Property Prices - A glimpse of the future?

Hong Kong ae 5 years into a property slump with average prices down 60% from their peak and last weekend managing a clearance rate of 220 homes out of 10,000!

This from todays AFR.

Developers desperate to end slump
Oct 10
Jasmine Yap, Bloomberg

Hong Kong's biggest developers, Cheung Kong Holdings and Sun Hung Kai Properties, are increasing home prices in an attempt to convince buyers a five-year slump has ended.

Analysts fear the tactic may not succeed.

Cheung Kong has now started selling its 880-apartment Hampton Place complex in Kowloon, with prices beginning at $HK2,497 ($586) per square foot. Company representatives said the second phase of the complex would cost as much as 5 per cent more. Sun Hung Kai plans to raise prices at one of its projects by 3 per cent.

The developers are taking their cue from Hong Kong chief executive Tung Chee-hwa, who said last week the government was seeking ways to support prices, which have slumped 60 per cent.

So far there are few signs of a rebound, with just 220 homes sold of the 10,000 on offer on the weekend and Tuesday's National Day holiday, according to the Centaline Property Agency.

The government may be able to halt the decline, but it would only be a "temporary phenomenon", according to Nicholas Brooke, chairman of property consultant Insignia Brooke Hong Kong.

It was "only putting off the inevitable", he said. "We've got another five, possibly 10 per cent to go."

Hong Kong's developers - once used to long queues of buyers even as they raised prices with each stage of a project - are battling a slowing economy and near-record unemployment. At the end of August there were more than 17,000 unsold homes in a city of about 6.7 million people, analysts said.

The oversupply has hurt stocks. The Hang Seng Property Index has declined 31 per cent this year, compared with a 20 per cent fall in the benchmark Hang Seng Index.

For the developers' latest pricing gamble to succeed, they must convince buyers who have seen prices tumble as much as 60 per cent from their peak.

"Affordability has never been the issue," said Anthony Wu, the head of regional property research at Lehman Brothers Asia. "Buyers have been waiting for prices to stabilise and will go into the market if they are confident prices will not drop next month."

Buyers left the market even as developers cut prices by between 6 and 10 per cent over the past two months, according to a manager at property consultants Colliers International, Simon Lo.

"Developers need to work together to boost prices to bring back confidence," he said.

Cheung Kong has started selling apartments in the Hampton Place complex to those who have registered as potential buyers. The developer's staff said the prices of future units would be raised by between 3 and 5 per cent.

Sun Hung Kai is expected to raise the price on 270 apartments at its Aegean Coast project by 3 per cent to $HK2,459 per square foot. The developer has sold about 700 of the project's 1,624 homes in Tuen Mun.

Following the lead of the top two developers, Wharf (Holdings) Ltd is expected to raise prices at its Bellagio apartments in Sham Tseng when it announces sale plans for the 1,704-unit project.