Developers Offering Free Holidays in Bid to Shift Hong Kong Property
(Bloomberg) -- Developers in Hong Kong are offering perks such as free rail tickets and early move-in dates in a further sign one of the world’s hottest property markets may finally be cooling.
In a bid to shift apartments, CK Asset Holdings Ltd. is giving away high-speed rail holiday and travel packages, including accommodation, worth HK$280,000 ($35,700) for people who agree to purchase one of its four-bedroom units at a development in Hong Kong’s west. At Kerry Properties Ltd.’s Mantin Heights project in Kowloon, you can move in after paying only a 10 percent deposit, and for the first two years, buyers just have to pay government rates and management fees.
Incentives are being laid on thick as firms rush to sell stock ahead of a vacancy tax that will penalize developers for holding onto empty apartments. Various government cooling measures announced in June, along with rising interest rates, have prompted some market watchers to predict Hong Kong’s 15-year run-up in home prices may be coming to an end.
Some developers are selling apartments at quite steep discounts, while others aren’t providing mortgages at all due to the concern that rising borrowing costs may increase defaults.
Sun Hung Kai Properties Ltd. has gone the other way, offering to loan 100 percent of a unit’s price to buyers of its Park YOHO Napoli project in the New Territories. That financing plan is only available for those purchasing apartments of more than HK$7 million, and does include a few additional conditions, like pledging other property as collateral.
"Flexible financing plans are more attractive to buyers because they can’t get mortgages with high loan-to-value ratios with banks easily," said Thomas Lam, a senior director at Knight Frank LLP.
Real estate companies are also boosting property agents’ commissions in order to accelerate sales. Some developers are now paying more than double the usual 3 percent, according to the South China Morning Post. New World Development Co. raised its agent commissions to 7 percent from 3 percent for some of its more exclusive apartments in Tsuen Wan, the newspaper said.
Home prices may drop 15 percent in a year as real estate in Hong Kong faces the worst combination of fundamentals in 15 years, analysts at CLSA Ltd. said in a note last month. Affordability is "highly stretched," with even aging public rental units seeing price increases of as much as 90 percent.
"Developers are offering these incentives particularly for the projects they’re not confident in,” said Patrick Wong, a property analyst at Bloomberg Intelligence. “Projects with poor public transportation access, for example.”
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