Hong Kong’s homebuyers packed a real estate developer’s showroom over the weekend to snap up hundreds of new flats, as assurances of low interest rates by monetary authorities drove them to seek sanctuary in fixed assets.
New World Development said it sold all 337 flats at Phase II of The Pavilia Farm project in Tai Wai in the New Territories, for a haul of HK$3.4 billion (US$438 million) within nine hours.
The weekend’s haul puts New World on track to generate HK$10 billion in receipts from The Pavilia Farm, after three successful rounds of sales since its launch four weeks ago, a record for the developer in a down-market year weighed down by a global coronavirus pandemic and the city’s worst recession in history.
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“The Pavilia Farm is a mass market project that attracted a lot of registrations of intent,” said Sammy Po, chief executive of the residential division at Midland Realty. “Many buyers were turned away” by the limited offers in each launch, he said.
New World raised today’s average price by 5 per cent to HK$19,800, compared with the first batch. With sizes from 264 square feet to 753 sq ft, flats started from HK$5.73 million for the smallest units. Still, that did not deter buyers, who snapped up a third of the offerings within the first two hours, with a customer forking out HK$29 million for two three-bedroom units, according to the developer’s sales and marketing director Akan Wong.
Across town at Kau To Shan, CK Asset Holdings saw a cooling in buyers’ enthusiasm, selling only 10 flats and four houses a day earlier at the upmarket El Futuro project, out of 42 flats and 12 houses offered. El Futuro, scheduled for completion in March 2023, was priced between HK$7.62 million and HK$27.64 million, or HK$15,599 to HK$22,537 per square foot during its first round of sales on October 27.
CK Asset’s luxury project will not sell as quickly as mass-market homes, said Po, adding that New World’s Tai Wai flats will perform well because there are still many buyers who are able to afford the project’s price bracket.
New World’s strong performance reflects the need for a reliable store of value in an environment of low interest rates, especially when the price point is considered reasonable.
First-home buyers, with financial support from their families, or employees in high-paying jobs, can still afford the flats, especially after the relaxation of mortgage restrictions in October last year, said Neon Yiu, researcher at Liber Research Community.
Still, the impact of rising unemployment rate is “not fully reflected” in Hong Kong’s housing market as those who are laid off, such as those in the service industry, are not the main buyers of the market, he said.
Risk could be high for the housing market if more lay-offs take place in other segments of the economy, and if city residents begin to emigrate en masse, causing the sales of projects to slow and putting pressure on prices, said Yiu.
“Hong Kong’s unemployment rate is even higher than the UK” at 4.5 per cent, Yiu said.
Looking ahead, the primary sales market is expected to remain active with several new projects scheduled for launch in the fourth quarter, said Martin Wong, associate director of research and consultancy in Greater China at Knight Frank. “Developers may provide more incentives and discounts to speed up sales before the year end.”
With more units available for sale and protracted negative market factors like the economic recession and mounting market uncertainty, the consultancy expects housing prices to drop by 3 to 5 per cent in the rest of 2020.
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