Property Market Finally Softening but Still Pricey

Some 96 percent of the units at Cullinan West II were sold this weekend

We never thought we would see this, but developers are starting to lower their prices because of rising interest rates, a slowing economy and a depreciating Chinese currency.

This past weekend Sun Hung Kai Properties dropped the prices of its flats to an average of HK$23,893 per square foot after discounts of up to 20 percent, about 10 percent lower than a previous batch that went on sale in December.

The 364 units ranged from 269 to 1,500 square feet

It's still shocking that people are paying over HK$20K per square foot, but the market was willing to shell out, as SHKP was able to see 96 percent or 350 out of 364 units at Cullinan West II at Nam Cheong MTR station in Kowloon.

"The good turnout means the market still has liquidity. Once developers are willing to lower their selling prices by 5 or 10 percent, it will encourage investors and buyers to quicken their purchase decisions," said Colliers International's deputy managing director Vincent Cheung Kiu-cho.

The developers also offered first-time mortgages of up to 80 percent of the flat's value, much higher than the standard mortgage ceiling of 60 percent of a property valued below HK$10 million (US$1.3 million), and 50 percent for those above HK$10 million.

That's a very good enticement for first-time buyers if they can't make a big down payment.

More than 4,800 prospective buyers bid for 364 units

The flats' areas ranged from 269 to 1,500 square feet, with prices starting at HK$6.28 million. Gulp.

For an indication of the demand, more than 4,800 prospective buyers signed up for the 364 units, an average of 13 bids for each available flat. However, Alfred Lau, an analyst with Bocom International, says the sales response was "satisfactory", and expects developers to offer even bigger discounts soon.

"There are only 364 units in this batch and the pricing was not aggressive in the first place, largely in line with nearby average selling prices," he said.

Some buyers bought more than one unit -- one bought six

"If these units had come in two weeks earlier, they would have sold at the full price. This further confirms the slowing momentum. Developers may need to offer a larger discount if they wish to push the volume."

Some buyers bought more than one flat. In one case, one splurged HK$156 million for six units, five for the family to live in, one to rent out. Another bought three units ranging from 1,200 to 1,500 square feet for a total of HK$120 million.

Still staggering for most of us, but there are others who have money to spend and are looking to snap up some good deals...

Home Buyers Walk Away

Buyers are more cautions with higher mortgage rates and cooling measures

After 27 consecutive months of house prices rising, buyers finally started having second thoughts. The first half of this year was very strong, with prices going up 13 percent, though people are starting to retreat, even if it means losing hundreds of thousands of dollars in deposits.

St Martin II in Tai Po has had buyers lose their deposits

One buyer who had purchased a HK$7.25 million studio unit in Tai Po, New Territories two weeks ago has now cancelled the purchase and forfeited the 5 percent deposit, or about HK$362,700 (US$46,200).

Five other buyers cancelled their purchases of flats in Yuen Long, which totals HK$2 million in penalties.

There seems to be a gloomy outlook due to banks raising mortgage rates, the ongoing Chinese-US trade war, the inactive stock market, and the Hong Kong government trying to cool the property market.

As a result, some developers have cut prices in the hopes of boosting sales, like Sun Hung Kai with its Cullinan West II development on top of Nam Cheong MTR station. The average price was cut by 10 percent to HK$23,893 per square foot after discounts.

Even Park Yoho Milano in Yuen Long has seen cancellations

"Seeing some developers tag their new flats at a less aggressive level or even lower down the prices, buyers are expecting more cheaper new flats to be put onto the market soon," said Vincent Cheung Kiu-cho, deputy managing director for Asia valuation and advisory services at Colliers International. "The sentiment will last at least a quarter."

But don't pity the property developers -- they are cutting prices by 10 percent and are still making a killing.

UBS has predicted housing prices will drop as much as 10 percent from this month to the end of 2019, while Citibank has forecast a 7 percent fall in the second half of this year.

The MTR's Bizarre Housing Solution

MTR Corp's Frederick Ma suggests a "Hong Kong Town" in Guangdong

The MTR Corporation is brilliant at thinking of how to make more money off us little guys.

The latest? To help ease the housing shortage, why not build a "Hong Kong town" across the border in China and so young people and the elderly can commute everyday (via the MTR of course)?

Frederick Ma Si-hang of the MTR says the company is already in talks with the state-run China Railway Corp to explore the feasibility in Nansha and Foshan and residents can use a high-speed rail to get back to Hong Kong to work everyday.

