 Units) on Saturday.

I was told by one of the agents that the developer had received about 400 cheques, and that people were given lottery numbers, and they would start assigning with no.1: Who would get his first choice of any of the 60 flats. No.2, would have his pick of the 59 that were left after no.1 picked, and so forth.

These 60 Units (in round #4) are the "new" ones in Towers 7 and 8, where the LIST prices are 20% or more above the bank valuations of the existing units in Towers 3, 5, and 6. So even after the 16% discount, prices are slightly ABOVE THE SECONDHAND MARKET.

Selling any at all is a sort of triumph for HL - In effect they have "fooled" the buyers into thinking the flats in the "new" towers are worth more than the ones available in the secondhand market. (Remember, all these flats were built at the same time, and there are just a few cosmetic decorative changes in the "new" flats.)

Anyway, HL sold 40 of the 60 flats, leaving just 20, that no one among the 400 cheque-givers wanted to buy.

The "rejects" were released back into the market, and are now available on a first-come, first-served basis. I understand there were a few sales in the hours soon after the lucky draw.

The rejected flats had common characteristics. They were on low floors, mostly below 30. These suffer from inferior views, and are also going to be noisy. (And as someone else has posted here, all flats on floors 49 and below have "low" ceilings of 2.8 meters. 50/fl= 3.15m, and 51/fl + 52/fl = 3.10m.)

It will be interesting to see if the strong demand begins to spill over into some of the "better" flats now on offer in the secondary market.

gdep 11 yrs ago

not sure fair to compare Imperial Kennedy(IK) vs TLB..

But from the latest IK prices it seems a better bargain vs the Hemispheres..

Looking at IK pricing, The avenue - especially the middle to lower floor ones will be hard to sell.. and will probably end up ~15K psf (Net) putting pressure on Zenith and others in the neighborhood

Lucane01 11 yrs ago

OTP,

How were the empty TLB towers handled regarding interior work? Did they finish the interiors years ago and leave it empty, or did they leave them as bare concrete and recently do-out the apartments up for sale?

Seems fishy that there were 400 checks and only 40 real buyers. I don't trust agents / developers.

Lucane01 11 yrs ago

http://www.thestandard.com.hk/news_detail.asp?we_cat=2&art_id=139685&sid=40907902&con_type=1&d_str=20131118&fc=10

"Sun Hung Kai Properties (0016) priced 39 of its one- to two-bedroom flats at Imperial Kennedy at rates similar to nearby secondary homes and 35 percent lower than the first batch. The third batch at the Western district project comes at HK$19,578 per sellable sq ft."

30% decrease from first batch sold, sounds pretty awful. Usually smaller apartments have premium prices too unless we are comparing them to penthouse quality.

Anyone have any color on IK to share?

gdep 11 yrs ago

Actually the lower floors until 20 are on average 18K psf. Take 15% avg discount and it should end at 15.3K net sqft or 12K gross psf.. which is inline with Merton..

Merton though has a better location but that building will be 10 years older than IK.. I am not a fan of IK's location.. that street is fairly busy.. IK is panicking with The Avenue coming up offering a whole range of flats.. Guess The Avenue will be prices around 20K psf..

surely shows if you wait you are gonna be well served.. don't fall for the gimmicks..

OffThePeak 11 yrs ago

L,

There were 400 Real buyers, who handed in their cheques, with one ort more flats in their sights. But not everyone got the flat(s) they were wanting to buy. Someone else with a lower number may have snapped up the most desirable flats.

By the end, 40 were sold, but none of them wanted 20 of the flats. It does not mean that they are really undesirable, just not cheap enough. After all, ALL of the new flats were priced at the above the secondhand market. And in that assessment, I am using the LIST price, and subtracting the discount.

I am not aware of transactions in the secondary market. Perhaps some were bought instead of new flats.

OffThePeak 11 yrs ago

G.,

I disagree that Merton is a better location.

Time and prices will show if the market agrees with me, or with you. The "better" location will be the more expensive one.

gdep 11 yrs ago

Isnt the BSD subsidy by the developers like flouting Govt rules?? I am surprised the govt still has not closed the loop hole on this one.. and let only prices and discounts to play in the market, so real pricing effect is seen..

Lucane01 11 yrs ago

gdep,

Isn't that just semantics? The only difference I see thus far is just that it gives the appearance that prices have fallen less than they really have.

gdep 11 yrs ago

Lucane

"The only difference I see thus far is just that it gives the appearance that prices have fallen less than they really have." Yes, the whole point is that .. to keep sales going .. as falling prices mean lower sales as per below evidence...

http://thestandard.com.hk/news_detail.asp?we_cat=2&art_id=139833&sid=40937181&con_type=1&d_str=20131121&fc=7

i certainly feel the 16K new supply from 2014 onwards will result in 10% annual price correction..

Lucane01 11 yrs ago

Nothing abnormal there, in this property market where all buyers are end users, it is totally normal for people to contract to purchase a home and then walk away weeks later leaving a million HKD on the table. These Hong Kong family end-user purchasers are just so cash-rich with such strong balance sheets that walking away from that money is nothing.

Completely normal market conditions.

OffThePeak 11 yrs ago

L.,

Have you ever bought a new flat under pressured conditions in HK?

I have TWICE, and it is a tricky business. So I totally understand what is happening with these 5% losses. IMHO: It has nothing to do with a falling market, and everything to do with people who bought the wrong flat, and did not realise it until it was too late.

In the secondary market, you can take your time buying. Then, you sign a contract, and put down a small deposit, maybe 1-3%. Then you still have 10 days to change your mind, and lose only the deposit, plus the agents' commissions.

With these new flats, the people can be under unbelievable pressure. As the article in the Standard put it:

"A sales agent said buyers may have abandoned their purchases due to remorse, as they were only given seconds to choose a flat."

It is easy to imagine what happened. The buyers probably wanted another flat. But they got too high a high number in the lucky draw. Then when their number was called, all the flats they wanted were gone. And the buyers had to make a decision: Do we buy something in the project (and grab the discount), or do we wait for the next lucky draw and hope we can get a good low number and the same discount then.

The agents are very good at pressuring their clients in this type of situation. I am a strong-minded guy, and twice said: "No thanks," in a situation like that. (Another two times I got the new flats I wanted and bought them.)

The pressured buyers later studied the details of the flats they had bought, and maybe they did not like the view, the layout, or the size - after further reflection. So they decided to forfeit their 5% deposits. It's a rational, but painful decision.

The market has not changed much, if at all, so I think these failled deals reflect on pressures in the buying process, not pressures from the market itself.

I wonder how many flats the reporters on these stories have bought. And I wonder if they understand the pressures of the HK buying process?

OffThePeak 11 yrs ago

In a way, I did (give in to agent pressure). On one of the two new flats I bought.

But it worked out for me, thanks to a rising market.

I felt pretty awful the next day, when I realized that I had not worked out the view properly, and there was potential for losing my view (which I could not see until I completed on the flat.) It worked out fine, BTW.

==================

FORFEITED DEPOSITS:

xx

> http://thestandard.com.hk/news_detail.asp?we_cat=2&art_id=139833&sid=40937181&con_type=1&d_str=20131121&fc=7

gdep 11 yrs ago

wow.. people are ready to leave behind half a million behind because its not the right flat?? but still eager to invest to get 2% net yields.. doesn't make much sense to me .. its more fear of a further price drops rather than the right or wrong flat..

if you read the article carefully the Imperial Kennedy dropped flat was prices at 27K psf , a week later a few floors below you are getting for 17K psf.. assuming its a 1000 sq ft property , its like a 10 million loss already.. why spend 10million more to see the harbour ??

OffThePeak 11 yrs ago

It is not the 5% they left behind, but the 95% they save,

which concerns them, I think.

There could be a big difference in views or something which might justify the difference.

It surprises me that a Developer would have such severe price differences without a good reason.

BTW, $27k per sf seems crazy expensive for something in that area. So maybe it was a big mistake to buy in that particular case, and the developer was genuinely cutting prices, rather than raising them as we saw in Kowloon Station (Cullinan and The Austin), and at Olympic Station (Long Beach)

Loyd Grossman is Miss Venezuela 11 yrs ago

It may have something to do with nit being able to get the funding due to tight lending requirements.

Lucane01 11 yrs ago

OTP,

I have purchased no real estate in HK.

When conducting business (of any size) I have no tolerance for people pushing me to make decisions. If I were about to drop millions on an apartment and the agent or other buyers were hassling me in even the slightest manner, I would walk away and take my business elsewhere. And if the entire city's property market acts this way (as it seems to do) then my "business elsewhere" is the rental market, where I easily have taken my time to view and select the "best" option for me, at my convenience, and at a low price - no hassle.

Value investors sell into the herd and buy after it has left. That is, of course, not to say that there is not money to be made by participating in the herd - there is indeed, but I do not enjoy taking those risks.

My comment was not to indicate a change in the market - I have read about HKers walking away from deposits before. It was just a sarcastic remark, suggesting that end-users do not pick their homes on multi-second whims, but speculators do.

OffThePeak 11 yrs ago

Sure, L.

I totally agree with you - that's why I walked away twice.

But it is not see easy to do as you may think.

And they may have thought: "it was a good idea... at the time."

Have you ever visited a HK showflat?

If not I recommend it.

+ NYC does Broadway shows

+ London does West End flats

+ HK does show flats

Each of these cities has an art form (and part of its culture), that it has developed to a high degree. I probably have seen more of these than 99.999% of the Expats in HK. (And it may not be something to be proud about. But I am being factual with you)

gdep 11 yrs ago

I just showed the math how much the investor would lost just a matter of new days.. so better to lose 0.5 million than lose 10 million.. the investor should have done the math before , why pay double the price compared to similar properties with better facilities in the area (Belchers).. but am sure he would be some big shot sitting somewhere and would have send his maid to deposit the cheque trying to catch the speculative wave and once the second list was announced conveniently dropped the deposit

Agree, totally sucky pricing form SHKP during the first list.. (but they could have got away from it if there was no BSD/SSD etc..and shows the efficacy of the measures ) the second list onwards is very close to secondary market prices ..and makes sense..

If it is difficult to place 10K units in 2013 at a slight premium to secondary prices ,

Where the heck is the pent up demand that Loyd keeps talking about?? Shouldn't there be zero apartments available by now from new property launches ..

how would it be easier to sell 16K units in 2014 without dropping the price ?? supply is up by 60% .. how can demand increased by 60% in an year.. ??? i still believe prices will drop by 10% in 2014 in the primary market and the new apartments will have only 5-10% premium to secondary homes in a particular area which would push secondary apartment prices in the latter half of the year..

Loyd Grossman is Miss Venezuela 11 yrs ago

Gdep. There is a lot of pent-up demand but obviously not at SHKP primary prices and not under the restrictions. The developers need to either sell to a) mainlanders who are very rich or b) at levels HK people can afford. That doesn't mean secondary prices will fall as that is now an end-user market. It means developers can't price 50pc ahead of what was then the secondary market like before. Also, the stock market is doing quite well and inflation is rising which should put an even bigger floor under the secondary prices - such as they are.

gdep 11 yrs ago

Loyd,

as I have indicated with stats, the premium of primary flats have reduced to 20% from about 50% in just 6 months. And with supply increasing developers will price at or below secondary prices. If someone in the secondary market has to sell then his pricing has to beat the primary one by a higher margin (based on the age of the building).. i think its just being in denial that there will be no pressure on secondary market in 2014 UNLESS you show me some HUGE demand compared to current quarter levels.. stock markets will be down as soon has fed starts tapering and the what? inflation argument almost sounds desperate..

16K new supply in 2014 or 60% more than 2013 under BSD/SSD environment is a tough one to sell..

gdep 11 yrs ago

Btw Loyd

Got an ad for a London property at the following location East One – 36 Commercial Road E1 . Prices start 340k pounds... is that ridiculous for that part of London?

Loyd Grossman is Miss Venezuela 11 yrs ago

Gdep. When the housing market was performing normally, supply was typically 20,000 per year. Fourteen thousand still not that much. Also, most new supply is in the NT so shouldn't have much effect on HK side or core Kowloon prices. The housing market is no longer like the stock market as we have only end investors and no market makers thanks to the SSD. As for Commercial Road, it's a very long road and some areas around there are quite grotty. I haven't lived in London now for 20 years. For London, I take the Barbican as a benchmark as supply is limited and most of it is in the City of London. It is, however, leasehold and about 40 years old - the latter is not a problem in the UK. The UK government is planning to introduce capital gains tax on properties held by non-UK residents. Therefore, it will have to be your principal dwelling to avoid CGT - and if it is, you'll of course pay UK income tax.

Loyd Grossman is Miss Venezuela 11 yrs ago

Gdep. Of course someone who wants to sell in the secondary market will be affected but a) there are hardly any sellers - as we have seen over the past year and b) anyone who buys can't sell for three years without paying a penalty. Really, most people holding secondary market flats are like superbugs. The government keeps hitting them with stronger antibiotics - and a few are wiped out - but the ones who survive are stronger. You can get a cheap secondary flat but there is no longer any meaningful supply there.

gdep 11 yrs ago

http://thestandard.com.hk/news_detail.asp?we_cat=2&art_id=139878&sid=40946667&con_type=1&d_str=20131122&fc=8

The avenue similarly priced as Zenith, Johnston (after factoring in discounts) and way lower than One Wanchai, Oakhill etc

good Sino is not allowing corporate buyers.. helping individuals

OffThePeak 11 yrs ago

Thanks, GDEP.

SCMP says: The Avenue is "20 percent below secondary prices in the area"

Is that Really true?

Or Did Sandy Li, of SCMP, "drink the developers kool-aid" (marketing materials), and miss out on the true broader market? I suspect so.

First batch is advertised at HK$18,771 psf (for cash buyers.)

They say the relevant comparison is J-Residence at HK$23,500.

For me, I would probably want a cheaper price than Olympic Station, to live in crowded Wanchai. (But the market does not yet agree with that.) But HK$19,000 psf does not seem cheap to me.

What will be really interesting will be how buyers respond to the (cheap?) first batch, and see if they raise prices in later batches.

rititt 11 yrs ago

property market like any market is determined by offer and demand. HKG is quite special, it's a very tight/small market and subjected to many players with the property developers as cartel and with the government help, have been manipulating the market. it has somehow changed with CY Leung, an x-communist and an outsider who dares to go against the cartel to implement his program of property accessible to the mass. i believe this iis how he wants to be remembered in history.

despite the government determination to control the market, which is not a small factor, prices will ultimately be dictacted by offer and demand and for that, supply of flat to come (offer) and interest rates/mortgage ratio (demand) are determinant.

banks are lending on lower of hibor and prime (minus). now hibor is less than 1% and borrowings could still be made below 1% p.a. v.s. prime at over 3% p.a. Once interest rates will go up (not if but when) hibor could easily shoot up above 3% which in turm will push prime and sooner rathen than later, borrowing cost will quadruple from 1% to 4% p.a. and it will definitely have a negative impact on the property prices.

