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Price cuts fail to attract Hong Kong home buyers

Sun Hung Kai Properties Ltd sold just 100 of 1,300 discounted apartments on sale at its Aegean Coast complex this week. That's the latest indication price cuts won't revive Hong Kong's property market soon, analysts said.

Sun Hung Kai, the city's biggest developer by sales, cut the average price at Aegean Coast, a 40-minute commute from the central business district, to HK$2,400 (US$307) per square foot, spokeswoman Cathy Kwong said. That's less than the HK$2,600 per square foot that buyers paid last month at Sun Hung Kai's Park Island -- a similar commuter development.

Hong Kong developers, battling sagging demand in an economy with a near-record 7.6 percent jobless rate, are struggling to break even as they cut the prices for projects on land many bought at the height of the city's property bubble in 1997. Since then prices have fallen by half.

"People are afraid if they buy today, prices will go lower tomorrow," said Sam Ho, an analyst at East Asia Asset Management Co. "Too many developers are selling at the same time."

That caution is hurting property stocks. Sun Hung Kai was down 3.7 percent at HK$44 at the midday break in trading in Hong Kong yesterday, its lowest level in 12 months. The stock has fallen 30 percent this year, pacing the Hang Seng property index's 31 percent decline.

The index, which touched a 47-month low earlier yesterday, may fall 5 percent more by the end of this month, according to a Bloomberg survey of four analysts.

Another example is Kerry Properties Ltd. The mid-sized developer's stock is down more than 20 percent in the past three months. Last week the company cut prices of apartments at its Constellation Cove complex in the city's New Territories district to an average HK$2,808 a square foot -- down from HK$4,000 a square foot it charged for earlier units.

Analysts estimate Kerry's development cost for Constellation Cove at HK$4,500 per square foot.

New World Development Co joined the latest round of price cuts on Wednesday, knocking 10 percent off the price of 16 Seaview Crescent homes at Tung Chung, a suburb near Hong Kong's airport and a planned new Disney theme park. New World's partners in the 1,536-apartment project are Hang Lung Properties Ltd, Henderson Land Development Co, Sun Hung Kai and Swire Properties Ltd.

"It's a confidence problem," said Jeff Yau, an analyst at South China Research Ltd. "Property prices may go down another 10 percent before we see a bottom."

HKR International Ltd will offer 18 Siena Two homes in its Discovery Bay enclave on Lantau Island at a lower-than-expected average price of HK$2,379 a square foot, after selling Siena One units for HK$3,926 a square foot in March.

Price cuts may intensify in coming weeks as developers seek to clear inventory. Deutsche Bank earlier this week lowered its target prices for developer stocks amid concern over rising supply in the next six months.

The number of unsold homes is expected to rise by about 24 percent to 16,923 at the end of the year, from 12,694 at the end of last year, Deutsche Bank Securities analyst Andrew Lawrence said.

Among the offerings are Cheung Kong Holdings Ltd's 880-unit Hampton Place in West Kowloon and 166-unit Princeton Tower, and Nan Fung Development's 1,264-unit Summit Terrace.
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