Source: Securities Times Author: Roman
$CK ASSET (01113.HK)$The subscription for its Yau Tong Chin Hoi Station II met market expectations. It was officially closed at 8 p.m. on August 10. It finally received more than 38,000 tickets (meaning the subscription), exceeding subscriptions by nearly 60 times, making it the highest number of tickets ever collected in Hong Kong.
The reason why this edition has attracted market attention is that the gimmick of its launch is that it is 30% lower than the surrounding market price (equivalent to 30% off), which is very attractive. What kind of signal did Li Ka-shing, the “weather vane” of the real estate industry, send out this astonishing move — selling properties at low prices? Why does Changjiang Industrial Group sell buildings at a discount? On August 11, a Securities Times reporter visited the site of the Yau Tong Shinhai Station II project in Hong Kong to find out.
Hong Kong's new ticket prices have been oversubscribed by nearly 60 times
The subscription response for the Yau Tong Chin Hoi Station Phase II project of Changshi Group, a subsidiary of Li Ka-shing, can be described by the word “hot”. Kelvin, sales manager of Zhongyuan Real Estate, told the Securities Times that before the project ended at 8 p.m. on August 10, a large number of prospective buyers still submitted registration information for the final sprint. Therefore, developers process registrations and count tickets until the early hours of the morning to confirm the number of tickets received.
According to what the reporter learned, after counting by the developers, it finally received more than 38,000 tickets. Compared with the 626 sets sold on August 12, the subscription amount was exceeded by nearly 60 times, replacing the Pak Ao Zhuang III on the new ticket throne with the strongest ticket collection in Hong Kong's history. In terms of the number of visitors who received tickets, Yau Tong region accounted for 15%, Tseung Kwan O accounted for 25%, Kai Tak accounted for 20%, Kwun Tong accounted for 10%, and the rest came from Tsuen Wan and the northwest of the New Territories.
Kelvin explained, “On August 12, Qin Hai Station II sold a total of 626 standard multi-level households, with an average price of HK$14,868 per foot (equivalent to 150,000 yuan/square meter). This price is actually more favorable than the surrounding area. It's not that what the outside world says is that only a few low-priced housing units are used as a gimmick, but rather that the overall average price is greatly discounted compared to the surrounding area.”
The Xitai Real Estate next door (3-year property) currently has an average foot price of HK$16,934 (approximately RMB 156,000 per square meter), an average foot price of HK$2,045 (approximately RMB 186,000 per square meter), an average foot price of HK$18,321 (approximately RMB 169,000 per square meter), and the average foot price of Ocean One (10-year floor) is HK$16,516 (approximately RMB 150,000 per square meter).
However, as the outside world said, it is true that several low-priced housing units in this project have garnered a lot of attention. The smallest K-unit size unit sold is only 210 feet. The minimum price after discount is HK$2.9 million, or HK$13,800 per square foot (approximately RMB 127,000 per square meter). If you calculate 10% of the minimum down payment for the first home in Hong Kong, it only costs HK$290,000 to get on the bus. For single people, this price is really attractive.
According to the residential property area of Zhongyuan Real Estate Shangqinhai Station Phase II, the smallest area is 19.538 square meters, the largest is about 67 square meters, and the area of most properties is about 20 square meters.
There are two phases of Qinhai Station, including the first batch of 132 units in Qinhai Station Phase II. The unit types include open plan and one to three bedrooms. The discount rate is around 18% to 19%, and the discounted price is about HK$2.9 million to HK$11.143 million. The estimated delivery date is October 15, 2025, and the construction period (pre-sale period) is about 27 months.
Exploring Shinkai Station II
On August 11, the reporter went to the Qin Hai Station II project in Yau Tong. It took about 15 minutes to walk from Yau Tong subway exit A to reach the destination. Google Maps showed that it was about 1 kilometer from the subway station. During the trip, the reporter discovered that the surrounding area was mostly auto repair shops and old factories, and that the surrounding facilities and environment were not very good.
Afterwards, the reporter came to the site of the Qin Hoi Station II project. Currently, the building is still under construction. Next to it is the Kwun Tong Fish Wholesale Market and cement factory. It is worth mentioning that the project does face the sea, but a nearby agency told the reporter that in reality only the upper floors can enjoy the ocean view; the lower floors have almost no scenery to speak of.
According to the staff at the scene, the fish wholesale market next door will be bought and rebuilt at that time and turned into a residential project, but it is not yet known exactly when it will be reconstructed. “The low price has a reason for the low price. The environment isn't very good. If you buy a lower floor, you'll probably smell fishy when you open the window. Also, there is a cement factory next to Phase I, and they still have to endure the noise and dust of the surrounding cement plants. The surrounding area is full of factories, so the noise pollution is quite high.”
It seems that Hong Kong people have engraved property into their DNA. Even though the surrounding environment can be described as “dirty and poor,” it is still impossible to resist the enthusiasm of Hong Kong people to buy houses. Kelvin told the reporter that the property attracted a large number of customers other than luxury property customers, breaking the psychological expectations of buyers. “There are even quite a few mainlanders who go to see the property and submit housing application materials, but mainlanders have 30% stamp duty when they come to Hong Kong to buy a house. If the total price of this house were 3 million Hong Kong dollars, they would have to pay an additional 900,000 Hong Kong dollars.”