If i were a buyer, i would want to wait and meanwhile if there is cash to invest, i would buy shares in blue chip developer such as cheung kong or shk prop.

for people without much experience in the real dealing/purchasing, don't be in a hurry, there will be plenty of better deals to come, meanwhile keep your cash or stay very liquid to jump into better opportunites.

gdep 11 yrs ago

the SCMP/Standard comparison is based on the fairly NEW apartments like J-Residence, One Wanchai and Star Street apartments.. which are at 20K+ psf.. I find it very expensive for Wanchai area.. crowded and road level traffic/pollution is high.. if it was Kennedy road or above probably much better in terms of traffic but still 15K psf would be reasonable.. 19K is high..

I feel the second pricing list will be cheaper than the first ..there will not be many buyers.. the project will not have great views either.. so dont think there will be many takers..

gdep 11 yrs ago

OTP,

But I have to add that the smaller studio 1-bed apartments are fairly attractively priced (after discounts ) when compared to apartments in the busier Mid-levels like Caine road/Bonham road and even CWB ..

6.5 million for studios will attract investor who would be eyeing rentals of 20K-25K

For end user families it will totally stupid to live in there .. for 10million (after discount) you will get 530 sqft net .. for the same 10 million you can get 650-700 sq ft net in mid-levels west/Kennedy town

K-town will be pretty convenient within an year.. IK will trump The Avenue that way..

rititt 11 yrs ago

i agree with gdep, avenue is not an ideal place to live. this development has over 1,000 units! traffic, narrow pavement, commerce, pollution etc.. very messy and archaic area. but for young buyers, it's convenient and that supersides all the bad points. as long they live alone it's ok. the developers had purposely targeted this type of buyer who can afford the total pruchase price and have lower and better mortgage rate because of the amount involved.

you could all notice how hard the developpers nowadays have to come with marketing ideas to sell their stock of apartments. it is no more same as before. it's getting tougher and i believe this is the beginning of more to come.

OffThePeak 11 yrs ago

"6.5 million for studios will attract investor"

Doesn't sound cheap at all to me. But maybe if you limit yourself to HK Island, it is (?)

Check and see what $6.5 million will get you at the Visionary in Tung Chung.

OffThePeak 11 yrs ago

Further Update on The Long Beach

I double checked some information over the weekend, and came up with some slight different info.

There have been 4-5 batches of sales at TLB.

+ Since the original launch a few weeks ago, there have been two price RISES: +5%, and +1% in the LIST prices. (this was true on several flats I checked, but may not be exactly true on ALL the flats.)

+ Discounts have been cut from: 18% to 16%

+ Also, List prices on the flats in Tower 8, are perhaps 10-15% higher than in Towers 3,5,and 6 - for similar layouts, views, and floors.

Let's compare: (this is very approximate)

===

Tower : Orig.List: +5%+1%: -16% discount---- : 550 sfs

Twr.6 : $15,000 : $15,900 : $13,356 per sf. Net : $7.346 Mn

Twr.8 : $16,000 : $16,960 : $14,246 per sf. Net : $7.836 Mn

This is a rough estimate of the per square foot price of similar flats,

where the secondary market price for this flat might be:

+ $10,360 per sq. foot., and $14,000 psf, Net x 550= $7.700M

The overall conclusion is that most recent selling prices in Tower 8 are at or above the secondary market. But agents are still pushing the "new" flats hard, since the commission they get from Hang Lung, the developer is 3%, versus the 1% commission they might get from selling secondhand.

There are now less than 10 flats left in the latest batch. And one agent that I spoke to said he thought: "HL might halt further new sales. They may hold back for high prices, since they have already sold over 200 flats at fair prices. And their habits is to sell a few batches at a time. They still have all of Towers 1,2 and 9 to sell... But they are very unpredictable."

gdep 11 yrs ago

OTP, but the point you are missing is that new home prices (though TLB is not new) are very close or similar to secondary prices e.g Austin and the cullinan .. so people who are OBLIGED / REQUIRED to sell on secondary market have to set prices lower than primary market.. and centaline runs on the latest prices ..

OffThePeak 11 yrs ago

GDEP,

Generally speaking, you may be right.

But I have better data than that - And I think you need to ask:

+ WHAT new prices?

+ WHERE is the property?

+ HOW much of a hurry for the seller?

WHAT PRICE?

Initial launch, or later prices.

As we have seen on this thread:

Developers have been launching their new projects with big discounts. And then (if demand is strong enough) they move to raise the sales prices. In TLB, the rice rise was 8%, plus maybe another 10% for the new Tower.

WHERE?

In the case of TLB, they wound up with prices ABOVE second hand. Very few would have predicted that, but I think you will find that I did - see above. In other areas, where there is too much new supply coming, or not enough demand (because of where they are) - both New and 2nd Hand prices may be under pressure. In some areas, you may find developers CUTTING prices, to generate demand, if it is too weak.

HOW much rush?

If a seller is in a hurry, he may have to cut prices to 5% or even 10% below the (theoretical) market price to attract a buyer

gdep 11 yrs ago

OTP

When Cullinan was launched initially what was the premium to secondary market and what was the premium in the latest batch ? Has the premium gone up or down ?

Imperial kennedy had to bring prices close to secondary market in oder to sell. avenue pricing closely as well in order to sell.. Market is established at the lowest buying price usually

OffThePeak 11 yrs ago

Cullinan

You may have to check with the Developer or the Agents to get the answer to that.

My impression is that they simply cut discounts in the first 2-3 batches. After that, I do not have any knowledge of what they might have done.

I was a little surprised to discover that the Developer at TLB was moving both Discounts and List prices. But, Why Not?

OffThePeak 11 yrs ago

THE AVENUE - A very successful launch

4,483 registrations - 20X oversubscribed

That's for 220 units at a discounted HKD $18,994 psf, net (Average price).

The initial discount is 17.5 percent

THE VISIONARY

2,700+ registrations - for 318 units

Average price : HKD$ 9,686 psf, Net BEFORE 20.8 percent discount,

so I make that: HKD$ 7,671 psf, Net

To me, Visionary is the better buy - But HK Island fans may not agree

OffThePeak 11 yrs ago

WANCHAI RENTS to be pressured by The Avenue (?)

Excerpt from SCMP article, P1:

Average Flat price: HKD $18,771

"RENTS in the area could reach HK$28 per sf in terms of usable area -

(So) they could enjoy a rental return of about 5 per cent."

Let's see:

Rent: $28 x 12 = $336 pa / $18,771 = 1.79% ??? !

What is the agent talking about?

BTW, $28 seems far too low. More likely might be $50 per sf.

MORAL:

Always check everything a property agent tells you !

gdep 11 yrs ago

With 1200 new apartments in a particular area how can rentals increase. I want 20% yields but will not get it ..

OffThePeak 11 yrs ago

The Latest at the Avenue - per The Standard

+ Prices increased by 2% (about $20,000 per flat)

Thanks to buying "stampede".

With over 4,000 people unable to buy (after 220 units were allocated), the Developers can be sure there is still some big "unsatisfied demand", even with many Double and Triple applications.

And they now know which flats were most popular, based upon which ones went first after the lucky draw.

The article also corrected the incorrect rental info:

"Chan expects to rent the two units he bought for HK$60 per sellable square foot"

(previously they quoted $28 psf)

OffThePeak 11 yrs ago

FOR THE RECORD -- (duplicate post from Main thread):

"Article in The Standard about how the subscription numbers for apartments are bogus because people submit multiple checks in order to game the ballot system."

A USEFUL WARNING:

/ http://www.thestandard.com.hk/news_detail.asp?we_cat=16&art_id=140016&sid=41004703&con_type=1&d_str=20131128&fc=7

Remember they have to put up Real Money - usually $100,000 - $300,000 cheques per application to get into the game. So this is not as artificial as you may think. And also, some buyers want more than one flat, so those will have reason to put in more than one cheque.

In the end, the thing to watch is whether or not all the flats are sold. As the ratio of "over-subscribed" drops, there will be more and more left over.

At TLB, there has been a pattern to the leftovers, and that is the lower, noisier floors - with the less attractive layouts. Maybe others here can describe the patterns on projects they are following

"many flats remained unsold":

Not true!

I visited the salesroom on Tuesday (with some friends who wanted to understand the overall project), and there were exactly 9 flats left... All of these were lower floor, noisy flats (with one interesting exception.) To me, those were overpriced, and ABOVE the secondary market - so why buy new?

I follow the market very closely. An that should be obvious based on the quality of info that I have posted here. (And if I make an error, I will correct it when I discover it, as I have done recently on the other thread.)

Lucane01 11 yrs ago

Why do the developers not do a silent auction style sale of properties? Everyone with interest in the apartments submits their single bid highest offer and then it sells out to that person.

traineeinvestor 11 yrs ago

Would they be allowed to do that under the Residential Properties (First-hand Sales) Ordinance? I have not looked into it, but it would not appear to fit with all the regulations and guidelines on transparency of pricing:

http://www.srpa.gov.hk/en/guidelines.html

OffThePeak 11 yrs ago

"Why do the developers not do a silent auction style sale of properties? Everyone with interest in the apartments submits their single bid highest offer and then it sells out to that person."

=== ===

Their objective is not to get the highest price on the most appealing flats - It is to sellout ALL the flats. And I think their arrangements make sense

HERE ARE THE STEPS

+ They open the flats for viewing, and can see how many people show up

+ They put out a price list, offering a Big Discount on a first batch of maybe 40 flats or more

+ They collect as many checks as possible over a week or so

+ They announce their oversubscription to the Press to create a sense of excitement and generate a bandwagon effect

+ They have a lucky draw, assigning a number to all of those who have submitted checks

+ They bring people, one-by-one into their salesrooms, knowing that the most attractive flats will go quickly

+ They hope that the apparent "discount", the time pressure, and the sales effort from the agents will allow them to also sell the less attractive flats

+ If the first batch has sold well, they launch a second batch with a higher LIST price, or a smaller discount

This procedure is orderly, and it allows them to handle a large number of people in a way that gets many cheques submitted, gives news flow, and still puts pressure on buyers to purchase the less attractive flats.

Do you think you can improve on it?

Maybe you can. It would be interesting to hear a detailed alternative plan

gdep 11 yrs ago

I feel the use of AGENTS for the sale of first-hand sales totally ridiculous especially when a commission of 3% is paid to them.. why not extend that as a discount to buyers?? and handle the sale using your staff..

Understand using agents for properties not in demand. But for something that has so much interest does not makes sense..

second list of the avenue draws 750 odd apps.. does it mean less interest ?or they give preference to the people who applied during the first list

"Sino Land (0083) and Hopewell Holdings (0054), on the other hand, received more than 752 registrations for the second batch of 220 flats at their The Avenue in Wan Chai to be put up for sale on Sunday."

Lucane01 11 yrs ago

Agencies have helped build up the entire property market here for decades now - developers would be morons to turn their backs on their informal partners. If a developer cuts out the agents when times are good, then the agents are not going to be there nor willing to help when times are bad.

There is major value added to the developers by the agents. Do you think that these properties would be so many times oversubscribed if there were not 30,000 agents across the city spamming fliers, calling phones and working their networks to make it happen?

What would a buyer / speculator think when he goes in to view the place and there is not a frenzy of agents everywhere? The giant circus that the agents help create closes deals and makes things sell.

OffThePeak 11 yrs ago

Why?

Because Agents may have existing clients, and they may be more skilled at the actual selling process than the staff of Developers.

If you are reasonably certain you will buy, you should find an agent who will pre-agree to rebate to you 1% or even 1.5% from the purchase price. It was often done in the past, but agents are resisting it now because many bosses see their business has been struggling this year, but it is worth a try.

OffThePeak 11 yrs ago

TLB has released at New Price List:

29.Nov : http://www.hanglung.com/en/hong-kong-properties/residential/the-long-beach-price-list.aspx

Prices are high enough, that prospective buyers are also viewing secondhand flats

(it would seem.) But agents are still mainly pushing the new flats, because of he higher commissions they can earn. The problem is that buyers are having trouble getting the flats that they want.

Pricing - on a high floor of Tower 7

=======

L1 : 23 Oct

7-47B : $9.808

7-47C : $9.215

==

L2 : 03 Nov / 07/11 Nov : + Pct.% : 19 Nov. : + Pct. % :

7-47B : $9.808 : $10.298 : +5.00% : $10.401: +1.00% :

7-47C : $9.215 : $ 9.678. : +5.02% : $ 9.773 : +0.98% :

==

L3 : 29 Nov

7-48B : $10.443: +0.40%

7-48C : $ 9.812 : +0.40%

=====

Initial discount was 18%, and is now set at :

+ 16% (for buyers completing inside 60 days)

+ 14% (for buyers completing inside 90 days)

Want to Buy one of these flats on the 48th floor of Tower?

You cannot. You can only Buy one of the 28 flats in the present batch.

(the highest floor in Tower 7 in this batch is on the 16th floor.)

Even then, you must summit a $300K cheque into the Lucky Draw which will be

held on 7 Dec. 2013, at 10 am. Good luck in getting a low number.

OffThePeak 11 yrs ago

We visited Tung Chung yesterday (for a social purpose)

And stopped to talk with two of our Agent friends who work there.

I had expected that some bargains would be showing up now in Caribbean Coast - now that the price pressure from The Visionary is being felt. It is not as evident as I had expected:

+ The post-lottery sales went ahead on Saturday with "mixed" results:

. Over 2,500 cheques were received

. Of the 318 flats for sale, 40 flats were left unsold

. The 1BR flats with low lump sums were grabbed very quickly

. Most of the "leftover flats" are 3BR flats with relatively large lump sums

+ The high "cheque count" was somewhat misleading

. The size of cheque was small, only $150,000

. Some agents were using only Credit Cards charges (not processed)

. Multiple cheques were given by some, to improve their chances of getting a low lumpsum 1BR flat

. Some agents were encouraged to put in cheques, to boost the cheque count

. It is said that 4 of the first 10 lottery numbers did not show up to buy

THe Visionary has a strange quirk in its contract:

. The get the big discount (over 20%), you have to close the transaction, and pay all the monies within 60 days. But you will not get the key then

. The earliest possible move-in date in the project would be Dec. 2014, but that is "unlikely" said one agent. And the completion of the whole project will take months

. The default date is a year later: Dec. 2015,

. So buyers must pay within 60 days, and will have no rent, and no flat to live in for one year, and in some cases may have to wait almost two years.

That inconvenience certainly justifies a 5-10% discount in the price.

