‘No price war’: Hong Kong developers brush aside fears of a property crash even as CK Asset offers new Kowloon flats at 15 per cent discount

CK Asset Holding’s aggressive pricing of homes at a development in Kowloon – where prices lower than Hong Kong has seen in seven years have drawn a throng of potential buyers – is not the first shot in a catastrophic price war but simply a smart strategy to clear inventory, experts said.
The developer, the property flagship of Hong Kong billionaire Li Ka-shing, also dismissed claims that its discounted pricing aimed to, or would, trigger a price war.
More than 22,000 prospective buyers have deposited cheques in hopes of buying flats at Coast Line II in Yau Tong, which are priced at HK$14,686 (US$1,880) per square foot on average after discounts. CK Asset expanded the sale, which starts on Saturday, from 254 units to 382 and finally to all 626 available flats given the response.

“Every developer has different strategies to sell their new residential projects, and CK Asset just chose to quickly sell [these units] by offering some discounts, ” said Stewart Leung Chi-kin, chairman of the executive committee of the Real Estate Developers Association of Hong Kong.

A view of a showroom of Coast Line by CK Asset Holdings. Photo: CK Asset

The move should not be seen as a dire omen for the market, as the developer is still earning a healthy profit, Leung said. “If a developer decides to sell a property at a reduced price, but they are making a loss, then there would be a need to panic.”

Leung and other experts believe that the aggressive pricing was a marketing strategy to test homebuyers’ responses and attract market attention. It is also seen as good business.

“Holding inventories amid a high interest-rate environment is not good for developers in the long run, because [it] means paying extra interest every month,” said Eddie Hui Chi-man, associate head of Polytechnic University’s faculty of construction and environment. “If I sell [inventory] at a slower pace, my costs will increase, so it is better to sell faster.”

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“We always price our developments to the then-market situation,” Justin Chiu Kwok-hung, CK Asset’s executive director, told the Post, adding that the lower prices will give the younger generation a chance to own their own residences or upgrade their homes.

“Every development has its own calculation,” Chiu said, dismissing concerns that the discounts could lead to a price war among the city’s major developers. “It is not a very big development, it will not change the market. It’s money from our pocket … so why would I trigger a price war?”

“Every development has its own calculation, [The Coastline] is not a very big development, it will not change the market,” the executive said.

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The pricing level will make “not a lot of profit, but a decent profit”, he added.

The gross margin for the whole project will be about 25 to 30 per cent, which is still a reasonable profit for the company, albeit lower than the 30 to 40 per cent yield from projects over the years, according to Raymond Cheng, managing director of property management at CGS-CIMB Securities.

Low prices at this one project are unlikely to affect the entire market, said Chau Kwong-Wing, chair professor of real estate and construction at the University of Hong Kong.

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“What happens later also depends on the next batch, and on CK Asset or other developers’ calculations,” he said. “If all developers follow this huge discount, then, of course, the impact on the market would be quite significant, but I don’t think that is likely to happen. I think they will observe for a while first.”

Meanwhile, the number of unsold units in completed projects is the highest since 2007, according to JLL, which said a total of 83,000 housing units are available in Hong Kong, with 18,000 in completed projects and the rest under construction. About 25,000 more units are expected to hit the market in 2023.

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An on-site lottery on Saturday morning at Fortune Metropolis in Hung Hom will decide which of the 22,000 hopefuls get to buy the Coast Line II flats. The expected sale proceeds from the 626 units are HK$4.67 billion.

The cheapest flat at Coast Line II, which lies about 10 minutes from an MTR station in the southeastern corner of Kowloon, is a 210 sq ft studio on offer for HK$2.9 million, or HK$13,810 per sq ft, after an 18 per cent discount.

Additional reporting by Chuqin Jiang


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