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Hong Kong property developers contemplate price cuts

Hong Kong-based real estate developers are contemplating cutting prices in an attempt to push residential sales amidst escalating construction costs and buyers’ fears of a potential home price crash. A recent study from surveyor firm Langdon and Seah notes that building a high-end apartment in Hong Kong now costs between HKD29,999 (USD3,866) and HKD35,004 (USD4,510) per sqm, a 133 percent increase from five years ago. The rising costs are consuming the profit margins of developers. Nicole Wong, regional head of property research at CLSA, told the South China Morning Post that residential property developers must reduce prices to attract new buyers and keep their businesses alive. “Developers aim for a net profit margin of at least 30 percent. If they get single-digit profit margins each year, it is a fruitless business to them,” she said. Similarly, some companies in the secondary home market segment are pushing for more reasonable prices of luxury residences to appeal to buyers and close more transactions. Several developers in the secondary home market in New Territories and Sha Tin slashed prices over the weekend upon the request of buyers. Sixteen units were sold compared with only seven homes on the previous weekend, based on Centaline Property Agency records, according to the Hong Kong Standard Meanwhile, some traditional buyers are concerned that the high cost of residential properties in the city–such as a HKD20,000 (USD2,577) per sqm luxury apartment in Wan Chai–may replicate the price crash that they experienced during the Asian financial crisis in the late 1990s, when they realised that their purchased homes were worth less than the actual mortgages or loans. Ronald Cheung of Midland Realty told the South China Morning Post that some Hong Kong developers have been offering cash rebates on stamp duties instead to lure more buyers, including foreign investors.   Hong Kong Skyline by Diliff was used under a Creative Commons licence.

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Hong Kong by Diliff

Hong Kong-based real estate developers are contemplating cutting prices in an attempt to push residential sales amidst escalating construction costs and buyers’ fears of a potential home price crash.

A recent study from surveyor firm Langdon and Seah notes that building a high-end apartment in Hong Kong now costs between HKD29,999 (USD3,866) and HKD35,004 (USD4,510) per sqm, a 133 percent increase from five years ago. The rising costs are consuming the profit margins of developers.

Nicole Wong, regional head of property research at CLSA, told the South China Morning Post that residential property developers must reduce prices to attract new buyers and keep their businesses alive. “Developers aim for a net profit margin of at least 30 percent. If they get single-digit profit margins each year, it is a fruitless business to them,” she said.

Similarly, some companies in the secondary home market segment are pushing for more reasonable prices of luxury residences to appeal to buyers and close more transactions.

Several developers in the secondary home market in New Territories and Sha Tin slashed prices over the weekend upon the request of buyers. Sixteen units were sold compared with only seven homes on the previous weekend, based on Centaline Property Agency records, according to the Hong Kong Standard

Meanwhile, some traditional buyers are concerned that the high cost of residential properties in the city–such as a HKD20,000 (USD2,577) per sqm luxury apartment in Wan Chai–may replicate the price crash that they experienced during the Asian financial crisis in the late 1990s, when they realised that their purchased homes were worth less than the actual mortgages or loans.

Ronald Cheung of Midland Realty told the South China Morning Post that some Hong Kong developers have been offering cash rebates on stamp duties instead to lure more buyers, including foreign investors.

 

Hong Kong Skyline by Diliff was used under a Creative Commons licence.

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Hong Kong property developers contemplate price cuts