Both agents whom I spoke to said that there has been little immedaite impact in the price. But they did agree that buyers now have little reason to purchase secondhand (unless they need a quicker and certain move in date.)

My view is the biggest price pressure in the secondhand market wil be on the larger flats, especially if the developer is forced to cut prices for the new 3BR flats, which would then put more pressure on secondhand.

Lucane01 11 yrs ago

OTP,

Over the last few years, how were new property sales handled regarding payment? Was it down payment and then the remainder upon receiving keys? Or was it down payment and then payment during milestones as estate is built? Or down payment with full payment soon thereafter?

Also what is the deal with the check? If you cut a check, your lottery number is pulled but you choose to purchase nothing, I assume you lose that money? But if your number is never pulled then the amount is refunded? Is that all correct (and are we positive this is how it actually works?)

As I understand it, HK new property sales historically were sold at premiums of 10-20% over local secondhand market properties. Now there is a complete reversal where new property is 0-20% below secondhand market prices.

Feel free to correct me if any of the above is wrong (because I am genuinely unsure).

OffThePeak 11 yrs ago

L-1:

+ The cheque with application - is not tied to a specific flat, it is NOT a downpayment, though it will be used as one, if you choose to go ahead and buy a specific flat.

+ Normally, you do not pay so much upfront as 100%. Maybe 30% within 60-90 days, and the rest on closing would be normal. And you can do that with The Visionary too, I believe. But you will not get the 10% discount. So 80-90-95% are going for the 10% discount, I have heard.

+ NO. You do not lose the money. Of course, you get your cheque back if you have a low number and do not choose a specific flat and sign an S&P contract.

(I have handed over a cheque in the past, and had it back, or used it, the system works fine. It is all about a test of seriousness, and the larger the cheque, the more meaningful the test.)

Lucane01 11 yrs ago

OTP,

So if I cut a check and my name is drawn but I don't actually want to buy anything, there is no loss on my side? If so then I fail to see what value this check system has at all. Cutting a check does involve a minor amount of hassle in that you actually need to fill out the check and hand it in... but if they aren't going to actually cash it then who really cares?

The lottery would be a lot more serious if everyone who's name was drawn lost their check if they opted to not actually purchase an apartment. As it stands now (as I understand it... correct me if I am wrong though), it is little more than simply people writing their name on a cost-less lottery ticket and seeing if they get picked.

Presumably there might even be free value in entering the lottery game because perhaps only 10% of the apartments are desirable, and if you are lucky enough to get picked for one you can instantly flip it to a person who actually wants to purchase it to live in.

To me it seems like the check # is just a gimmick to make it appear as if there are lots of people who actually want to purchase these apartments. First off you can submit multiple checks and secondly (and most importantly) there is no potential loss in participating.

OffThePeak 11 yrs ago

That is right.

You must have some degree of seriousness to go to your bank, and pay for a bank-certified cheque - that's what the Builders normally require. The bank will block the funds, and charge you something, if you return it unused.

This procedure cuts down on the frivolous interest, since people must have that much money in their banks, and will suffer a small loss for the processing charges from the bank.

Obviously, the $300,000 cheque required at The Long Beach (an many other new projects such as The Avenue - I believe), is somewhat more meaningful than the $150,000 cheque required at The Visionary.

THe larger cheque also cuts down on the multiple applications by those who really only want one flat, since they must block a larger amount of money for a week or two.

FLIPPING?

Not really possible since there is a 15% tax on selling within 12 months. It reduces after that, but you must pay something for as long as three years

The government has done its best to kill all short term speculation. But first time buyers (who plan to hold for three years or more) are mostly unscathed.

JUST A GIMMICK?

Not at all. It provides an effective queueing and allocation system. But the "gaming" behaviour by the buyers does inflate numbers, and you must be aware of that - AND the fact that all flats offered for sale are not equally attractive. I think the Builders are relying on the agents (seeking their 3% commissions) and the time pressure the system puts on "successful" lottery "winners" to move the less attractive flats.

When I look at TLB, I can see some flats that are obviously under-priced, and others that are overpriced. But this will not be so obvious to buyers who are less familiar with the building. I am sure this is true with any building. And the buying off-plan system means that most buyers are somewhat "blind" on what they are buying.

For years, we have seen fat premiums being collected by Developers selling new flats off-plan. A more realistic world, with waits for keys (and so forth), might mean that New Flats are sold at a discount to the secondhand market.

I predicted that a year ago, and some scoffed at my idea. Seems like it is already a reality - at least on the early batches of these new properties.

THis means, as I said in the first post here:

"HK's Property Developers (are taking) the brunt of this correction, especially in the early stages of the present correction"

traineeinvestor 11 yrs ago

@ Lucane01 - OffThePeak's summary is consistent with my experience. Back in 2002 - 2003, developers were also offering discounts to buyers who settled in full immediately rather than waiting until completion to make the final payments. IIRC,when we purchased a property 2002 we were offered a small discount (around 5% I think) for settling up front but decided that having to (i) service the first mortgage and (ii) using up some of the four year interest free period on the second mortgage, even before we had moved into the property meant we were better off not taking the discount.

A 10% discount combined with the higher deposit ratios required today and no interest free second mortgage would probably have resulted in a different decision.

gdep 11 yrs ago

The Avenue - HK Island, selling out vs TLB or The Visionary - Olympic/ New Territories.. emphasizing HK Island still is preferred.. (business district, school district etc etc).. and this will be the trend..

Its just not connectivity alone that will command sales..

Still a lot of properties ~1000 will be available in western districts in the coming 6 months .. and will be priced to secondary new homes (3-5 years old).. the 10+ years old properties will be under pressure..

OffThePeak 11 yrs ago

Do you think transport connectivity is better at The AVENUE ?

To what?? (certainly, not the the airport, or to China)

And, within a few years, the Tung Chung line will be extended to Causeway Bay and beyond. So I think not.

HK Island is a "fading star", and the evidence is everywhere

Lucane01 11 yrs ago

Another question:

Scanning through The Visionary & The Austin 200+ page brochures I noticed that they are fully devoid of any images representing what the estates are intended to look like. Websites, newspapers and ads are also turning up nothing. I'm assuming that there is a government regulation which prevents developers from releasing computer generated images of their estates now?

If so, what exactly is an owner-occupier thinking when they purchase a property that they cannot see and cannot access for 2+ years? They are buying a volume of a layout in suspended in space - no clue as what the exterior nor interior styles are like.

Once again please correct me if I'm wrong, but so far it seems like there is a blackhole of information regarding what these new properties are going to look like.

I can imagine purchasing a property in advance, site unseen, if they had a detailed layout with detailed photographs (real or computer generated) that showed every aspects of the property (inside and out)... and a contract that holds the seller / developer to delivering a property that matched the advertisements. But to purchase a faceless property, clueless as to what it looks like at all? Normal rational markets do not do that. Not even Russian oligarchs and Arabian sheiks purchase London property without at least seeing one picture of what it looks like.

OffThePeak 11 yrs ago

Yeah, it is risky.

But HK People and some mainlanders were long "educated" to prefer New properties, and to pay a premium for them.

There has been plenty of disappointment, when they finally get the key. Just look at the advertising for Imperial Cullinan, and the difference between ...

Video-1:

https://youtu.be/yWaQgYkidVc?si=p7VcbyuKscPGnxkw

(Can anyone explain the connection between the following Video-2 show and Imperial Cullinan? Was it just a promotion to give some mainland chinese buyers a mistaken impression about WHAT and WHERE I.C. was?):

Video-2:

https://youtu.be/xttN9P4ahKc?si=FipuqFg_YfXmYyF_

Compare these two Videos and THIS image:

https://hongkong.asiaxpat.com/Utility/GetImage.ashx?ImageID=8c2012c9-3873-4cdf-b697-042747f3fa20&refreshStamp=0

...with the final result:

https://hongkong.asiaxpat.com/Utility/GetImage.ashx?ImageID=030a0cd0-1661-49a7-b3f4-7d3563db8683&refreshStamp=0

Video-3:

https://youtu.be/Mijq7BTPMsM?si=nIR0eI8J15ohmhlJ

(Awkwardly sandwiched between OneSilverSea and The Long Beach, but priced at a premium to its neighbors with better views.)

Plainly speaking, I.C.'s advertising was a Big Fat Lie !

(IMHO, the advertising for I.C. was one of the pinnacles of false promotion in the HK property market.)

Like property promoters everywhere, HK Developers are skilled at selling Dreams.

OffThePeak 11 yrs ago

SCMP post had a negative spin article on Tung Chung today:

Developer's brochure silent on noisy neighbors

Sales material for Tung Chung estate fails to mention that it's near airport and new bridge:

"Most of the northernly windows face directly towards the take-off point for flights choosing the southern runway."

On the other hand:

"Developer Nan Fung dismissed the claim from environmental concern group Green Sense arguing the documents met legal requirements."

(We were here yesterday, and there is no doubt the aircraft sounds are very noticeable - but we lived there for 3-4 years, and can confirm you become accustomed to them within a few weeks.)

It is possible that close access to the bridge to Macau and China will be a plus in the long run.

gdep 11 yrs ago

OTP,

I said just connectivity alone is not considered important when people buy properties. School network , access to other amenities, neighbourhood do matter..

HK Island commands and will command the highest avg psf value in the future as well.

OffThePeak 11 yrs ago

Why?

Already some trophy properties in West Kowloon have sold at prices above those in Central and Mid-levels

PERCEPTIONS CHANGE OVER TIME

(Here's a comment from back in March 2008, who would you say has called the market more correctly?):

ESTATE AGENT RAMPING... but will the market pay attention? I think not

Here's Anne-Marie Sage, as quoted in Square Foot:

"Rental allowances will have to increase as the overall market is up 17.6 percent since this time last year."

I think not, Ms A-M Sage. The market doesnt work like that, as you should well know!

What you may not want to see is there's a global financial crisis developing, and many bankers based

in London and New York, are FIGHTING for assignments in Hong Kong, where they hope to spend a few

safe years until the troubles blow over in London and New York.

What do you think their cash-strapped employers will do?

Freeze or cut the generous housing allowances that they have been paying.

I'm betting on the mass market, Ms Sage. There you will see the benefit of:

+ Lower rates, making it cheaper to buy than to rent

+ Rising mass market rents, which will start to catch up with the over-bloated luxury sector

+ Affordability still means something in the mass market

+ The supply of new hosuing will be low (under 11,000 units) for the second year in a row

+ International investors are waking up to the appeal of HK's mass market

Give it a few months. I cannot guarantee I am right. But the programmed complacency of these "

international property agents" is rather maddening !

Here she is saying:

"On the peak you are now looking at a rental of hk$40 to hk$64 psf; on the South Side:

HK$33 to HK$59 psf; and in mid-levels hk$34 to hk$53 psf."

If I was a HR person for a Bear Stearns ex-employee, eager to take a job and my bank,

I might say: "Go to Tung Chung where you can rent 1,220 sf for hk$15 or less.

...That is. assuming you want the job, of course."

Meantime, Ms. Sage will go on saying:

"Proximity to good schools is one reason high-flyers favour the top three locales.

A sense of belonging is another. Particularly when they first move to HK, foreigners want

to live in well-established expat areas."

Well, I'm seeing a new international school open up in DB. And there are more foreigners

every week in TC.

OffThePeak 11 yrs ago

RISING TIDE... along The Avenue in Wanchai

The Joint developers of The Avenue have boosted prices by 7.25 percent in the newest batch of releases.

This came after the previous batch sold out within four hours yesterday

(ie those who gave a cheque, and participated in the lottery, turned up on the assigned day, and bought out all the flats they were offered.)

The newest batch of 200 flats was released at an average of HK$23,003 psf - that's 21.1 percent higher than the first batch.

Discounts of up to 17.5 percent (depending on how soon the closing happens) will be given on Launch prices.

You think the HK Property market is FALLING?

Better guess again !

gdep 11 yrs ago

OTP,

Its a good test for the new set of apartments at higher price. What you are missing is that if the measures were not there the latest prices would have been the initial price. If someone wants to buy at a better price he can look at the nova or imperial kennedy at kennedy town.. Alas the herds will chase wanchai..

OffThePeak 11 yrs ago

The success of the Avenue has surprised me somewhat

And it looks as if prices have been raise to a level which may be in line (or even above) the secondary market for the area. Perhaps people like the layouts and/or the clubhouse.

UPDATE on Long Beach (have stopped by the sales office today)

There are about 30 flats for sale, and lottery assigned numbers to about 100 cheque-backed applications. As of the time I dropped by, about half of the flats had been sold to those with low lottery numbers. People are still waiting for their numbers to come up, so there will be more sales today.

As expected, the higher floor flats seemed to be going first. But not the very top floors which were priced over $30 Million.

Slow selling were:

+ C-flats, in Tower-7

+ E-flats, in Tower-3 (restricted views)

I will try to check in tomorrow or next week, to see if there were any flats left. Today's sale (and time slot assignments?) continue until 7pm.

gdep 11 yrs ago

how they keep the price high??

http://thestandard.com.hk/news_detail.asp?we_cat=5&art_id=140452&sid=41087912&con_type=3&d_str=20131211&fc=4

I am surprised the govt lets Stamp duty rebate to thrive..

punter 11 yrs ago

Nothing illegal there, but that loophole may be plugged-in by the gov't in the future.

gdep 11 yrs ago

Indeed not illegal , but a big loophole..

gdep 11 yrs ago

An article on The standard reports new home sales momentum to slow down in 2014 .. on the contrary I feel that it will pick up post CNY.. when HKese loaded with bonus will look to park their money somewhere .. and is also considered auspicious .. Q2 is the next downturn in sales

OffThePeak 11 yrs ago

Rush for new homes unlikely to keep pace - TheStandard

(I read it somewhat differently)

SELECTED POINTS:

=======

+ Developers can hardly keep pricing new apartments low, since projects under construction occupy expensive land acquired in recent years.

+ "The recent overwhelming response for first-hand flats does not reflect a rebound of the market. Instead, this shows acquisitions are attributable to accumulated purchasing power," said Centaline Property Agency founder Shih Wing-ching.

+ Nearly 600 new homes were sold last weekend, marking the best performance in eight years. This followed the some 530 transactions the weekend before.

+ Both Shih and Lau expect developers to continue offering generous discounts next year to boost sales.

However, Cheung Kong Holdings' (0001) executive director Justin Chiu Kwok-hung doubts whether developers can afford to maintain the huge discounts since future projects will be built on land acquired at relatively high prices in the past two years.

=======

> http://thestandard.com.hk/news_detail.asp?we_cat=16&art_id=140489&sid=41109338&con_type=3&d_str=20131212&fc=7

I think it is possible that Buyers will have to turn to the Secondary market in Prime locations, since the pipeline of new projects in such locations may be drying up. It seems possible that Builders PANICKED and offered big discounts than they needed to, and now they are left with supply in less advantageous locations.

