First-time Hong Kong property buyers being lured with discounts and move-in schemes

0

Sun Hung Kai

As Hong Kong’s high-end property market continue to struggle due to government cooling measures and surging constructions costs, developers are luring first-time, middle class buyers with lower rates and immediate move-in schemes.

Property prices have increased by about 120 percent since 2008 in Hong Kong—one of the most expensive markets in the world—and buyers are on the lookout for more affordable investments, forcing developers to give discounted rates to meet sales projections at the cost of lower profits, according to Reuters.

Accounting for 70 percent of transactions reported in 2013, the mid-income demographic who are buying homes for the first time are largely exempt from measures to curb the secondary home market, which have seen its worst performance since 1997.

“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,” Raymond Liu, property analyst at Macquarie, told Reuters.

Sun Hung Kai, one of the mass-market Hong Kong developers facing fiercer competition next year when new housing stock reaches its highest level in eight years, is implementing an uncommon “move-in, pay-later” tactic, offering buyers up to 540 days to make their initial payment.

Another firm, Henderson Land Development, has launched new homes starting at HKD6 million (USD773,000), which is considered very reasonably priced, and gave up to 28 percent discounts in one project.

Discount schemes appeal to middle-class investors, according to Wong Leung Sing, research director at Centaline Property Agency, and Macquarie analysts ranked Sun Hung Kai and Henderson Land as the top two firms that would most likely gain in the current investment climate, whilst Barclays named Cheung Kong Holdings as the market’s sole front-runner.

Meanwhile, rising construction costs is also becoming a huge problem for developers, and profit margin projections for Hong Kong’s six major firms will shrink from 36 percent just a couple of years ago to merely 14 percent by 2016, according to UBS research. “Unless [developers]purchase land in the coming year for 20 percent less, [their]profit margins will drop. That’s for sure,” Ricky Poon, executive director of residential sales at Colliers International, confirmed to Reuters.

is the region's leading luxury, real estate, architecture and design publication