The Hong Kong apartment market is truly on the decline. Various developers are lowering their prices in an effort to lure unwilling buyers to purchase their property. Nan Fung Developers is the second giant developer that has had to lower its prices in a short span of time. The decline can be attributed to a number of factors, such as the newly enacted property policies, rising interest rates and a sluggish Chinese economy.
Nan Fung plans to sell its first batch of 487 flats at the LP6 Project in Tsueng Kwan O at HK$ 15, 304 per square foot next month. This will be a 3% drop from its previous pricing of its nearby flats in Malibu. In fact, statistics show that the current price will fall below 30% of the price of some of the 1600 Malibu units that were sold in March.
Generally, the drop in the price of Hong Kong apartment for rent is expected to become a trend. Apart from Nan Fung Developers, another giant development company that has been hit hard by this storm is Sun Hung Kai Developers. This company has had to cut prices at its Cullinan West II in Nam Cheong by up to 10%, which is the second occurrence in less than a month.
A number of financial institutions have also predicted that the drop is here to stay. One such institution is CLAS, which has predicted that that the prices will drop by up to 15% in the next 12 months. Other institutions that have predicted drops include UBS and Citibank.
Nan Fung Developers has stated through its General Manager Victor Mak that it will consider policies in setting prices for its next batches of Hong Kong apartment for rent. They are aiming for non- aggressive pricing in order to be able to clear their stock.
The policy being referred to is one that dictates that development companies must sell at least 20% of their flats at every launch. The flats that will be affected are those whose pre- sale consents were approved after 29th June. There are also levies that will be imposed for units that remain unsold after a year. All of these policies are aimed at preventing flat- hoarding that is so rampant in Hong Kong at the moment.
Nan Fung will for instance have to sell 479 flats of its 2392 flats with every sale in its LP6 Project at the Phase Six of the Lohas Park Community. This will be the first project to be hit by the new policies.
At the moment, developers are exceedingly cautious about setting prices. Now, it is far better to even sell at lower prices than to hold on to the flats waiting for the prices to improve. For the foreseeable future, prices are not likely to improve any time soon. Additionally, research shows that the 20% policy is more likely to affect mass residential units than luxury units. If the policies continue to be enforced, then no doubt flat- hoarding will become a thing of the past.