So maybe the Secondhand Sellers will have the last laugh after all. No guarantees that will happen, but it is a much more likely scenario than most would have predicted six months ago, isn't it ??

gdep 11 yrs ago

Developers are worried about the prospects of rising interest rates and tapering towards end 2014..and will unload as much as they can..

Century gateway 2 launched at 9.7K psf vs 11K psf for Century gateway 1. So if you had bought an year ago at this .. you are already under 10% loss, no yields and all the outgoing in stamp duty..

it does not make sense investing in new territories even if the project is on top of MTR, SHK quality etc . blah blah..

core areas are different indeed.. relative lack of new supply .. but considerable redevelopments can happen.. the amount of 50 year old buildings in mid levels west, wanchai, cwb is incredible..

OffThePeak 11 yrs ago

"core areas are different indeed.. relative lack of new supply .. but considerable redevelopments can happen.. the amount of 50 year old buildings in mid levels west, wanchai, cwb is incredible..'

True enough.

But the process takes a long time.

I walked by Imperial C-. / (whoops: Imperial Kennedy) yesterday.

And it was such a long walk from Sheung Wan, that it amazes me that such an area can be considered prime. The journey from there to the XRL will not be so easy for a mainland Chinese in a hurry

gdep 11 yrs ago

OTP

You mean Imperial Kennedy?? don't forget there is a new MTR which will go all the way till Kennedy town and operational by Q1 2015 which makes it convenient for HK side ..and to XRL as well..

kowloon is great if you want to travel to mainland on a regular basis..

HK side benefits

electricity prices will be cheaper than Kolwoon side in a couple of years,

great access to country parks and beaches (within 15 mins from most places)..

better school network

better neighbourhood feeling

more cosmopolitan

pollution is probably lower.

water sources are probably better

why buy in kowloon (just for better clubs and XRL and more mainland neighbours ??)

OffThePeak 11 yrs ago

Kowloon is cheaper, and far more convenient:

+ NOW, to get to Central

+ Longer term, to get to XRL (fast train to China), and to the airport

Missing : some schools, and some Mid-range Western restaurants (will come?)

OffThePeak 11 yrs ago

I found myself in Wanchai yesterday, so I visited the showflat for The Avenue.

I think the gimmick of having a reconstruction of an old Hong Kong street scene as part of the development is a clever idea that will work. The place looks set to become a Landmark and a place for people to hangout, shop, and have a meal.

The initial launch price at slightly below Zenith looks like a bargain, and the subsequent popularity and price rises are further evidence.

On the way back to Olympic Station, I stopped at ICC to visit the showflat for Century Gateway, phase two...

Loyd Grossman is Miss Venezuela 11 yrs ago

OTP. I buy the West Kowloon idea - as long as it is top of the range (which is out of my budget). Still, I think most locals and expats prefer HK side as it has more to offer from a day-to-day point of view. Better schools, more interesting lay-out and architecture, convenient for government and business. If we need to go to ICC, just one stop from IFC.

OffThePeak 11 yrs ago

lgmv. when you have time come visit tkt and i will give you a tour so you can see things through my eyes and maybe i can learn something from you too

gdep 11 yrs ago

Nice offer OTP :)

btw, few more blocks on HK island will be on offer as Avenue sales slowdown.. Diva , Summa ( good marketing names) .. in two weeks.. about 300 flats.. i see swire's bulding getting briskly built on castle road, The pierre on aberdeen street is also close to ready.. the finished one on bonham road for some reason is not on sale yet..

1H 2014 there is a URA project on second street in Sai Ying Pun.. lots of options at decent prices.. hence secondary market will be under pressure.. (IMHO)

gdep 11 yrs ago

Is the pricing out for the diva and the summa yet??

Loyd Grossman is Miss Venezuela 11 yrs ago

Gdep. What secondary market?

gdep 11 yrs ago

Your dear Centaline index

OffThePeak 11 yrs ago

(How the market is being reported):

Fall in prices set to continue

Joanne Lee / December 12, 2013

The property market seems to have come alive after being quiet for a bit. Reacting to counteract the low home transactions, developers offered price reductions through incentives.

With cash rebates on Special Stamp Duty and Buyer's Stamp Duty, recent sales at projects such as The Avenue in Wan Chai, The Cullinan and The Austin in West Kowloon, and Imperial Kennedy in Western district, were all positive.

We observe that the selling prices of new projects are getting closer to secondary market levels. Prices of primary launches are generally 20 to 30 percent higher, but the gap between the new and used markets has now narrowed to within 10 percent.

Many prospective buyers are hoping for the price of secondhand flats to drop following the price cuts of new projects and a gradual increase in new housing supply.

They expect at least a 10 to 15 percent discount - taking into account the rising transaction costs due to the Special Stamp Duty, Buyer's Stamp Duty and Double Stamp Duty.

===

> http://thestandard.com.hk/news_detail.asp?we_cat=16&art_id=140490&sid=41109339&con_type=1&d_str=20131212&fc=7

(Some Data - to back up these comments, etc.):

1. The Cullinan : all sold out ** properties offered **

2. The Austin : all sold out

3. The Avenue : all sold out

4. The Visionary : 700 units sold

5. Century Gateway : 120 units offered, with 3,000 registrations

6. Park Metropolitan : all low zone units sold (other prices above secondhand - by far?)

7. The Long Beach : nearly all sold (new prices are above secondhand)

===

All within three months (per message from a property agent)

OffThePeak 11 yrs ago

You have to compare like with like :

High standard new with High standard new

There's no doubt that HK people tend to pay a premium for new.

(Also, I am sure a good clubhouse is worth something extra)

Loyd Grossman is Miss Venezuela 11 yrs ago

The primary market is liquid and the secondary market isn't. Very few people are selling flats on the secondary market now. They see a HK flat as more of a resource than something to trade. Those who want to trade are probably waiting for CY to go - which looks more likely now following his spanking in Beijing.

OffThePeak 11 yrs ago

Anil.

You should be clear that you are talking about a building in a good location, but which is nearly 50 years old. Unfortunately, it may not be a suitable target for redevelopment because of its very high density.

Loyd Grossman is Miss Venezuela 11 yrs ago

Anilhk. I don't know the property or location. I don't think prices are heading down but it's no longer possible to buy property to trade. If you shop around, it's possible you may get a panic seller - but most aren't budging and the only reference prices with any liquidity are in the primary market - so I suppose you work back from there. I would trade up if I could afford it. Buy if you plan to stay in HK, you can afford it and want to save on rent. I don't know your budget, but I would avoid the NT unless it is very convenient for transport.

OffThePeak 11 yrs ago

Yes, the location is very good - and there will be excellent redevelopment potential. The Land is almost worth more "dead" than "alive" (except for One Thing.*

Photo : http://img268.imageshack.us/img268/6353/07ph.jpg

No.2 : http://www.expressraillink.hk/images/en/construction/002_l.jpg

The cranes are building the station for the Express Train to China. And on one of the other sides is the Coronation building, which sells at about $23,225 per sq. ft, Net, and $18,148 psf, Gross- versus maybe $7,500 psf, Gross for the ManWah buildings. Coronation has 32 floors, and Man Wah has 18 floors.

/More Photos of the area: http://tinyurl.com/GEI-XRL

*The ONE THING is...

THE DENSITY of the Man Wah buildings. (see photos above.) If they are torn down, they would likely be replaced by Taller buildings, but less densely packed. So there may be little or no net gain in saleable area from redeveloping the space there. There could even be a loss of saleable space, depending on how tall the new buildings are, and the design of the replacement buildings.

Having said that, I think you will make money, so long as rents remain above your interest payments (If this works, it will be because interest rates do not rise too fast.) Even so, I would avoid the 3 or 4 buildings made with slat water, which are said to have crumbly concrete, since that might add some unnecessary headaches.

gdep 11 yrs ago

anilhk,

based on what OTP and you have shared.. looks like a good buy..

gdep 11 yrs ago

the key is re-development ..and just on the XRL .. given the age of your building .. high chances it gets redeveloped..

OffThePeak 11 yrs ago

HIKES of the Century - haha

Century Gateway (in Tuen Mun) raised prices "slightly" after brisk sales - all 195 flats were sold out in phase two yesterday. The previous price was HK$10,922 psf, Net.

Example / the cheapest:

HK$ 3.63 Million for 372 sf with a 11.5 discount, and stamp duty rebates

Since the original launch: 495 flats out of 911 have been sold.

More misleading reporting on the secondhand market - in Wu Kai Sha:

"Owners selling their flats in the district are cutting their selling prices by up to 10 percent, agents said"

(I am non-plussed by this misleading sentence pisses me off, Karen Chui ! It does not mean anything. One owner may have cut his asking price by 10% - So what ! Others may have cut less than that, or not at all. In a slow market, it is natural that those in a hurry to cut their prices. What these teen-aged scribbles SHOULD be saying is: Buyers are benefiting from a slow market that favors buyers, in some cases they have been able to negotiate price cuts as large as 10% off the sellers asking prices. But most sellers are holding their prices firm - Obviously, or there would be more sales, and the Indices would be coming down. They seem to be moving sideways, as we see each week, despite many reports of 10% cuts.)

>story link: http://www.thestandard.com.hk/news_detail.asp?we_cat=2&art_id=141080&sid=41239810&con_type=1&d_str=20140102&fc=4

OffThePeak 11 yrs ago

Wanna date a Diva (in Tin Hau) ?

"Only" HK$22,514 psf. Is he high maintenance?

From Cheung Kong. It's first launch of 2014.

This is the price on the first 50, of 118-units.

Flats are large, so the minimum price is HK$7.97 Million : 493 sf, third floor

(Note: many properties will have their "cheapest flat" smaller than this one. Most of the flats are larger than 500sf.)

Lucane01 11 yrs ago

"Flats are large... 493 sf"

lol

gdep 11 yrs ago

A similar property on Hemispheres 486 sq ft on 3rd floor is listed at 12.62 million and with 20% discount will be 10million (not sure what the discount is) .. Guess what Hemispheres might do??

Diva is about 20% cheap.. Assuming the sold ones were similarly prices, the hemisphere buyers seems like have paid 20% higher by buying 2 months earlier.. so that itself is like a 20% drop in primary market..

punter 11 yrs ago

Not a drop. It's just a correction. LoL. Prices are still going up this year.

OffThePeak 11 yrs ago

Diva's not cheap. Hemispheres was way overpriced.

As the Standard said, DIVA's price AFTER the discount is just over $16,886 psf, NET, which is just OVER the high end of the range of prices in the secondary market.

This may be justified by the location on Oil Street close to the MTR, but I do not think I would be interested in buying even if the discount was 30-35%. I don't think property is worth than in such an old neighborhood. But others (such as LGMV) may have a more informed opinion and disagree. But I do think Lloyd would agree the price of Hemispheres was above "cheeky".

punter 11 yrs ago

It's very expensive but there are buyers. It must be fairly priced, or buyers are just fools with lots of dough.

OffThePeak 11 yrs ago

Kerry Properties announces "Happy Prices" at the Summa

(Happy for whom?)

Minimum Price: $15.24 mn ($20,159 psf) = 756 sf unit on the 10th floor

Listed Price----: $17.92 mn ($23,704 psf)

Average price of $22,989 per sf : on first 50 of 168-units

===

> http://eng.28hse.com/utf8/developer-179.html

gdep 11 yrs ago

This is ridiculous .. HK better to buy .. Robinson place at 17million and get 1050 net sq ft .. or blessings garden at 13 million .. and get 820 sq ft.. and a better location.. I remember Azura was priced at those levels as the summa - could be wrong..

given most properties are $15million+ expect less than 50% to sell.. (will be similar to IK)..

at this price the studio in tower 2 will be 5million .. and that will attract potential buyers.

punter 11 yrs ago

5m for a box not big enough to live comfortably for one person. Crazy indeed. Hong Kong buyers have accepted this "reality". I say shame on the HK government for not doing enough to have its people live more comfortably (take note, I'm not talking about luxury). In my view, a 500 sqf studio is a comfortable place to live for a single person.

It's better than nothing of course, but HK is supposed to be a world class city!

OffThePeak 11 yrs ago

Move away from HK Island, and you get far more for your $5 million.

The questions I would like people to ask might be:

+ Why do HK people not commute longer distances?

+ Is it HK's ability to generate wealth that has driven property prices so high?

gdep 11 yrs ago

"+ Is it HK's ability to generate wealth that has driven property prices so high?

phew.. few things which have helped

- Govt' rigging supply..

- Govt's hand in hand working with developers ... restricts supply when prices go down..

- Mainland China and the flow of money

Overall given limited supply, flush of of money and lack of investment options .. brick and mortar gets driven to crazy heights by a few wealthy individuals from HK and cross the border..

"+ Why do HK people not commute longer distances? "

lack of cars ?? and parking?? car ownership being ultra expensive ?? do not like mtr, buses .. in short i do not know..

OffThePeak 11 yrs ago

Are you joking?

With respect, I think you may have some of this backwards.

HK has a fine transportation system (best in the world?).

And that is one reason why it is so good at generating wealth. (The bigger reason is low taxes.) With the fine transport, people do not waste money on cars. And HK will go on generating wealth, while countries like the US see it drain away on imported oil prices.

With all that wealth rolling in, of course property prices are rising. Where else can people invest their money? Gambling it away on London''s property bubble may be less sensible that buying a flat in the HK SAR.

Sure, there are some constraints on Supply, and the govt keeps saying they will address it.

If you don't like the MTR and buses, go ahead and be a snob, and pay thru the nose for the privilege of living without those things. But don't expect many people to share your irrational prejudice.

gdep 11 yrs ago

its not my prejudice.. i do travel by MTR, bus and mini-bus.. actually love the public transport system here.. for the record i do not own a car.. not that I do not like it.. its way too expensive to own one..

my reply of cars was w.r.t why ppl do not live far away.. probably it is way too inconvenient .. to be honest public transportation in HK works fantastically in core areas - MTR line and a few kms around it.. and thats where people tend to concentrate for living as well..

as to whether its the best ?? not sure.. for one there is no park and ride facility near remote stations.. and not extensively connected .. which they will resolve by 2020 and probably we can then say its the best and probably the perfect system in the world..

currently there are connectivity issues to some parts.. e.g.. discovery bay .. commute is expensive long and tedious.. lovely area to stay otherwise..

you have said it all.. HK property is a totally self serving rigged market..if the prices do not keep increasing people wont invest, the govt wont make money selling land and hence they will continue controlling it.. its where a net 500 sqft home is considered luxury.. (really ?? 4 ppl living in 500 sqft apartments in a world class city)

why not follow the Singapore model and increase public housing.. allow people to live in breathable spacces.. build a more competitive and diversified economy?? tech, medical toursim (HK talent is great), R&D etc etc..currently way too reliant on property, finance, retail and mainland tourists..

punter 11 yrs ago

It's a fact that Singapore is doing better than HK in housing.