The complex would be near the high-speed train station

He brushed off concerns that this project would be a conflict of interest...

The "Hong Kong Town" would be located near the high-speed rail station in Guangzhou and the whole complex would have a "Hong Kong ambience" that would have residential, commercial and reliable healthcare facilities.

It would also mean governments on both sides would have to come up with a monthly pass to make the trips not only more affordable, but also help them go through immigration faster and allow people living on the mainland to pay Hong Kong tax because they work there.

Readers who have commented on this story point out the legal ramifications -- is a Hong Kong resident who lives in this "Hong Kong town" subject to Hong Kong or China laws? While the housing will be cheaper, the food and water quality on the mainland are questionable. And what does "Hong Kong ambience" mean anyway? Like Central or like Mongkok?

Container terminals in Hong Kong could be turned into flats

The main complaint from other readers was this sense of resignation of having failed at trying to find solutions to the housing issue in Hong Kong and just dumping people who cannot afford it to a compound across the border. How does that achieve anything except shift the problem -- literally?

It just shows there is not enough determination on the part of the government to really tackle the housing issue. The MTR is also looking at possibly snapping up container terminals in places like Nam Cheong and Mei Foo in Hong Kong to turn into housing.

And who would be laughing all the way to the bank?

Li Ka-shing who owns Hongkong International Terminals Limited.

Us little guys never get to win.

Two Housing Extremes

Cullinan West at Nam Cheong station saw big sales of units today

More housing stories are in the news.

When you arrive at Kowloon Station and ascend the escalator to Elements mall, there's an army of property agents shoving brochures in your face, asking if you want to buy a flat.

No, I just want to have some dinner.

The show flat gives the aura of a sophisticated place to live in

The brochures are for a residential project called Cullinan West in nearby Nam Cheong station, and they average over HK$20,000 per square foot.

But that rate didn't deter a family today, where three members bought three four-bedroom flats each, with the total bill totaling a whopping HK$200 million.

Excuse me?

There is no further information on who these buyers were or how big the flats were, but who happens to have HK$200 million to spend like that?

And were they all first-time buyers so they avoided paying the extra stamp duty too?

Then there is the other extreme -- subdivided flats, not in seedy Sham Shui Po, but in the tony neighbourhood of Mid-Levels.

One flat here on Old Peak Road is subdivided into five units

Reporters posed as potential renters ad visited a 2,400 square foot flat on Old Peak Road that was subdivided into five units, ranging from 250 sq ft to 656 sq ft, and rents from HK$25,000 to HK$36,000 respectively.

Who pays HK$25,000 for 250 sq ft to rent?

Apparently the hefty price includes utility bills, and a maid coming in to clean up twice a week, bed sheets changed once a week and free wifi. There's also basic open kitchens with an induction stove top, kettle and coffee maker.

So now we have people hoarding flats with hundreds of millions of dollars on hand, and at the other end of the scale, expensive flats subdivided into smaller ones and charging exorbitant rents.

And the Hong Kong government says it's watching the situation closely and can intervene at any time?

Anytime now would be good...

Picture of the Day: Nature Calls

The kid looks unfazed as he does a No. 1 in a plastic bag

I'd read lots of stories about mainland kids peeing in the MTR, but I had yet to see it with my own eyes -- until today.

This morning I was on my way to Tuen Mun, when on the train from Central to Nam Cheong, I could see a mainland family, with the grandparents looking over a boy who looked around three years old.

And then the grandparents started rifling through their bag and took a bowl and spoon out of a plastic bag, while the mother, who was sitting in the seat across came over the started undoing the child's pants.

I thought, No! This cannot be happening!

Soon the pants were down to his ankles and the plastic bag placed in front, that collected the bright yellow liquid...

Interestingly no one said anything -- the woman nearby didn't even notice -- too busy looking at her phone, while others just tried to mind their own business.

I just happened to practically have a front-row seat at this spectacle.

OK nature is calling, but I don't recall any Hong Kong kid doing this in the MTR. Ever.

Their parents would have already trained the child to go to the bathroom before getting on the train, or making them hold it until they arrived to their destination. That would teach children to make sure they do their business at the right time.

But not mainland kids.

If nature calls, then just let them go wherever they happen to be.

In the countryside this would not matter -- natural fertilizer is good anytime.

But we're in the city. In a fast-moving train.

Is it too much to ask for children of a certain age to be toilet-trained before they come to Hong Kong? Or elsewhere for that matter?