Homebuyers flocked to CK Asset Holdings Ltd.’s latest project in Hong Kong after it slashed prices to a seven-year low as developers contend with rising inventories during a sales slump.
Billionaire Li Ka-shing’s company is seeing as many as 25 applications for every apartment on sale at the Coast Line II project, Ming Pao reported on Tuesday. That’s even after the developer offered a further 128 units, bringing the total to 382 after a strong response, according to Hong Kong Economic Times.
CK Asset generally likes to set prices at, or lower than, the market level to generate turnover, Chairman Victor Li said on an earnings call last week. With a price of HK$14,997 ($1,920) per square foot after a discount, Coast Line II is the cheapest among all new projects in urban districts since 2016, according to Bloomberg Intelligence.
The launch has drawn attention from analysts speculating whether it may spark a price war in a market that’s seeing buyers deterred by rising interest rates and a weak economy. Home prices have fallen 13% from their peak in 2021, according to the central bank.
Read reaction to CK Asset’s latest earnings
“The initial market response is good, showing that lower prices could attract strong end-user demand,” said BI analyst Patrick Wong. “However, this might affect the secondary market and other developers’ launch schedule, as secondary home owners and other developers would need to lower prices further to attract demand.”
CK Asset’s strategy comes as inventories in Hong Kong pile up. The number of unsold units in completed projects is at the highest since 2007, according to Jones Lang LaSalle’s mid-year market report. About 83,000 homes are available in the city.
“The impact of this on unsold inventory remains to be seen,” said Eric Tso, chief vice president of mReferral Mortgage Brokerage Services. “If the developer has many projects especially in the same area and is confident of making a profit, as it probably is in this case, then they will go ahead to release the units onto the market.”
CK Asset may consider releasing even more Coast Line II units on Tuesday, HKET reported. The developer saw its property sales in the city tumble 66% in the first half from a year earlier. It is scheduled to hold a press conference Tuesday afternoon.
The project in the Yau Tong area in southeastern Kowloon has attracted both end-users and long-term investors, said Ricacorp Properties Chief Executive Officer Willy Liu. Mainland students and prospective buyers waiting for the market to improve have been active renters, he said.
“Rental levels have been picking up, and returns are becoming more attractive, so it is the right time for the project to be launched at a shocking price,” Liu said.
Recent relaxation of mortgage rules may have helped as well, said mReferral’s Tso.
“There is always a market in Hong Kong and buyers are always on the hunt for a price bargain,” he said.