Conte_Riccardo_III 11 yrs ago

I don't think car ownership is ultra expensive in Hong Kong. Where did you get that idea from?

rititt 11 yrs ago

hk developers are a cartel, they are maniputaling the market with controlled release of new flats, because that is what they still can do. let's see how long they will be able to hold once interest rate increases.

rititt 11 yrs ago

car ownership in HKG is very expensive. first, price is 120% more than in the USA because of taxes. parking space is very expensive and maintenance cost also. for people working in central or tst or where there is no place to park, a driver is essential. the best is to use public transportation or taxi which are cheap compared to other large western cities.

rititt 11 yrs ago

hk properties are expensive because there is more demand than offer but it's a distorted market in that demand for luxury end was not mainly driven by real demand per se ie for usage but rather as a means to park the ill-gotten money from China, like ill-gotten money from russia invading europe and the usa at one time. and it didn't help because HKG is so small. Saying that, the reverse could be also true. Look at the stock market, hot money moving out and it crashes. it could happen to the property market. remember 1997 financial crisis, HKG wasn't immune.

Conte_Riccardo_III 11 yrs ago

Who cares about the US? You should compare HK to countries that really matter, like Malaysia and Singapore. Cars here are comparatively cheap.

OffThePeak 11 yrs ago

"I don't think car ownership is ultra expensive in Hong Kong"

I don't think anyone said that.

But it is true:

+ Parking is not cheap, and is often inconvenient

+ The other transport infrastructure is so good, few people need cars

They are, or should be, priced as a luxury item

gdep 11 yrs ago

http://thestandard.com.hk/news_detail.asp?we_cat=2&art_id=141315&sid=41282271&con_type=1&d_str=20140109&fc=7

I doubt Summa will get sold.. as expected Diva doing well.. and other NT projects selling below secondary prices

buyers at the first phase of double cove have lost 10% compared to second phase prices..

GW80 11 yrs ago

I went to see the Double Cove show flat yesterday. Was very impressed with the 2 bedroom 499sf net unit. While the bedrooms are very small and only fit a queen size bed, there's also a "store room" (perfect for a walk-in closet) with decently sized living room and kitchen. Very comfortable for a couple without kids. These units are going for $4.6-4.9m after discounts and the stamp duty rebate.

The 3 bedroom, 800sf net unit had a more awkward layout and i didn't find it as comfortable. Nevertheless, it has full 180 degree sea views and the pricing was around $8m.

punter 11 yrs ago

GW80, you're very impressed with a two bedroom 500sqf flat? That size should be a comfortable bachelor's pad. And 5M hkd is the price. Wow!

GW80 11 yrs ago

Not bad for brand new, next to the MTR station, very nice clubhouse and green areas. Future Shatin to Central MTR line. 5m with 80% financing. 1m down.

punter 11 yrs ago

In Hong Kong standards, that's fine. But if you're used to living alone (single) in a 500sqf studio apartment unit, a 2-bed 500sqf will make you feel like you're in a real shoe box.

GW80 11 yrs ago

Bear in mind it's 500sf net area so around 670sf gross. I think it's reasonable given the 60% premium for a similar size in Tin Hau/Kennedy Town for $8m.

punter 11 yrs ago

You really believe that it's a good enough home to raise a family? Or as you've mentioned, a good place for a childless couple? If it was a one-bedroom layout, then I would agree with you. For me, it's too small for a 2-bedroom layout. As I've said, HK people will be already very happy with it (brainwashed to accept it's ok, like elephants).

GW80 11 yrs ago

No, I agree, it's not enough space to raise a family. But it's a good apartment to get on the property market for newly weds.

Having said that, prices are likely to slide downwards at Double Cove. Phase II is closest to the MTR station and I expect later phases to release at cheaper prices (because it'll be a further walk). But the developers will get the churn they're looking for.

To raise a family, of course bigger is better, but in HK, I believe 1,000sf net is reasonable for 2 kids and the threshold seems to be around $13m for these flats in older developments on HK Island and Kowloon.

gdep 11 yrs ago

" I think it's reasonable given the 60% premium for a similar size in Tin Hau/Kennedy Town for $8m"

there are quite a few offers below $7million for that size (ofcourse they are older by 2 decades)

OffThePeak 11 yrs ago

A couple can live comfortably in a flat under 600 sf, net.

Provided the layout is good, and enough storage is built in.

What also helps is:

+ A good view, since you will feel less cramped,

+ A good clubhouse, that one can escape to, when needed

+ Good transport links, to justify the somewhat crowded conditions

punter 11 yrs ago

Obviously it's not the same as "a man can sleep comfortably in a subdivided flat", but it doesn't mean we should. I understand that this is HK and expats have adapted well enough (and still adapting by downsizing still), but it doesn't mean we're loving it.

OffThePeak 11 yrs ago

It is all about working out what is essential for you, and organizing that well

GW80 11 yrs ago

"Having said that, prices are likely to slide downwards at Double Cove. Phase II is closest to the MTR station and I expect later phases to release at cheaper prices (because it'll be a further walk). But the developers will get the churn they're looking for."

Update - Double Cove prices may actually be raised given the sell-out of all 173 units (first batch launched out of total 865 units) over the weekend.

Diva sales surprisingly slow?

Conte_Riccardo_III 11 yrs ago

I am surprised by the posters marketing double cove. Three smiling guys? Why waste such amazing view? Anyway, I am pleased they sold out and prices will go up. It's not priced that expensively. It's in line with the buildings around Sunshine city, which are 17 years old, Though of course those are closer to Ma On Shan shopping centres and bus interchange.

OffThePeak 11 yrs ago

"Prices are likely to slide downwards at Double Cove. Phase II is closest to the MTR station and I expect later phases to release at cheaper prices.."

Nope.

As people have pointed out, DC sold well enough, and has now raised prices by 1.3%-4% on the next phase.

Most of the other properties, are selling well too. Such as Century Gateway, one of my favorites, now 96% sold out on 911-units since Dec.17th.

Even The Riva, a high end offering from SHKP in Yuen Long (yes, Yuen Long!) is coming back to market.

The disappointments seem to be Kerry's The Summa, with only 32 of the 70 units on offer sold. Many think the discount there is too small. And CK's the Diva in Fortress Hill, which sold less than half of units. Discounts are big, at 25%, but the List prices may be too high. (And Lloyd is so far "sitting on his hands", it would seem. Comments, LGMV? Is it any good?)

Conte_Riccardo_III 11 yrs ago

The problem with The Summa is the name. Can you imagine living in a place with such a name. Call it The Summit, and you sell out. It's already taken? Then call it The Sublime. It's taken too? What about The Wealthy? My Hot Wife? The Billionnaire? The Warren Buffett?

gdep 11 yrs ago

As I expected The Summa was overpriced and the sales response is in line.. never expected it to sell out though agents were touting otherwise...

I am surprised at the Diva only given that prices there were cheaper than Hemispheres.. I still feel for Tin Hau it is expensive.. Anywhere along King's road +/- 100 meters I do not feel paying so much given the high level street pollution.. and crowded neighbourhood.. if it were Tai Hang it would have sold out..

GW80 11 yrs ago

""Prices are likely to slide downwards at Double Cove. Phase II is closest to the MTR station and I expect later phases to release at cheaper prices.."

Nope.

As people have pointed out, DC sold well enough, and has now raised prices by 1.3%-4% on the next phase. "

Just to clarify, the original comment was targeted for the later phases of Double Cove which are located further from the station than Phase II (and not the price trend of batches within Phase II) .

Lucane01 11 yrs ago

"The problem with The Summa is the name. Can you imagine living in a place with such a name. Call it The Summit, and you sell out. It's already taken? Then call it The Sublime. It's taken too? What about The Wealthy? My Hot Wife? The Billionnaire? The Warren Buffett?"

http://app.midland.com.hk/residential_ebook/%BB%A8%AA%F9-le-billionnaire

Sorry Conte, that name is already taken.

gdep 11 yrs ago

And also Phase 2 prices are lower than Phase 1 prices once discounts are factored in.. DC and Century gateway shows the affordability in HK?? In that sense lohas park next phase should sell well

GW80 11 yrs ago

True, I think DC and Century Gateway show the price point for current local appetite... but it's gotta be a specific product by the MTR station.

I would expect Lohas Park to sell sub par because of the negative stigma of the landfill and the inconvenient 1 stop interchange. Can't recall off the top of my head, but I also believe it's a further walk to the station?

OffThePeak 11 yrs ago

It is a longer walk at LOHAS.

And there is also a shortage of restaurant choices there.

So rents are really much cheaper than other new properties "near stations"

gdep 11 yrs ago

Seems like a lot of flats (2K) will be put on market before CNY including Riva, The avenue first phase (thought there were no more flats there), and something like 700 flats at Tai Po.. should be better than Wu Kai Sha in terms of travelling..

OffThePeak 11 yrs ago

Developers are enjoying the Rosy Scenario

+ 430 homes were sold last weekend

+ Some 2,000 homes are about to be released

1. Monte Vest - : Tai Po ------- : 1,350 flats

2. Riva---------- : Tuen Mun----- : 778 flats

3. The Avenue- : Wanchai ------ : 179 flats

4. Double Cove : Ma On Shan-- : 176 flats

5. ChathamGate : Hung Hom--- : 031 flats

6. Long Beach - : Tai Kok Tsui-- : 020 flats

7. Dunbar Place : Ho Man Tin--- : 012 flats

Centaline says the number of NEW flat sales rose 150 per cent year on year in the last quarter to 3,880, with their value jumping 270 per cent to HK$41.2 billion.

The secondhand market has been quiet, mainly because the agents are pushing new properties so hard, thanks to the higher commissions. And buyers seem to be confused by all the discounts they see advertised, and are doing a poor job of assessing relative value.

traineeinvestor 11 yrs ago

"Centaline says the number of NEW flat sales rose 150 per cent year on year in the last quarter to 3,880, with their value jumping 270 per cent to HK$41.2 billion."

And yet the share prices of most (not all) developers have been trending down recently. Even allowing for some margin compression (lower net prices and higher construction costs), I have some difficulty in reconciling the share price movements with the primary sales data. Perhaps the share market is pricing in heavier discounts to come?

OffThePeak 11 yrs ago

The stock market is looking forward.

But there may be a growing gap between Bearish expectations, and stable reality - And at some point, that gap may narrow suddenly, perhaps resolving itself with share prices rising.

REMEMBER this?:

Aug 1 — "Government cooling measures to rein in Hong Kong's property market are finally taking a toll on the city's powerful developers and industry watchers forecast prices could drop by up to 15 per cent in the second half of this year."

(post #2, on this very thread)

There was certainly no 15 per cent drop in the second half in the secondhand market. Having said that, some developers may have wound up selling 5-10% (or more) below where they would have expected at the beginning of 2013, when the adjustment is made for discounts.

traineeinvestor 11 yrs ago

That's where I got to as well. The discounts to NAV on a lot of the developers is very high and many have very strong balance sheets. It may be time to start doing some research again?

gdep 11 yrs ago

How do you know that the NAV is perfect?? the NAV itself could be overestimated?? worth doing the research

OffThePeak 11 yrs ago

A good trigger might be more buybacks.

As it is, principal owners, like Mr Li and Lee Shau Kee, are buying their co's stock

gdep 11 yrs ago

And both of them have lost significantly??

I certainly think Sino Land is a good stock based on the portfolio of expensive apartments they are building and a good dividend yield ..usually about 3% ..

i dont like the biggies SHK, CK, or Henderson..

traineeinvestor 11 yrs ago

There are pluses and minuses to all the listed property companies. Sino offers a better yield than many of the larger ones (4.5% trailing). Henderson has a very large land bank of agricultural land but one of the lowest yields (2.18% trailing). And so on.

Given that many of them have pulled back quite a bit, I really should make the effort to have a look at NAV discounts (among other factors).

OffThePeak 11 yrs ago

HOW MANY NEW HOMES was that ?

I called B-b-bullfeathers on the Notion that there is a Squeeze on Used Home Owners.

It is not on them, it is on the Estate Agents... who are now trying to talk the market down

> http://hongkong.asiaxpat.com/forums/hong-kong-property/threads/153181/hong-kong-property-market-2014-forecasts/

The article in The Standard says:

"Around 18,000 new flats - 45 percent than in 2013 - will be available for sale with aggressive discounts offered by developers." - Karen Chiu, in The Standard Property column today

NOPE - Not necessarily. These projections nearly always MISS TO THE DOWNSIDE on these projections.

I find it easy to believe that the actual figure will come in under 15,000 or even under 14,000.

And we started 2014, with one of the LOWEST numbers of new flats available for sale in years.

New Home Expected for Sale in 2014:

Developer----- : Proj.s : #Flats : Major Projects--------------------

Cheung Kong- : # 5 ... : 5,235 : Mont Vert (1,350), City Point (1,717) LOHAS P-3 (1,648)

SHK Properties : 7 - 10 : 4,277 : Riva (668), Yoho T-3 (2,508), Mont One (144)

Henderson Ld.. : # 8 ... : 2,766 : Double C-3 (1,092)

Sino Land------ : # 5 ... : 2,180 : Pak Shek Lots (1,091), Kau To Area (973)

New World ---- : # 3 ... : 2,239 : The Austin (691), Double C-3, Pavilia Hill (358)

Kerry Property- : # 4 ... : 1,238 : Kau To Area, Ede Road proj. (43)

Wheelock &Co : # 3 ... : 1,357 : The Austin, Tseun Kwan O Site (591)

China Overseas : # 4 ... : 0,470 : The Nova (255), Pak Tai St (168), The Green (40)

Swire Properties : 3 - 4 . : 0,444 : Mount Parker Resid. (92)

Chinachem Grp. : # 5 .. : 0,431 : Golden Gate (127), Jade Cove (86) BillionaireLuxe (37)

OffThePeak 11 yrs ago

The agents and the press continue their efforts to Cut prices ...

Look at this headline from today's SCMP PROPERTY section:

"Prices set to fall as host of new units hit market"

"Big test for sale strategy and demand as 4,000 flats with presale consent look to tempt buyers"

The article mentions:

+ 4,000 units for which presale consents have been granted,

+ A further 3,000 units may soon join the pipeline

SURE, but LOOK WHERE THEY ARE !

+ Riva, Yuen Long

+ One Regent Place, Yuen Long

+ Hemera, LOHAS Park

+ Mont Vest, Tai Po

+ also: Lai Chi Kok, and Cheung Sha Wan

Do you really think these properties are suitable for those who want a SHORT commute to a high-paying job in Central, or at ICC in Kowloon Station ?

