New-homes market seems primed for take-off after the Q1 lull

After a very slow Q1 2022, the primary property market is expected to bounce back this quarter. Q1’s direct sales caught the start of Hong Kong's fifth pandemic wave, were lacklustre and mostly consisted of units that had not been sold in Q4 2021. According to the electronic platform, Sales of First-Hand Residential Properties Authority, 962 first-hand units were sold in Q1, of which about 256 (26.6%) were launched in 2022, and the remaining 706 units (73.4%) had been launched last year or earlier.

However, as the fifth wave eases, many developers have said in newspaper they would actively redeploy assets in the second quarter. Among them, the first phase of Grand Mayfair – the Yuen Long Kam Sheung Road Station development, and once restrictions are eased tomorrow, 21 April, Phase 1A of the joint project by Sino, K. Wah International and China Overseas will go on sale. Many new properties affected by the fifth wave, such as THE MONACO MARINE in Kai Tak and ONE CENTRAL PLACE in Sheung Wan, had already obtained pre-sale consent but stopped selling. Once those restrictions ease, first-hand sales will accelerate.

According to HKET/Centaline Agency, 31 new projects are expected to enter the market this quarter, 15 of which will be luxury developments. The projects will offer 11,591 units; 13 (2,582) have been approved for pre-sale. A few large-scale new projects and almost half of the luxury projects are expected to be sold this quarter.

Although there are only nine new projects in the New Territories, the supply is the largest among the three major districts at 5,480 units because all are large-scale developments. The biggest among all the projects is the 11th phase of Lohas Park which will have 1,880 units.

Kowloon has 14 projects, and the supply is quite diversified, with both luxury and large estate types on offer.

On Hong Kong Island, several significant luxury projects should be launched this quarter, including Phase II of 21 Borrett Road. A particular duplex in Phase 1 of No. 21 Borrett Road, on the 23/F with three car parking spaces, a rooftop and a private swimming pool, was sold by tender for HKD459,408 million, and the price per square foot reached HKD136,000, setting a new record in unit prices for a strata residence in Asia.

New Territories

Source from HKET/ Sales of First-Hand Residential Properties Authority

Kowloon

Source from HKET/ Sales of First-Hand Residential Properties Authority

Hong Kong

Source from HKET/ Sales of First-Hand Residential Properties Authority

The fifth wave seems to have passed, and Wheelock's MONACO MARINE was the first to announce a first price list last Thursday, involving 112 one to three-bedroom units, all in two high-rise buildings ─ 1A and 1B, with saleable areas ranging from 326 to 713 sq. ft. Prices range from HKD9,049,000 to HKD21,538,000, and the unit rate ranges from HKD26,692 to HKD30,377. After deducting the maximum 12% discount – for successful buyers who pay cash – the discounted price is HKD7,964,000 to HKD18,954,000, and the discounted unit rate is about HKD23,491 to HKD26,733.

The entry-level unit is Flat B on the 3rd floor of Block 1A, a one-bedroom unit with a saleable area of 326 sq. ft. The cash price is HKD7.964 million, making its unit rate about HKD24,429 per sq. ft. As for the lowest unit price, Unit E on the 5th floor of Block 1A is a two-bedroom with a saleable area of 448 sq. ft. It is listed at HKD11.958 million and, after discount, would cost HKD10.524 million for a unit rate of about HKD23,491.

Nearly 80% of the units are priced below HKD12 million, which qualifies for the new Mortgage Insurance Plan, so the developer will not provide a second mortgage.

According to MONACO ONE and THE HENLEY I's initial price lists, MONACO ONE launched the first batch of 99 one to three-bedroom units, which, after discount, cost about HKD7.568 million to HKD16.054 million, for a unit price of HKD21,671 sq. ft. to HKD24,759 sq. ft. The second price list, of 96 units, had the same layout of one to three bedrooms.

According to Memfus Wong transactions data, the unit rate per sq. ft. of a similar development in Kai Tak, such as Vibe Centro, K.City, Victoria Skye, Upper Riverbank and One Kai Tak, has ranged from about HKD22,812 to HKD29,156 in the past six months. MONACO MARINE's asking price is also at market level.

Soon, we will know developers' asking prices. They usually set the first price list near second-hand transaction prices for units with a similar age in the same locality. If units sell quickly, developers will raise their prices by 5% to 10% in the next offering.

I examined surrounding second-hand transactions to predict the potential asking price for the 31 new projects.

There is a high demand for bigger flats, and buyers are motivated by the easing of the MIP limits, so developers are likely to put more two and three bedroomed units on their first price list to match the trend. Buyers will find it easier to purchase bigger pre-sold units in the New Territories.

From last year's primary residential transactions, I get a unit rate ranging from HKD 21,000 to HKD 23,000 for standard units. Special units (with a flat roof) went from HKD 23,000 to HKD 26,000.

New Territories

Source from HKET/ Sales of First-Hand Residential Properties Authority/Memfus Wong

Pre-sold units in Kowloon and Hong Kong districts are always popular when launched. Due to the shortage of urban land supply, developers will put a 15 to 20% mark up on their selling prices. In the Kowloon district, standard unit prices ranged from HKD23,000 to HKD40,000. Special units and luxury houses ranged from HKD51,000?to HKD68,000.?

In the Hong Kong district, developers set prices of?HKD34,000 to HKD49,000 for standard units, and house unit prices went from HKD80,000 to HKD100,000.

Primary residential transactions always simulate secondary residential prices because buyers can get secondary units for around 15% to 20% less than primary units. When developers' units are sold out, buyers often consider nearby flats in the secondary market.?Owners refer to the new unit prices to increase their asking price. It’s always best to know the price patterns and transactions in surrounding developments before making an offer.

Kowloon

Hong Kong

Source from HKET/ Sales of First-Hand Residential Properties Authority/Memfus Wong

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