Hong Kong developers raise prices, confident that buyers will snap up flats unlocked by vacancy tax

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Hong Kong’s home prices are showing no signs of letting up, as developers continue to raise their offer price with each successive sales launch, confident that there are enough eager property buyers to snap up any additional supply that goes on the market.

For proof, look no further than The Garrison’s 118-unit apartment complex in Sha Tin, developed by Far East Consortium International. The developer raised its prices by 14 per cent in a span of four days this week, adding HK$762,000 to the price of a 251 square-foot (23 square metre) unit in the single-storey tower, for a jaw-dropping HK$6.22 million, or HK$24,804 per sq ft.

Property developers blast ‘unfair’ vacancy tax, call for longer grace period

The burning fever in the residential property market, where the median price had been rising for 26 consecutive months, underscores the arduous challenge facing Chief Executive Carrie Lam Cheng Yuet-ngor and her administration to cool the world’s costliest real estate market.

A 1,599 sq ft unit at Victoria Harbour in North Point sold for HK$100.05 million, or HK$62,574 per square foot, according to data available on the government website on Wednesday.

In a city with HK$1.2 trillion (US$153 billion) of bank deposits, “it’s not difficult to find buyers who can afford these private homes,” said CLSA regional head of property research Nicole Wong.

Executive Council approves vacancy tax and sites for affordable homes

On the eve of the 21st anniversary of the return of Hong Kong to China’s sovereignty, Lam’s government unveiled on June 29 a so-called vacancy tax on developers who hoard completed units, and offered subsidies to allow more first-time buyers and low-income households afford public housing. The fact that developers are shrugging off the vacancy tax shows how limited the government’s power is in changing market demand, analysts said.

“Developers are still confident in the housing market, as there is a strong demand for homes,” said Stewart Leung Chi-kin, chairman of the Real Estate Developers Association (REDA), an industry guild.

More than 1,000 prospective buyers put up money to register their interest to buy 168 units at the St Martin project in Tai Po, while 300 people submitted bids for 45 units of the Victoria Harbour project in North Point, according to agents. Both projects, developed by Sun Hung Kai Properties, go on sale this weekend.

At Victoria Harbour, a 286 sq ft studio is being offered for HK$10.25 million.

The chronic supply shortage has given Hong Kong’s developers the upper hand over the government and buyers,” said Mizuho Securities property analyst Alan Jin, adding that neither developers nor buyers consider the government’s market-cooling measures game changing. “Developers will continue to enjoy their high profits, and would be reluctant to cut housing prices.”

Apartment units under the Hong Kong government’s subsidised Home Ownership Scheme would be made nearly 50 per cent cheaper than private flats.

Discounted home providers’ losses to be covered by Hong Kong

Under the scheme, the monthly income limit for family applicants will be HK$57,000. For individuals, the cap is HK$28,500.

Other proposals included imposing a vacancy tax equivalent to two years’ rental income on empty new flats, reallocating nine sites earmarked for private housing to build 10,600 public flats, inviting the Urban Renewal Authority to build starter homes at Ma Tau Wai and imposing more stringent conditions on developers’ sales of uncompleted flats.

Cussion Leung, head of conglomerates and property research at J P Morgan, said the decline in private residential supply would drive private home prices higher, and developers would transfer the vacancy tax burden to potential homebuyers.

“This could become less concern of the government as long as ownership ratio can be lifted via sale of subsidised flats. We believe the land market will remain heated as a result,” he said.

This North Point estate highlights Hong Kong’s housing woes

Leung said the government’s recent measures of shifting the focus of increasing supply of affordable homes after learning the cooling measures such as higher stamp duties was ineffective to contain the runaway home prices in the past nine years.

“Now, the government is trying to provide more affordable housing for the needs of genuine homebuyers. Let the richer buyers go for private homes,” he said.

With additional reporting by Peggy Sito

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