Price slash sparks peak buzz; A surprise cut in unit prices at the latest project of Cheung Kong Holdings (0001) has prompted speculation that the home market has peaked.

Price slash sparks peak buzz

Karen Chiu

Friday, March 08, 2013

A surprise cut in unit prices at the latest project of Cheung Kong Holdings (0001) has prompted speculation that the home market has peaked.

Prices at One West Kowloon in Cheung Sha Wan were reduced by an average of 11 percent.

Cheung Kong became the first developer to trim prices following the latest round of government curbs imposed on the property sector from February 22.

The first batch of around 50 flats – now all sold – was put in the market in November at an average price of HK$9,750 per square foot in terms of gross floor area.

Yesterday Cheung Kong offered another 20 apartments for sale at an average price of HK$9,147 psf. One Kowloon West consists of 286 units.

A three-bedroom 1,160 sq ft flat saw the sharpest cut. It is now priced at HK$10.17 million – 17.5 percent lower than the original HK$12.31 million.

The new prices are on par with the adjacent 10-year-old Banyan Garden, where flats are selling at an average of HK$8,983 psf.

Cheung Kong executive director Justin Chiu Kwok-hung said the price cut includes a rebate of the double stamp duty “in a bid to echo the government’s effort to help Hongkongers buy their own homes.”

The stamp duty on second home purchases has doubled to a maximum rate of 8.5 percent.

Chiu admitted the latest curbs could affect the secondary home market, but any impact may not be evident in the near term. He also vowed to offer discounts at other Cheung Kong projects, but he did not elaborate.

Cheung Kong earlier said it will launch five projects this year having a total of 5,238 units – the highest among local builders.

Shih Wing-ching, founder of Centaline agency, said the price cut at One West Kowloon showed that doubling the stamp duty has weighed on new home sales.

Vincent Chan Kwan-hing, Midland residential chief executive, said other developers may follow Cheung Kong.

Sun Hung Kai Properties’ (0016) deputy managing director Victor Lui Ting said it will not join a price war, while Wheelock vice chairman Stewart Leung Chi-kin said it is difficult to say whether there will be a price war.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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