Developers in Hong Kong began actively selling new residential units last month before the implementation of new rules regulating primary sales came into affect at the end of April.
The Residential Properties (First hand Sales) Ordinance applies to the sale of primary residential property and sets out a series of detailed requirements.
It covers sales brochures, price lists, show flats, disclosure of transaction information, advertisements, sales arrangements and the mandatory provisions for Preliminary Agreement for Sale and Purchase as well as Agreement for Sale and Purchase. It also prohibits the misrepresentation and dissemination of false or misleading information.
As a result many developers began offering substantial discounts in a bid to sell their remaining units before being required to renew all sales materials once the new rules came into effect.
According to reports about 10 residential projects successfully cleared all stock before the new rules came into effect on 29 April. Since then only two developments, Green Code in Fanling and Dunbar Place in Ho Man Tin, have obtained approval for their sales arrangements.
Major developers have the resources to comply with the new rules but according to international property advisors Knight Frank, small to medium sized developers will wait to see how the market reacts before following suit.
As a result, Knight Frank expects the primary residential market to enter a window period as developers slow the launch of new projects and remaining units in primary projects.
‘Consequently, we expect only limited primary residential properties will be launched in the next few months,’ it days in its May 2013 Hong Kong market report.
The report also points out that with the focus being on primary property last month coupled with the impact from various stamp duty policies, the secondary residential property market remained quiet in April.
Luxury residential prices fell 2.2% month on month, the largest drop since August 2010. In the mass residential market, although landlords became more willing to negotiate, sentiment remained gloomy, as buyers were adopting a wait and see attitude, hoping to buy at bargain prices.
‘Due to the various stamp duty policies which targeted to suppress investment and peculation demand, now the market is more dominated by end users, but their purchasing power has been largely absorbed due to developers’ active clearance of remaining units before the ordinance’s implementation,’ the report explains.
‘The market needs some time to recover and accumulate purchasing power again. With the new ordinance coming into effect as well as various new policies, we believe there will be a drop in activity in both the primary and secondary markets in the coming few months,’ it says.
‘We estimate the volume of residential transactions will fall about 10% this year, with mass residential prices dropping around 10% and the more resilient luxury sector falling 5% in 2013,’ the report adds.
