Hong Kong Developers Rush New Launches as Sales Slow
23 September 2011
Hong Kong developers are looking to bring new projects forward in an effort to try to capitalise on sales, with increasing concerns that the city could slip into recession. Property prices fell for the first time in seven months in July, after government measures began to take effect.
Last week the banks increased mortgage rates to their highest level in 28 months, and these factors have left developers facing a dilemma. They are worried that things may get even worse, but bringing new projects forward isn't any guarantee of good prices. It's expected that as many as 2,700 apartments could come online this month.
Two of the city's biggest developers have spent $4.2 billion between them buying sites from the government in Hong Kong this year, and developers who have spent large amounts on land are now likely to need to replenish their cash reserves. This means either selling more apartments or borrowing from the banks, and bank loans are becoming more expensive and difficult to secure.
Mortgage rates have increased by 2% during the last six months, and some analysts think property prices in Hong Kong could drop by as much as 30% over the next two years. They believe that the 70% growth since 2009 represents a market that has overheated.
This growth was fuelled by low mortgage rates, increased numbers of overseas buyers and a lack of supply, which prompted the government to increase the amount of public land available for sale and to introduce higher mortgage deposit requirements. Three sites sold by the government at auction last month realised lower prices than analysts’ estimates, and the number of home transactions has decreased for eight consecutive months.