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Thursday, Jul 16, 2020

Buyers spurn Hong Kong’s first home sale in two months, as Covid-19 outbreak adds weight to a slumping property market

China Evergrande sold 49 of the 141 flats on offer at Emerald Bay in Tuen Mun as at 5pm, even after the developer increased its average discount to 14 per cent. With Evergrande’s latest discounts, a 461-square foot flat originally listed at HK$9.41 million could be bought for HK$8.07 million
Hong Kong’s homebuyers spurned the city’s first property sale in two months, as larger-than-usual discounts failed to attract them to big-ticket financial commitments amid a slumping economy wrecked by a coronavirus outbreak.

China Evergrande sold 49 of the 141 flats on offer at the second phase of its Emerald Bay project in Tuen Mun as at 5pm, even after increasing the discounts on each unit by HK$20,000 per square foot to an average of 14 per cent, from the previous 11 per cent, according to sales agents.

“Everyone is worried,” because the coronavirus “epidemic is so serious,” said Louis Chan, vice-chairman of Asia-Pacific and chief executive of the residential division at Centaline Property Agency. A sales haul of 34 per cent is “already very good [considering how] the price is not exceptionally cheap,” he said.

The reception at Hong Kong’s first major property launch in two months underscores the correction that is underway in the world’s most expensive residential property market, as the local economy finds itself in the first technical recession in more than a decade. It’s a slump that still has ways to go, even after the Hong Kong Monetary Authority slashed its base lending rate by 50 points on March 4 in lockstep with an emergency cut in the cost of money by the US Federal Reserve.

“The price [of Phase Two] is similar to that of Phase One,” said Centaline’s Chan, adding that the developer was also offering small units priced between HK$4 million and HK$5 million for buyers.

Emerald Bay, comprising 1,982 apartment units and 22 villas in Tuen Mun, is Evergrande’s maiden project in Hong Kong, as one of China’s biggest developers seeks to establish a beach head for expanding offshore. Its first offering of 167 flats last October sold out in one day, as the developer slashed prices amid easier mortgage financing rules to attract homebuyers to a neighbourhood that had been the focus of several anti-government protests.

Sales had been lacklustre after the first launch. With Evergrande’s latest discounts, a 461-square foot flat originally listed at HK$9.41 million could be bought for HK$8.07 million.

But this time around, sales agents are facing a hard time getting “worried” customers out of their homes to consider buying property. As many as 109 people were confirmed to have caught the coronavirus in Hong Kong, with two dead. Schools are shut until after Easter, while public servants and businesses had been asked to work from home to contain the outbreak, all of which are damping consumption and retail sales.

“Some buyers are worried about the health consequences of attending property sales, and decided to delay their buying decisions to avoid crowds [at sales venues],” Chan said. “Without the coronavirus epidemic, sales result would be 20 to 30 per cent better.”

Flat viewings have dwindled and transaction volumes shrunk in private housing estates, where some infected residents were detected by health authorities. Residents of some housing estates in Tuen Mun, the neighbourhood where Emerald Bay is located, were revealed to have caught the Covid-19 pathogen, according to the Department of Health.

The remainder of Evergrande’s unsold Phase Two flats will be offered on March 14 and March 28. The developer will have some competition to contend with.

Wheelock Properties, which owns the developer of the Harbour City and Times Square shopping centres, offered discounts of up to 22.1 per cent on average for 101 flats at its Ocean Marini project at Lohas Park in Tseung Kwan O.

The properties – including 52 two-bedroom units with open kitchens, and ranging from 471 to 616 square feet – were originally priced at an average of HK$18,853 per square foot. A sale date has not yet been set.

“The Lohas Park project will be better,” said Chan. “[Emerald Bay] has been selling a long time. It’s not new. Its phase one still has a lot of remaining stock. If it were a new project, it would be better.”
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