No wonder the SCMP and agents are now suggesting that expats look outside the usual "prime areas" in their renting:

http://hongkong.asiaxpat.com/forums/hong-kong-property/threads/153621/expats-moving-to-cheaper-areas/

OffThePeak 11 yrs ago

DIVA versus RIVA - a different approach.

The Standard wrote about the "price war" between Cheung Kong's Diva (on Fortress Hill) and SHKP's Riva (near Kam Sheung Rd.)

They wrote about the size of the discounts, which CK has just increased. But maybe there's a different approach:

Per SF, Net- : -- Diva - : -- Riva - : Difference :

Launch Price : $ 22,514 : $ 09,268 :

List Price--- : $ 25,173 : $ 09,268 :

For 800 s.f.- : $20.13mn : $7.41mn :

Central mins. : about 12 : about 40 : about 28 mins

Rent at 3.0% : $603,900: $222,300 :

Price per day : $1,654/d: $ 609 /d. : $1, 045 /d.

============

Assuming my time estimates and maths are right:

The Buyer at Diva is paying and extra $1,045/ day

in order to live in wonderful Fortess Hill.

The advantage, He/she gets may be mainly a shorter commute.

Assuming this "example" person works in Central, he is paying :

$37 for each minute saved ($1,045 / 28) in commuting.

The numbers will look very different, and much in favor of Riva,

if the person travels regularly to China, and can drive there.

NOTHING IS REALLY THIS PRECISE:

But it is "food for thought" maybe

gdep 11 yrs ago

nice math OTP..

none of the new properties on the HK island side are worth their price.. second hand price at 10K psf is attractive vs the 10k psf of new properties in new territories.. considering SCHOOL DISTRICT benefit and arguable commute and again somewhere on the mid-levels (east to West, north point) happy valley etc.. where pollution levels (street level) are lower compared to areas surrounding MTR station..

i really dread the areas just around King's road, Hennessey road etc... Pollution is always the highest recorded at CWB station and Central station.. not sure why MTR convenience is so attractive on HK island side.. there are enough mini buses .. the hills are better for living .. though its inconvenient ..

we are on an average 25% higher now at 12.5K psf in mid levels area for older properties.. once it comes to 10kpsf or lower it becomes attractive..you always have private gyms for club house replacements..

saw palatial crest with car park on offer for 13.3million.. coming to that 12.5K psf.. Loyds favorite Bella Vista has a 316 net sqft with a huge terrace for 5.9million.. practically unthinkable before BSD.. things are sliding down.. i hope more people from HK island are attracted to the gloss of the Riva and likes, reducing demand for HK island properties.. (hope, hope, hope )

OffThePeak 11 yrs ago

AT $9,000 per sf Net = I think Riva is good value

But only if you want to travel regularly across the China border.

If you NEVER do that, you are better off in some place like TKT/Olympic, or maybe even Four Little Dragons. You have decent choices on modern flats, can get much quicker into Central than from midlevels, and it is still far cheaper.

Under $3 Million can get you a "nice" 300 sf flat in a 39 year old building an easy walk from Olympic station. Or you can rent that for just under $10,000 a month - that's only $333 a day. A bargain compared to that new stuff

Lucane01 11 yrs ago

3 million for a 39 year old building and 300 sqft livable space... would only take a young person about 20 years of saving in order to afford such a "lovely" place (and by the time he can purchase it will be 50+ years old). Living the high life, I can see why the youth are so optimistic about the future !!

Working your whole life just so that you can put a concrete roof over your head and four dilapidated walls around you - what a bargain.

Nothing says "I'm rich" like owning one of these beauties: http://image.yaymicro.com/rz_1210x1210/0/f9f/hong-kong-old-building-f9f526.jpg

gdep 11 yrs ago

Lucane, unfortunately thats the choice many youngsters make... there are so many of them returning from UK, Canada etc to work in HK instead of staying back there.. not sure why .. guess grass is greener on the other side syndrome..

if you are a young IT grad in HK.. staying in NT makes sense and if your job is based in Shenzhen with Tencent, Alibaba etc.. you earn more, save more.. and probably build a company of your own one day.. much better prospects than the 10K-15K/month jobs in Hk retail or consumer banking..

but HK people keep returning to HK for underpaying jobs.. after spending huge sums on gettting educated in UK/US/Canada etc.. may be study locally and spend that money on a house should be the motto if you finally want to end up here anyway??

traineeinvestor 11 yrs ago

I had a look the NAVs of a non-random selection of HK listed property companies.

Of the large ones, Henderson stood out. NAV as per last interim report was HK$88.13 per share. Current share price is $42.45 - 52% below NAV. While there is a good chance that NAV will show as being lower when the annual results are released, that is a huge discount (even allowing for the land banking element). Some of the smaller companies have even larger discounts.

Disclosure: I hold Henderson.

OffThePeak 11 yrs ago

Beauty is in the eye of the beholder, Lucane. And especially financial beauty. What happens at ground level, and the length of the commute is more important to many young HK people.

If your alternative (to buying or renting the old property) is paying $20,000 per month, or more, to live in a nice new building. - Or maybe shelling out $8-10 Million (or more) to buy a modern property, I think a smart person, who is also flexible, may want to buy the old property, and pay $10,000 a month towards the mortgage, while banking the $10k per month savings.

If prices of those modern properties fall, which seems likely - then they can buy AFTER the prices come down 20-30%, and they will have a growing cash balance for the deposit. And when you eventually buy something more modern and closer to your dream property, you rent out the old one, and maybe enjoy a cash flow surplus.

This seems to be the sort of choice the nephews and nieces of my partner (she's from HK) are making.

They may also renovate the old property to taste, if they buy it.

OffThePeak 11 yrs ago

Poor SHKP (haha) they must have thought that mainland buyers would be falling all over themselves to buy Riva, when they first planned it.

They were not aware (probably) that the 15% BSD would all but kill demand from mainland buyers. But maybe there are enough Mainlanders with HKID cards, or HK people with businesses in China, that they will be able to sell it at the nonw-reduced prices.

It is an attractive project, so I think they will.

If i was going to buy there, I would be tempted to buy some farmland nearby, with the idea of growing food on it, and cycling to a small hut on the farm property

OffThePeak 11 yrs ago

A Mosque?

There are other areas available

gdep 11 yrs ago

What is the biggest part of the construction costs ?? Labor or material.. I keep hearing overcapacity in steel, cement, glass industries in China with prices under extreme downward pressure..

standard reporting fall prices in secondary market ..

punter 11 yrs ago

Prices are finally coming down? Or it's just made up stories to bring prices down?

gdep 11 yrs ago

As per what I have seen from Agents showing me flats around.. asking prices are definitely down by 5-10%.. compared to 6 months ago.. i still settled for renting .. as i believe there is a further downside potential of that magnitude per annum over the next two year.. my next buying decision will be in 2016..

OffThePeak 11 yrs ago

GDEP,

That's not what I am seeing...

I have a few questions:

===

+ WHERE are you looking?

+ WHAT price range? What size, age of flat?

+ Are you comparing with original asking prices, or the independent index figures?

There's a great deal of imprecise talk, and I hope we can tighten that up, since the agents will use it to mislead people.

gdep 11 yrs ago

OTP,

This is around Mid levels area.. and the range is between 7-10million.. asking prices have come below by 5-10% .. from premium to bank valuation to discounts to bank valuations.. liquidity is also improving..

in the apartment i live now.. there was one property for sale around 4 months ago .. now I see 3 on sale.. and competitively priced ~7million for 450 sqft net (still a bomb according to me).. age range is 20-30 years..

atleast from a buyers' perspective things are down. Just from the postings (not actively hunting in that space) below 6million properties in mid-levels and soho (1 bed or sutdio) are also getting posted at lower levels compared to 6 months ago..

if you really have a bullish view on prices you can pick up some properties in this area.. which will be discounted to bank valuations by 5-10%..

Rents down by 10% compared to an year ago..

OffThePeak 11 yrs ago

Thanks, GDEP.

That is very useful - and not just to me, I reckon.

I think the lower rents (in Mid-Levels) may be an important part of the story.

My partner rented out her flat about a week ago, at a healthy 4%+ yield on her purchase price, and so I am not seeing a downwards trend here.

In fact, we seem to be seeing many expats moving to the very convenient area of Olympic station, from more expensive areas like Mid-Levels.

Let's see how these trends go in the weeks and months to come.

OffThePeak 11 yrs ago

Haven't we seen this Movie before?

"Sellout as buyers go with Riva flow" - headline in The Standard today

SHKP sold out its first batch of 64 flats in its The Riva in Yuen Long

(with photo of hundreds of people queued up at the sales office)

What go us here?

1. Riva launched the low rise house part of the project at a hefty $12,000 psf-Net back in March 2013. The properties sold but slowly

2. Developers tweaked their sales strategies, as suggested early in this thread

3. SHKP launched the high rise and mid-rise part of the project a month ago

4. The price in the first batch was "an average of HK$9,268 per sq foot"

5. The press and other trying to talk the market down, remarked at the low prices, saying things like: "the developer cut its prices by nearly 40 percent" (not mentioning a different product was being sold, and the discounts are temporary)... "which is beyond my expectation..."

6. Others remarked that prices were below the existing market (though there is really nothing comparable near Kam Sheung Road) and that: "the sale resulted in a freeze in the secondary-market deals in the district... expects owners will have to cut prices by at least 10 percent."

7. The first launch sold very well, with many prospective buyers unable to get what they wanted.

(( What next? I Think we know ))

+ SHKP will (probably) begin to push up prices in the coming batches

+ If demand stays strong, they may push prices up 5 to 10%

+ Prices may soon reach a level on par with the secondary market

We have seen this pattern before... in Kowloon station, and in Olympic station, and in other areas. Will it happen at Kam Sheung Road/ Yuen Long? Maybe. If the demand stays strong enough to allow SHKP, we may.

Eventually, we will see a discounted launch where this does not happen. (Perhaps in someplace like TKO, where new

punter 11 yrs ago

Or:

Other properties on sale in Yuen Long include The Reach, jointly developed by Henderson Land Development (0012) and New World Development (0017), which has its last batch of 326 flats on sale, but buyer interest lags.

Park Signature, a New World Development project in Yuen Long, which started selling last year, may also face a cool response now that it faces competition from The Riva, agents said.

OffThePeak 11 yrs ago

Yes - a price break in Yuen Long remains possible,

If fresh supply floods in.

But it is by no means as certain, as the media pundits have said. We saw "the same movie" in Kowloon Station some months ago. and the "break" did not happen.

In some ways, I would prefer Kam Sheung Road to YL, because it is one stop closer to HK Island, and Kowloon. Why? Because in the future (some years from now) there will be a direct rail link from KSR to the Chinese border. Personally, I find these sorts of transport links an important LT consideration.

OffThePeak 11 yrs ago

(The Press is finally writing about what we have been saying here for a long. long time: The health market is in serving HK's middle class... such as below HK$6 million, where all those extra taxes are not hitting so heavily):

Hong Kong property tycoons bank on middle class to weather tough times

HONG KONG, Feb 28 (Reuters) - When things get choppy at the top of the property ladder, it pays to have your feet planted on the middle rungs, which makes developers Cheung Kong (Holdings) and Sun Hung Kai Properties the best bets to weather the storm brewing in Hong Kong.

These powerful property developers are targeting middle-class, first-time buyers who are exempt from the impact of government cooling measures at a time when secondary home transactions are hovering at a 17-year low.

"This represents a large potential market for developers launching new projects, so long as they price units affordably and draw first-time buyers from the secondary to the primary market," said Raymond Liu, a property analyst at brokerage Macquarie. First-time buyers comprised 70 percent of the market last year, up from 53 percent in 2011, Liu said.

With 45 percent of its saleable units this year aimed at mass-market buyers, the highest among its peers, Macquarie has identified Sun Hung Kai as a potential winner in this market, although success will come at the expense of profit margins.

It ranked Henderson Land Development second with 37 percent of its new launches considered "affordable", or below the HK$6 million ($773,600) mark for a unit.

With 44 percent of the large-scale housing estates, a market that has seen a stronger take-up than many single-block developments, Cheung Kong was singled out by Barclays as another developer best placed to win in this market.

==

>More: http://www.reuters.com/article/2014/02/27/hongkong-property-idUSL3N0LO0O120140227

The secondary market below $4-5 Million is also in reasonable health, though not so much the case in the Above $10 Million Mid-Levels market that the media so often focuses upon

OffThePeak 11 yrs ago

(For the record here, a reaction to a comment from SHKP's Kwok):

KWOK...

"... believes that the prices of second-hand property in some areas will fall 10% next year,the first-hand properties won't fall greatly due to the expensive construction costs and other issues related to."

That is a self-serving comment, which flies in the face of what has been happening

Most developers have timing issues, and thus HAVE TO SELL, while owners of properties in the 2nd hand market can choose to wait. Usually, in an illiquid market, it is those sellers with time pressure who cave in and sell cheaper.

So : What is he talking about ?

The sellers of secondhand have the additional problem of ;

Once they sell, it is very expensive to redeploy their funds back into the market.

So with rates so low, most just continue to own, and rent their properties out instead. This fact, has put pressure on high end rents, since owners of properties who had planned to sell, shifted into renting - And the increased Supply of Properties-to-Rent, plus some job cuts, have put downwards pressure on luxury rents.

Cheaper luxury rents, leave high end buyers with an alternative to buying the expensive new flats from the developers. So I see the pressure staying high on SHKP (and others) to cut their prices, especially in the luxury sector.

OffThePeak 11 yrs ago

Despite all the naysaying, here and elsewhere, Riva near Kam Sheung Road is selling well.

The hiked prices (again) for the newest batch, up 5% to an average of HK$9,378 - versus HK$9,157 on the first batch.

I must say, I am surprised the way some banks are pushing their bank valuations lower while the secondary market remains mostly stable, and early price cuts on new properties are often quickly followed by price rises.

Are banks really serving their clients, or are they just making the secondary market even more illiquid ?

OffThePeak 11 yrs ago

LONG BEACH, Olympic Station update

=========

Hang Lung has slowly sold off most of its previously available flats

So last week, they launched 20 "new" units, and the first sales were processed on Saturday, March 8th. They sold three, which is not too bad, considering the price levels:

Flats sold were all in Tower 7:

47E (562 sf) at : $10.695M , or $8.983M after the max. 16% discount*

42E (562 sf) at : $10.610M , or $8.912M after the max. 16% discount*

31C (569 sf) at : $ 9.503M , or $7.982M after the max. 16% discount*

47E was the highest floor available in the sale,

and the other two were the popular "cherry wood" interiors.

The price on 47E (562 sf) was $18,879 psf, Net. before discount,

and $15,984 psf, Net after the max 16% discount for an rapid closing

Prices have been raised twice previously:

From $10.085M, to $10.589M, and to $10.695M (Dec.24, 2013) : overall rise; +6.05%

(No sign of a falling market in THESE real, completed transactions.)

