Thursday, June 17, 2010

Buyers get cold feet over HK$2.6b luxury condo units

(HONG KONG) Billionaire Lee Shau-kee's Henderson Land Development Co said that the sale of 20 luxury apartments had collapsed, ending HK$2.67 billion (S$478.2 million) in deals that sparked a government inquiry and fuelled efforts to rein in home prices.

Most buyers pulled out of the 39 Conduit Road project in the Mid-Levels district, Henderson said in a filing with the stock exchange on Tuesday, responding to government demands for more information on the sales of 24 units. It said that it had sold four of the units and would record a charge of HK$734 million in its half-year results.

The failure of the sales, including a unit that would have set a world record price of HK$88,000 per square foot, marks a setback for Hong Kong's second-richest man as regulators try to cool a surging property market. Mr Lee had said in March that buyers could have more time to complete the deals.

The cancellations are 'quite a negative surprise', said Raymond Ngai, an analyst at JPMorgan Chase & Co. 'Those record prices they reported earlier, I doubt they'll be able to sell them at those prices again . . . To sell them for around HK$30,000 per square foot is still quite possible. But selling an apartment at HK$70,000 a square foot is just too out of line with the market.'

'We won't be cutting prices,' Mr Lee told reporters on Tuesday. 'Maybe we'll make more money when we sell these apartments again.'

The company added that it was confident in selling the apartments because of the 'prestigious' location, and will be 'sparing' with sales.

Henderson announced the sale cancellations after the stock market closed on Tuesday. The market was closed yesterday for a public holiday.

Responding to an outcry over rising property prices last year, Hong Kong raised downpayments on luxury homes to 40 per cent from 30 per cent and clamped down on marketing techniques.

The HK$439 million apartment that Henderson had said was sold for a record - based on usable space excluding common areas - was listed on the 68th floor when it was actually on the 45th. Floor numbers are often skipped in Hong Kong to avoid those considered unlucky.

In a March 30 release, Henderson included sales of the 24 apartments plus one that was sold in a completed transaction as part of its revenue of HK$15.2 billion for the 18 months ended December 2009.

The total price of the 20 apartments whose sales collapsed came to HK$2.67 billion, Henderson spokeswoman Bonnie Ngan said yesterday.

The government responded to Henderson's filing, saying that 'clear market information' is important to the city. 'The government is determined to create a fairer and a more transparent environment for flat purchasers.'

Home prices have risen 5.7 per cent this year, adding to 2009's 29 per cent advance and raising concerns that the market is overheating. Builders often sell apartments before they are completed, drawing in customers by showing models of the homes.

The government this month tightened rules on new home sales, including the implementation of unfurnished show apartments and asking developers to disclose properties sold to their own executives.

Financial Secretary John Tsang in February announced higher stamp duty on luxury properties and pledged to raise the supply of land as he wants to reduce the risk of 'a property bubble' and keep housing affordable. -- Bloomberg

Source: Business Times, 17 Jun 2010

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