In order to promote, some Hong Kong agents used the slogan “You can afford three million rooms even if you pay 3,000 a month” at Qinhai Station. According to information, for three-bedroom customers interested in purchasing Qinhai Station Phase II, Changjiang Industrial has also introduced a “90% mortgage” to attract customers. First, customers don't need to pass a stress test or provide any proof of income; they just need an ID. Second, the customer can make a 10% down payment, and the developer unconditionally lends the remaining 90%. Third, you only need to pay interest for the first three years. The interest rate is fixed at 1% for the first year, 2% for the second year, and 3% for the third year.
This strong promotion of discounted property sales has also had a significant impact on the Hong Kong real estate market. Since the price of these properties is significantly lower than the market price, some industry insiders even said that this price is like a “deep water bomb,” breaking through the psychological defense line of second-hand property owners, causing many owners to have to re-evaluate their property values and market prospects.
In fact, recently, Cheung Kong Industrial has been dropping a “deep-water bomb” on the Hong Kong property market. For example, Tuen Mun Feiyang Phase II, which launched in March this year. The first batch of units launched at the time ranged from 11042 to HK$13,972 (approximately RMB 100,000 per square meter - 130,000 per square meter). The lowest price hit a new 3-year low in the surrounding area, described as a “blood release price.”
This has also sparked various speculations in the market about the reason behind Li Ka-shing's sale of the property. As a legend in the business world, Li Ka-shing has always been known for her prudent investment strategies. According to some opinions, this sell-off may mean that he anticipated the potential risks of the future real estate market, so he needed to quickly return the funds.
“For the diversified development, strong strength, diverse funding sources, and strong cyclicality, it is clear that selling houses is not due to cash flow or performance pressure; it is probably due to measures to speed up removal and repayment based on grasping the next changing trends and opportunities in the economic situation.” Bai Wenxi, IPG's chief economist in China, thinks so.
Hong Kong financial commentator Yan Baogang said that the inventory volume of first-hand buildings in Hong Kong this year is close to 20,000 to 30,000 units. If developers are unwilling to cut prices, it will be difficult to achieve the goal of inventory removal. The long-term new sales method follows the Group's consistent and steady investment strategy, but it will hurt the development of the Hong Kong real estate market.
Yan Baogang said, “Changshi has created a gap in selling houses at reduced prices, putting some pressure on other developers. They also need to cut prices according to market prices in order to reduce their level of debt. The second-hand market is influenced by the first-hand market. If developers cut prices drastically, the second-hand market will inevitably follow suit. Because the Hong Kong economy is mainly supported by consumption this year, if the property market has a negative effect on the wealth effect, it will also have a certain negative impact on Hong Kong's economy as a whole.”
The property market is weak, and the HKSAR Government's “hot move” stimulates
The Hong Kong Special Administrative Region Government's Bad Property Valuation Department (“Hong Kong Bad Valuation Authority” for short) gave this assessment of the Hong Kong property market in 2022: the residential property market lost momentum in 2022. However, entering 2023, the Hong Kong property market has not improved significantly and is still showing a weak trend.
According to a set of data released by the Hong Kong Monetary Authority in July, as of the end of June this year, overall residential property prices in Hong Kong had fallen 13% cumulatively from the 2021 high level, and the situation in the non-residential property market was similar. According to the latest statistics released by the Hong Kong Differential Estimation Authority, the prices of office buildings, multi-storey factory buildings and retail properties fell by 20%, 8% and 17%, respectively, compared to the peak period of 2018-2019.
Yu Wai-man, Chief Executive of the Hong Kong Monetary Authority, said that the weakness of the property market is mainly affected by peripheral environmental factors. Major economies are still facing greater inflationary pressure. Interest rates may remain at a high level for some time to come. If the global economy slows growth due to high interest rates, the local economy will inevitably also be affected.
Accordingly, on July 7, the Hong Kong Monetary Authority revised countercyclical macroprudential regulatory measures for mortgage loans from some properties, including:
First, for eligible properties priced at HK$10 million or below, the highest mortgage insurance fraction remains at 90%; for eligible properties with prices above HK$10 million to HK$15 million, the highest mortgage insurance percentage is 80% or based on the mortgage loan limit of HK$9 million, whichever is higher; and qualifying properties with a price of HK$15 million or more to HK$30 million, whichever is higher.
Second, the maximum mortgage percentage for non-residential properties was raised from 50% to 60%.
Third, the maximum mortgage percentage for property mortgage loans based on “asset level” has been raised from 40% to 50%. This amendment applies to all residential properties and non-residential properties.
Fourth, abolish the current requirement to lower the upper limit of the number of mortgages used and the upper limit of the “contribution to income ratio” by 10 percentage points for mortgage loan applicants whose main income comes from regions other than Hong Kong; at the same time, the requirement that current mortgage applicants lower the upper limit of the applicable “contribution to income ratio” by 5 percentage points due to the overall mortgage ratio exceeding the level permitted by the HKMA by 20 percentage points.
This is the first time that the Hong Kong Monetary Authority has relaxed measures on residential properties since implementing countercyclical macroprudential control measures in 2009. After this revision, citizens will be able to apply for higher percentage mortgage loans.
Wang Meifeng, managing director of Zhongyuan Mortgage, said that this “trick” allows homebuyers with a self-occupied property price of HK$10 million or less to choose to buy a home with a loan of up to 90%, taking the HK$10 million property price as an example. Previously, the down payment for a mortgage required 30%, or HK$3 million, but now it only takes 1 million to get on the bus, greatly reducing the boarding threshold for buyers. Currently, after the implementation of the new policy and clarification of the policy, buyers are exempted from wait-and-see suspension of market entry in order to wait for the policy to be relaxed. I believe prospective buyers will speed up the pace of entry into the market. It contributes to the healthy development of the property market.
edit/lambor