These prices are far, far above the bank valuations given on some equal or better units in the other towers.

I wonder how much the banks will finance for these flats?

When they are eventually sold, they will be secondhand.

So what's the difference? How can the bank justify a higher valuation?

I think they cannot. But I expect they are happily accommodating the developer.

OffThePeak 11 yrs ago

HONG KONG Property : The Waiting Game (again)

Property agents in HK are complaining about "Dark Days"

There were some hopes that tinkering with the Double Stamp Duty ("cooling measure") might UN-freeze the market.

But that is not happening, as per an article in the Property section of today's SCMP:

"Only 176 new units have been sold so far this month. It is the lowest since about 80 deals were recorded in June" (soon after the new taxes were imposed.

"Assuming a supply of 15,000 new flats a year... the average number of transactions per month should be 1,250."

By giving buyers more time to sell (and not pay the double tax), some though transactions would pick up. This has not happened. Buyers and Sellers have very different expectations. And Buyers are not rushing in to pay the (higher) prices sought by sellers in the secondhand market; they are waiting for the developers to bring their new projects to market, and are hoping for big discounts.

It seems that no one wants to be first (among the developers) to test the market's appetite for new properties.

Cheung Kong began pre-sale activity for its City Point project in Tseun Wan, with 1,717 flats to sell, giving it an (unpriced) "soft launch" three weeks ago.

The market is waiting with baited breath to see what happens. In past times like this, SHKP would jump in with somewhat cheap prices on one of their flagship projects, and then quickly raise them when the buyers appeared. CK has plenty of experience, so the other developers now seem content to let them take the lead.

CK also has a big project at LOHAS Park, and so maybe that one will be their lead play. We should know soon.

OffThePeak 11 yrs ago

(2-3 weeks ago, at the time of the "soft launch")

City Point pricing won't undercut secondary market, property agents say

Demand for Tsuen Wan project should hold up pricing for Cheung Kong and partner, agents say

More than 1,700 units to be offered

=

City Point image : http://i273.photobucket.com/albums/jj235/jimolsen2/city_point_zps772e6cc6.jpg

Guessing how Cheung Kong will price City Point, the housing estate in Tsuen Wan it plans to launch with Nan Fung soon, has been a popular game recently for property agents such as Eva Tse.

"The project has more than 1,700 units. The developer will probably offer a big price range for various potential buyers.

But I believe they will not undercut secondary home prices," said Tse, assistant sales director of Centaline Property Agency's Tsuen Wan and Belvedere branch.

"This is the first large-scale residential launch in Tsuen Wan since the launch of Vision City [by Sino Land] in 2006. There are quite a large number of families in the district who want to upgrade their living areas. They are eyeing the project," she said.

"The developer can find buying support if the price is at par with the secondary market."

Tse guessed the selling price would compare with nearby Chelsea Court in Yeung Uk Road, where transaction prices ranged from HK$8,500 to HK$11,000 per square foot.

But the price range could be wider, depending on the flats' views. Agents said some two-bedroom units of the development facing a cemetery will be priced at HK$8,000 to HK$8,500 per square foot, comparable to adjacent Riviera Gardens, which was built more than 30 years ago.

Many of the four-bedroom flats have a sea view and may cost more than HK$10,000 per square foot, Tse estimated.

City Point, at the Tsuen Wan West MTR station, will have 1,717 two- to four-bedroom units. Cheung Kong said it would launch the first batch shortly but gave no details.

The developer plans to sell 800 flats at the project this year. Under the Residential Properties (First-hand Sales) Ordinance, the first batch of units released by the developer is required to be at least 20 per cent of the total.

Bocom International analyst Alfred Lau said that given its strong financial position, Cheung Kong is unlikely to undercut the prices in the secondary market to speed up sales.

==

> more: http://www.scmp.com/property/hong-kong-china/article/1505769/city-point-pricing-wont-undercut-secondary-market-property

OffThePeak 11 yrs ago

( 2 hours ago )

Cheung Kong offering 15.75pc discount on City Point flats

South China Morning Post ‎- 2 hours ago

Cheung Kong will release flats at discounts of up to 15.75 per cent at City Point in Tsuen Wan, the first housing estate to go on sale after the ...

. . .

South China Morning Post ‎- 2 hours ago

Cheung Kong will release flats at discounts of up to 15.75 per cent at City Point in Tsuen Wan, the first housing estate to go on sale after the ...

. . .

The discounted prices are up to 24 per cent lower than the HK$12,000 per sq ft achieved in recent secondary-market transactions in the area.

Prices for the first batch of 350 units at the joint project with Nan Fung Development will be as low as HK$9,062 per square foot.

The cheapest flat being released for sale is a 483 sq ft unit with a balcony, priced at HK$4.5 million.

Justin Chiu, an executive director at Cheung Kong, said the City Point prices were attractive.

“We will offer the first batch of units at lower prices to attract market attention, and our clients can buy their homes at a happy price,” he said.

==

> http://www.scmp.com/property/hong-kong-china/article/1517792/cheung-kong-offering-1575pc-discount-city-point-flats

THIS NEWS delayed it:

Urns queer pitch for mega-project / Friday, May 16, 2014

The sales brochure of a large-scale Tsuen Wan project will have to be amended after a Town Planning Board decision to rezone a nearby plot.

The 1,717 unit City Point - a much- awaited project developed by Cheung Kong, Nan Fung and MTR Corp - had its brochures printed on April 24.

But last Friday, the board announced that a nearby site will be earmarked for a public columbarium.

==

> http://www.thestandard.com.hk/news_detail.asp?we_cat=21&art_id=145454&sid=42276670&con_type=1&d_str=20140516&fc=8

OffThePeak 11 yrs ago

MORE detail...

"Less Pressure on prices... " - says Bloomberg article

With prices-after-Discount being between: $7,634 to $12,071 psf, Net (ie around $10,000, Net)

Cheung Kong Holdings Ltd., the Hong Kong builder controlled by Asia’s richest man, is offering as much as 16 percent discount at its latest residential project in the city as developers are set to accelerate sales this year.

City Point, the company’s biggest Hong Kong housing project in two years, will sell 350 of a total 1,717 units in the first batch, the company said today. After discounts, the flats in the estate developed jointly with Nan Fung Development Ltd. located in Tsuen Wan district, range from HK$7,634 ($984) per square foot to HK$12,071 per square foot.

Developers including Cheung Kong and Sun Hung Kai Properties Ltd. are competing for buyers in the world’s most-expensive housing market as the government’s curbing measures cooled both prices and transaction volume. Prices, which Barclays Plc forecasts will drop at least 30 percent by 2016, are also under pressure from increasing supply in the coming years.

“Cheung Kong is sitting on the most available-for-sale units so its strategy is very important for the market,” said Alfred Lau, an analyst at Bocom International Holdings Co. in Hong Kong. The discount at City Point “is not a severe price cut so it seems they’re not going for volume, which puts less pressure on the pricing.”

Sales Target

Cheung Kong will sell a total of 800 units at City Point this year, Executive Director Justin Chiu told reporters today in Hong Kong, adding that the company is confident it can reach its sales target in Hong Kong this year.

==

> http://www.bloomberg.com/news/2014-05-22/cheung-kong-offers-discount-on-hong-kong-project-as-supply-rises.html

I have been examining this project, and think it will sell well (at this prices).

If buyers respond very well, then there is some possibility it could "ignite" the market.

(I am thinking this way because of the recent strength in HK Builders' shares.)

OffThePeak 11 yrs ago

DESPITE ALL THE TALK about price cuts, and selling pressure over the last 1-2 years.

Take a look at prices in Riviera Garden, a 30year+ building near CK's new project: City Point:

RIVIERA : http://i273.photobucket.com/albums/jj235/jimolsen2/RivieraGdns_zps3bbbfea5.png

Does this chart bear any similarity to what you would EXPECT to find, after reading all the posts from the Bears on AX ???

The Bears have been wrong a long time, and I do not think anyone should rule out a period of "surprising strength" - But I am not promising that, just identifying it as a possibility, given what I am seeing in the market now, and ignoring the heavy spin in many news articles.

WANT TO get a better sense of the Real market?

Go along to the show flat, and see how people are reacting to the launch and how many people show up. You do not need to buy. Many people who visit will also be "window shoppers."

punter 11 yrs ago

In today's Standard report, it says that some owners of nearby (to City Point) flats have lowered their asking prices.

OffThePeak 11 yrs ago

City Point : in the first batch:

+ 180 will have three bedrooms

+ 114 have two bedrooms, and

+ 56 are four-bedroom units

Prices: between: HK$5.3 mn - $13.09 million

Per Sf: HK$9,062 - $14,328 psf, Net : BEFORE discounts*

(Calculation: mean: HK$11,695 > after 15.75 discount = $9,853 psf)

Compare - Nearby--- : Price psf, Net. = Psf, Gross

Vision City (7 yrs old): HK$12,866 psf :

Indi - Home ( ?? yrs. ): HK$10,410 psf

Chelsea Ct ( ?? yrs. ): HK$ 9,660 psf

=========

*Note the discounts assume:

===

+ Basic: 4 %

+ Cash: 5 %

+ Early: 3 % - if closing is prior to June 30th

+ DSD : 3.75% - to cover the Double Stamp Duty

= Total: 15.75%

So, the buyer must close quickly, and pay cash, and "buy" a flat he cannot move into straight away,

As an example:

2 BR on 7th floor in Bl. 7 / Cost: HK$4.5 million / 483 sq.ft = $9,317 psf, AFTER Discount

OffThePeak 11 yrs ago

LOOK AT THE DETAIL, please !

The prices at City Point are attractive, and for those who need 2BR, 3BR, and 4BR flats in the area, and prefer "new" are likely to be interested.

CK has called them "happy" prices at "discounts" to the secondary market - and that data (see above) show that these prices ARE LOWER than the nearby 7 year old Vision City, but are higher than the much older nearby properties.

If I lived in the area, and wanted to upgrade to a newer and larger flat, I would be very interested in looking at this project.

Let's see how it sells. If it sells well and fast, I reckon you will see HIGHER prices in the next round, and secondary market sellers may prefer to wait, and see what happens, rather than competing with CK"s price cuts (as most owners of existing flats usually do.)

A point that people should be aware is HOW STRONG prices have been in Tseun Wan in recent months. You can see it in the chart for Riviera Gardens. And you can see it in the prices of Vision City:

xx

WIMdowz 11 yrs ago

How is 4.5mill for a mere 483 sq.ft attractive >.<

OffThePeak 11 yrs ago

"483 sq.ft = $9,317 psf, AFTER Discount"

That's a nice fat discount to Vision City's "$12,000 psf"

Why do you think it is UNattractive?

Are you paying Rent in HK?

WIMdowz 11 yrs ago

Yes, I am. 7k/month for 500 sq ft >.> (very old building tho)

OffThePeak 11 yrs ago

That's cheap.

Even below the $9-10k that people are paying for 300-400 sf for near 40 year old buildings in the Olympic station area. And less too, than places like Tung Chung.

What area are you living in? IS the place zoned for residential use?

It seems to me that you have opted for ultra-downsizing, something few would be willing to do.

WIMdowz 11 yrs ago

I live in the Kwai Chung area, shek lei to be precise. I've lived in this flat for about 4 years now and started at 5k/month. It has increased by 500/m every year and quite frankly I'm sick of it. Which iswhy I want to purchase a home. However, since our household income is only around 3xk, this isn't easy. As mentioned before, at the end of this year I'll have about 700k to buy a property but with these insane prices that won't nearly be enough to buy the minimum size of 650net in Tsuen Wan/Kwai Chung/tsing yi area. And from what I hear, the income of my local friends who are my age or even way above (om 25) , my wife and me make quite a bit more than them. So I conclude from that that housing is way too overpriced for avarage end users in Hong Kong.

OffThePeak 11 yrs ago

Perhaps you should look to buy near where you live now.

If you are paying $7,000 per month, and assuming a yield of 4.5% Gross,

then you might - in theory - be able to buy something similar for HK $1.866 Million.

Would THAT interest you?

If not, why do you think sellers would be willing to sell at a level which assumes a higher yield than that?

WIMdowz 11 yrs ago

what makes it all very annoying for me is seeing the graphs from a couple years back where in some buildings I am now interested in, such as riviera gardens, highland park, belvedere gardens, etc used to be 3-5k/sq ft and now are 7-9k/sq ft. A rise in price like this within 5 years is quite amazin and great if you bought a property before. I just don't understand how a high price range like this is being sustained for this long.. Buildings get older, yet more expensive. Shouldn't it be the other way around?

I feel/hope a drop is imminent, especially if Chinese inverstors stay away from buying property here and with other financial problems going on in the world..

I just hope it's coming soon o.O

OffThePeak 11 yrs ago

Yeah. I can understand your frustration.

What is happening is money is flowing DOWNWARDS into the "more affordable" properties below $4-5 million, where the tax bite also happens to be lower.

I think that is where the buying has been concentrated, and so it is showing up in the outperformance of these older buildings.

Will it continue forever? No.

But it may continue so long as people are basically "too frightened" to buy the more expensive luxury buildings over $10-20 million.

I would be very careful in buying tehse older buildings now, and would only do so in an area where you have a high expectation of getting a good "kick" from future transport developments.

WIMdowz 11 yrs ago

That actually makes sense. And yes indeed, I'd rather not buy in a 20+ yr old building, even if I consider myself an end-user. Gotta keep the gates open for possible upgrades in the future, and older buildings may very well be a lot more difficult to sell after x years.

Thanks for taking the time explaining things a bit. I follow this particular forum daily as it's a good way to see a number of different views on the market. Even though I'm hoping for a downturn in the market, it's always healthy and important to keep an open mind to the possibility of this not happening anytime soon.

only time will tell, I suppose!

OffThePeak 11 yrs ago

An older building CAN be harder to sell, but it may also bring several advantages:

1. The price per sf is usually much lower (half?) when compared with a newer building

2. The yield can be higher: 4-5%, versus 3-3.5% for new or new-ish

3. There is often redevelopment potential when it reaches 40-50 years or more

WIMdowz 11 yrs ago

What exactly is meant by redevelopment? Rebuilding? Simple renovation? Would there be extra charges for the house owner and/or is mandatory relocation involved?

OffThePeak 11 yrs ago

According to today's Standard, City Point notched up over 5,000 registration since Friday.

These are meaningful, since each registration needs to include a cheque (maybe a cashier's cheque?) for $150,000. But these are not all individual buyers, since one buyer was reported to have made 50 registrations, requiring cheques totally HK$7.5 Million. Whatta game! He must be using separate companies, or something, since each individual name is only allowed two registrations.

Since only 350 flats are available in the first batch. CK is reported to be considering a price rise in the next batch - No surprise there!

The secondary market is quiet, since many prospective buyers seem to have their focus on the 1,700+ flats at City Point. Perhaps prospective buyers who are "disappointed" at City Point, will soon revert to the secondary market.

Centaline reported just 13 transactions over the weekend at the Top 10 estates monitored. That's down from 18 on the previous weekend.

OffThePeak 11 yrs ago

RESERVATIONS at City Point are now up to : 9,000

That's in comparison with 350 flats in the first batch.

But the story in the Standard gives tales of how prospective buyers are conspiring with agents to get around the restriction of "Only Two flats per buyers"

Don't lose sight of the real story, which is:

There's Huge demand for City Point, despite some recent articles that said the market was slowing.

Batch #2 with 241 flats was announced yesterday at "slightly higher prices":

Flats between 490-914 sf, are priced between $4.59 and $11.08 million:

+ That's HK$7,929-12,126 psf, compared with:

+ HK$7,634-12,071 psf in batch #1

B# : --Low- : --High- : (per sf)

#1 : $7,634 : 12,071 :

#2 : $7,929 : 12,126 :

chg:+3.86%: +0.46% : > maybe +2% average

It seems that CK has raised prices more "on the low end" where the demand is strongest

punter 11 yrs ago

This strategy has proven to be very effective.

punter 11 yrs ago

The Green in Fanling offers 30% discount to 2012 prices. Good deal, but current owners won't be happy about it.

OffThePeak 11 yrs ago

I presume that is only for the "less attractive" properties still on their books (?)

If you look into the detail - which is something you NEVER do, Punter - you may find it is not quite what it is cracked up to do. The market has been in what I describe as a "sideways" drift for many, many months - so why should they need to do that?

OffThePeak 11 yrs ago

(It worked!

They are 74% done on their 800 flat Target for 2014.

What's left are many unfulfilled buying intentions.)

591 City Point flats in Tsuen Wan snapped up in a day

South China Morning Post-5 hours ago

Property sales throughout the city are likely to be boosted after the entire first batch of flats at Cheung Kong's City Point in Tsuen Wan sold in a day...

... real estate agents involved in the transactions say.

The developer sold the 591 flats in the 1,717-unit project in under seven hours, the agents said. The second batch, of 354 flats, would be released this week, Cheung Kong said last night.

"It attracted upgraders back to the property market as the asking prices were reasonable and the government has recently extended the qualifying period for exemption from double stamp duty," Midland Realty chief executive Sammy Po Siu-ming said. "Upgraders have not been active since the government announced cooling measures in February last year."

More than 13,500 people registered to buy flats at City Point last week, the highest for a new project in 12 years.

Last year, the government doubled the stamp duty payable on property purchases, but with an exemption for permanent residents who sign a provisional contract to buy a flat within six months of selling the only flat they owned. It recently proposed widening the exemption.

Cheung Kong executive director Justin Chiu Kwok-hung said: "The amendment helps upgraders to buy flats. We found we had mostly upgraders buying at this project."

The cheapest flat was HK$5.35 million. But if a buyer is eligible for all the discounts on offer, that price drops to about HK$4.51 million. Midland estimated about 80 per cent of its clients were buying the flats to live in, with the rest being investors.

Peter Wong, a director at Hong Kong Property Services, said: "The strong sales will encourage more people to look at flats in the short run."

With many buyers waiting for the second batch of City Point flats, Po believed activity in Tsuen Wan's secondary market would remain slow in the short run.

"But the sale has proven housing demand is very strong," he said. "Forthcoming projects will benefit from the good news. The sales of second-hand flats in other districts should increase, but for small flats only.

==

> http://www.scmp.com/property/hong-kong-china/article/1522913/591-city-point-flats-tsuen-wan-snapped-day

traineeinvestor 11 yrs ago

If, as Cheung Kong claims, many of the buyers were upgraders, that suggests that there will be an increase in the supply of smaller and older flats in the area on the market soon and, unless people are willing to pay the double stamp duty, they will have to price their units competitively with the units available in the primary market.

OffThePeak 11 yrs ago

Yes.

There's some truth to that.

Of course, those who were Renting with the intention to buy, may make up a significant part of the 591 flats.

The fact that this project was coming, was no big secret.

punter 11 yrs ago

Who do you think is the next developer that will beat the prices of City Point?

OffThePeak 11 yrs ago

CK ROSE prices by almost 10% in the new batch at City Point (so some agents calculated)

Why would any developers with fewer flats (that the 1,700+ that CK had to sell at City Point) think about cutting prices, when almost 13,000 reservations went unsatisfied at City Point?

We will find out on Thursday how many people stepped up to pay CK's higher prices at CP

My GF and I visited the showflat for City Point yesterday, and we could see why people were buying, but we were not much impressed with the layouts and views. The bedrooms are (nearly?) all too small for a tall guy like me - at 6'2".

We have a friend called "Charlie" who is about 5'3" tall, and when we see a BR that does not easily accommodate a bed over 6 feet long, we call it a "Charlie flat." I joked with her that City Point was the first development by CK where they had sold all 591 flats in the first batch "to a guy called Charlie."

We were told by the agents that nearly all the buyers were from Hong Kong, and many lived already in the Tsuen Wan area - and were "upgrading" to newer and larger flats. For an expat who works in Central, or has many friends on HK Island, TW seems a long long way. He agreed, and said they saw very few, almost none of the buyers were expats.

There's more coming from various developers, per this article from the Standard:

Plenty of offers ahead

The battle for homebuyers will continue at new projects in the forseeable future with flats set to remain competitively priced, especially in the New Territories.

> http://www.thestandard.com.hk/news_detail.asp?we_cat=16&art_id=145849&sid=42350743&con_type=1&d_str=20140529&fc=7

I think some of the pricing pressure may have eased, now that so many buyers have enthusiastically "shown their hand" at City Point.

EXCERPT:

"Meanwhile, "the developers are strongly determined to sell the units in the New Territories," he added, and more discounts are expected for large- scale projects with more than 1,000 units, such as the upcoming Hemera, the third phase of Lohas Park in Tseung Kwan O, providing 1,648 units.

Big projects are expected in Tai Po this year as well. Phase one of Cheung Kong's Mont Vert, and Mayfair by the Sea by Sino Land will offer 1,350 and 1,091 flats, respectively.

The more aggressive pricing in the New Territories is also reflected in the conservative bids for sites recently, Vincent Cheung added. He urged caution, however, saying offers of low prices may be a gimmick and buyers should be careful.

On the other hand, "prices for projects in Kowloon and Hong Kong Island will not be too low," Cheung said. "

HEMERA - at LOHAS Park could be the next "Hot" property with sizeable discounts. It is "on top of the station" at LOHAS Park, and there are over 1,000 flats to sell.

I thought that CK might launch quickly, after the success at CP. The agent I met yesterday said that was unlikely. He said that more detailed info was due out in August, and thought the actual launch might be November.

By then, the plans for unscrambling the Train lines in the north of HK Island should be announced, and that might provide a spur for buying properties at LOHAS.

punter 11 yrs ago

Why lower prices? Maybe they have the same reason as CK in selling City Point at prices they are selling? Maybe they bought their lot at lower prices? Or maybe they think prices are going lower.

Lower prices at Riva worked. Lower prices at City Point worked. It's very effective.

OffThePeak 11 yrs ago

Punter,

I think you have lost touch with the market.

It is firming now, and the City Point launch has proven to be a "trigger event".

Even Riviera Gardens, which is next to City Point has held up well:

http://i273.photobucket.com/albums/jj235/jimolsen2/RivieraGdn2_zps7be40f11.png

And over the last few years, Tseun Wan has been one of the best performing locations in HK, thanks to the convenience of West Rail's TW-West station, I believe,

punter 11 yrs ago

You're extrapolating what's happening in Tsuen Wan to the whole of HK?

And, what's happening in Tsuen Wan is due to "lower" prices. Properties will sell at "lower" prices. As mentioned above, Riva, now City Point.

OffThePeak 11 yrs ago

Sure - and that's a sensible thing to do.

TW-CityPoint is not some LuxuryPocket highly dependent on Expats and Mainlanders buying trophy properties (er, ah: "funny money")

It is closely tied in with HK's middle class and professional sectors that are now driving the Property market in Hong Kong.

The ripples of City Point's success are already showing up, and even the mainstream media like SCMP has had to acknowledge it.

Next Step may be:

A RISE in Bank Valuations.

That's what is needed to sustain a rally in the Secondary market.

I cannot promise it, but I now expect it

punter 11 yrs ago

If City Point, a good development in a good location, sells at lower prices. It's logical that other/new developments will/can offer lower prices. Especially those at inferior locations.

With no good news and no bad news driving the market, the developers need to "create/manufacture" their own drivers. Low price strategy is working.

OffThePeak 11 yrs ago

I really don't think you are paying attention enough to what the market is telling us now, Punter.

Doing some checking, as I always do the the beginning of a new Month:

I have found that banks have started to push up bank valuations again. Not by much, maybe just $100k or so for flats prices at $7-10 Million.

I expect that they are doing this, because they were not getting enough business at their previous "ridiculously low" valuations. (That is, banks like BofC may have been getting nearly ALL the lending business where their valuations were higher, such as the Olympic Station area.)

I know some said that I was being silly in complaining about low bank valuations, but I think this "market driven response" is confirming what I was saying. Let's see if this move up in Bank Valuations will "get some legs".

punter 11 yrs ago

OTP, you're overanalysing things. How can you make conclusions in such low volumes?

OffThePeak 11 yrs ago

right.

13,500 registration - and a one day sellout of 591 flats means nothing.

Except that: it has transformed the market, and pushed up bank valuations

punter 11 yrs ago

Transform the market in a few days? That's pretty bullish.

I can see the number of transactions have gone up 200% in some areas, 700% in others. Incredible.

And looking at the bigger picture, retail's anemic numbers has got nothing to do with the property market. Of course.

iflylow 11 yrs ago

I post here rarely but read with great interest. I have to say OTP really nailed the predictions on this.

13 days ago OTP said this:

"Cheung Kong will sell a total of 800 units at City Point this year, Executive Director Justin Chiu told reporters today in Hong Kong, adding that the company is confident it can reach its sales target in Hong Kong this year.

==

> http://www.bloomberg.com/news/2014-05-22/cheung-kong-offers-discount-on-hong-kong-project-as-supply-rises.html

I have been examining this project, and think it will sell well (at this prices).

If buyers respond very well, then there is some possibility it could "ignite" the market.

(I am thinking this way because of the recent strength in HK Builders' shares.)"

Sales in the sub 6 mil market have picked up and prices are firm and/or slightly increasing. As much as I hope for a fall in prices to buy some more investments, it is certainly not happening at the moment, especially in smaller units.

OffThePeak 11 yrs ago

Thanks for acknowledging that.

By the "Law of Hubris" -

My next major prediction here, will probably go wildly, and hilariously wrong

punter 11 yrs ago

I'm sorry to pop your bubble OTP but isn't it true that your argument is not yet proven? It's too early to "celebrate" your correct call. Shall we wait maybe 1 or 2 months?

As an example, if you look at the numbers so far. HK property price index is down about 4% for June compared to May. http://data.28hse.com/en/

OffThePeak 11 yrs ago

We have seen before that those figures are not accurate.

They are either :

+ Delayed, or

+ Based on simple averages

So, for example, if more Small-Cap flats are sold, it will drag the averages down,

even if the market is healthy. I'll stick to Centaline, and specific properties I know

punter 11 yrs ago

Centaline is the delayed one. Take a look at their numbers and description of numbers.

ltse 11 yrs ago

This asiaxpat forum is so antiquated, you would think the owners would take a little time to improve its format to allows for pictures, screenshots to make for better discussion. Apparent not so, probably not a worthwhile business to whoever owns it.

If you an investor or trader, you must keep a close eye on this website, its actual data as compared to other peoples opinions, gut feelings, which are irrelevant.

http://www.tradingeconomics.com/

Go to Hong Kong, and China, and USA, and you will get a sense of what the global picture looks like.

Hong Kong - if you go to "Housing Index" (note the definition differs in jurisdictions) in Hong Kong, its defined by mortgage loans, you will see that the recent new residential loans skyrocketed to the 20,000 HKD million level, only around 15,000 level same period last year. When government supresses property prices articifically with stamp duties etc, the market becomes a coiled spring with pent up energy stored, and if you stretch the graph further back from 2008 to the current year, the central pivot level is 25,000, its has further upside to go.

Meanwhile you be suprised however we are actually in a deflationary environment, go to "Inflation Rate", you will see despite all the QE's inflation in Hong Kong fell from a peak of 6.9% August last year to 3.7% current month. Again, if you stretch the chart back to 2008 the last crisis point to the current year, you will see inflation making a lower high on a downward trend.

This is what the FED is fighting against, deflation. You hear Yellen talk about raising rates in 2015 etc, all this talk is a different tactic telling the market "Hey arsehole, you better borrow NOW because I am raising rates soons" in an attempt to push up inflation.

Similarly in China:

Take a look at the Housing Index, in China the index is defined as the % change in price year on year, and you see prices rising slower, and inflation at a pathetic 1.8%, GDP growth rate is also contracting. However, interest rates are at a healthy 6%, which is why I am VERY BEARISH on the RMB because their next step is what the Japanese and Americans have done, currency devaluation to supports its burgeoning real estate market, sames goes with the AUD.

MY forecast is that HK property will trend higher with a peak in the year 2015-2016 as supported by Prechter's work on Elliot Waves, 5 waves on the up side, 3 counter waves on the down side. Right now we are on last Wave to the upside.

punter 11 yrs ago

Take a look at the description for the figures in Centaline:

(1) The " Centa-City Leading Index " is a weekly index based on the current contract prices in Centaline Property Agency Limited transactions that monitors the up-to-date property price variations.

(2) The " Centa-City Index " is a monthly index based on all transaction records as registered with the Land Registry to reflect property price movements in previous months.

The first figure then is just "Centaline" property agency figures, they don't include numbers from other agencies. The 2nd figure is like 2 months old! Go figure.

traineeinvestor 11 yrs ago

@ ltse - thanks for the link, that is a very useful website.

However, I totally fail to understand how a CPI increase of 3.7% YTD can be construed as deflationary. HK experienced deflation from (about) early 1998 to late 2003, but we have had inflation every year since then: http://www.tradingeconomics.com/hong-kong/consumer-price-index-cpi

P.S. : you are citing one of the world's worst forecasters in support of your arguments. Following Pretcher is a good way to go broke. http://www.avaresearch.com/avanew/articles/713/The-Embarrassing-Track-Record-Of-Robert-Prechter-Part-1.html (and there are plenty of other links like this one out there).

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