Incomplete transactions are forfeited or units sold at a loss amid global credit crunch
Sandy Li and Peggy Sito 10 September 2008
Affluent mainland investors who borrowed heavily to pay peak prices for properties in Hong Kong last year are struggling to finance their deals and are being forced to walk away to cut their losses.
The squeeze comes as their wealth evaporates amid the stock market and property price slump on the mainland, and as Hong Kong housing prices are also softening.
At the height of the market boom last year, leading Hong Kong developers bussed mainland visitors into the city to visit show flats in new projects.
The marketing blitz attracted hundreds of mainland buyers, mostly speculators from Shenzhen, Shanghai and Wenzhou.
Their main targets were projects such as Grand Waterfront in To Kwa Wan, Long Beach and One Silver Sea in Tai Kok Tsui, and Central Peak Towers in Tin Shui Wai, which were among the worst hit by the turnaround, property agents said.
Fredy Wu Yat-fat, the chief executive of estate agency at Hong Kong Property, said some mainlanders had either forfeited their uncompleted purchases or sold the assets at a loss in the secondary market.
They were quitting their deals as a result of cash-flow problems arising from the combined effects of the mainland property and stock market slump, Mr Wu said.
“In the fourth quarter of last year, mainlanders who had made big profits from their stock and property investments [at home] were happy to buy Hong Kong property. But as property and stock prices fell this year, they have come under increasing cash-flow pressure,” he said.
Prices in Hong Kong’s mass housing market have dropped 5 to 10 per cent this year and analysts expect a further 20 per cent decline.
In October last year, Hong Kong Property arranged for about 400 mainland investors, mainly from Shenzhen, to view units at Long Beach and One Silver Sea. About 10 per cent bought units, mainly in Long Beach.
Some of these buyers had completed their purchases by April and some were due to close the deals next month, agents said.
Sources said two of the buyers in this project had already forfeited their deals and 10 others were expected to walk away when their contract completions are due next month.
“They stand to lose HK$500,000 or more,” the source said.
Of those who have completed their deals, more than 10 are selling in the secondary market at an 8 to 10 per cent discount to their purchase prices. They make up 10 per cent of Long Beach properties on the secondary market.
Wilson Chan Wai-kwan, an assistant district manager of the Hong Kong Property branch at Grand Waterfront, said a Shanghai investor recently sold a 757 square foot unit at a loss of HK$147,000.
Mr Chan said the investor bought the unit for HK$4.51 million in October last year and resold it for HK$4.37 million through the branch.
“Buyers holding more than one unit are offering to sell at 5 per cent below market prices or even at a loss,” he said.
Lured by Henderson Land Development’s 382-day deferred payment scheme, investors accounted for about 70 per cent of sales when the developer offered three blocks of Grand Waterfront on the market that month, Mr Chan said.
Now about 30 units in the development were being offered at discounts in the secondary market as the owners did not want to arrange mortgage loans to pay outstanding balances next month.
Perry Fong Kai-ming, a sales director in the Tuen Mun and Tin Shui Wai districts at Centaline Property Agency, said half of the 40 transactions concluded at Central Park Towers were recorded at a loss last month.
“Buyers suffered losses of about HK$100,000 each,” Mr Fong said.
Some of the owners were willing to take the losses now rather than face greater losses if they waited, while others were under pressure to liquidate their assets to finance mainland investments amid a credit crunch, he said.
The units were bought at HK$2,500 to HK$4,000 per square foot and were sold at about 5 per cent below their transaction prices.
Meanwhile, residential rents in the development have dropped 25 per cent to HK$9 per square foot as more units are being offered for lease.
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Mainland investors dump HK assets
Incomplete transactions are forfeited or units sold at a loss amid global credit crunch
Sandy Li and Peggy Sito
10 September 2008
Affluent mainland investors who borrowed heavily to pay peak prices for properties in Hong Kong last year are struggling to finance their deals and are being forced to walk away to cut their losses.
The squeeze comes as their wealth evaporates amid the stock market and property price slump on the mainland, and as Hong Kong housing prices are also softening.
At the height of the market boom last year, leading Hong Kong developers bussed mainland visitors into the city to visit show flats in new projects.
The marketing blitz attracted hundreds of mainland buyers, mostly speculators from Shenzhen, Shanghai and Wenzhou.
Their main targets were projects such as Grand Waterfront in To Kwa Wan, Long Beach and One Silver Sea in Tai Kok Tsui, and Central Peak Towers in Tin Shui Wai, which were among the worst hit by the turnaround, property agents said.
Fredy Wu Yat-fat, the chief executive of estate agency at Hong Kong Property, said some mainlanders had either forfeited their uncompleted purchases or sold the assets at a loss in the secondary market.
They were quitting their deals as a result of cash-flow problems arising from the combined effects of the mainland property and stock market slump, Mr Wu said.
“In the fourth quarter of last year, mainlanders who had made big profits from their stock and property investments [at home] were happy to buy Hong Kong property. But as property and stock prices fell this year, they have come under increasing cash-flow pressure,” he said.
Prices in Hong Kong’s mass housing market have dropped 5 to 10 per cent this year and analysts expect a further 20 per cent decline.
In October last year, Hong Kong Property arranged for about 400 mainland investors, mainly from Shenzhen, to view units at Long Beach and One Silver Sea. About 10 per cent bought units, mainly in Long Beach.
Some of these buyers had completed their purchases by April and some were due to close the deals next month, agents said.
Sources said two of the buyers in this project had already forfeited their deals and 10 others were expected to walk away when their contract completions are due next month.
“They stand to lose HK$500,000 or more,” the source said.
Of those who have completed their deals, more than 10 are selling in the secondary market at an 8 to 10 per cent discount to their purchase prices. They make up 10 per cent of Long Beach properties on the secondary market.
Wilson Chan Wai-kwan, an assistant district manager of the Hong Kong Property branch at Grand Waterfront, said a Shanghai investor recently sold a 757 square foot unit at a loss of HK$147,000.
Mr Chan said the investor bought the unit for HK$4.51 million in October last year and resold it for HK$4.37 million through the branch.
“Buyers holding more than one unit are offering to sell at 5 per cent below market prices or even at a loss,” he said.
Lured by Henderson Land Development’s 382-day deferred payment scheme, investors accounted for about 70 per cent of sales when the developer offered three blocks of Grand Waterfront on the market that month, Mr Chan said.
Now about 30 units in the development were being offered at discounts in the secondary market as the owners did not want to arrange mortgage loans to pay outstanding balances next month.
Perry Fong Kai-ming, a sales director in the Tuen Mun and Tin Shui Wai districts at Centaline Property Agency, said half of the 40 transactions concluded at Central Park Towers were recorded at a loss last month.
“Buyers suffered losses of about HK$100,000 each,” Mr Fong said.
Some of the owners were willing to take the losses now rather than face greater losses if they waited, while others were under pressure to liquidate their assets to finance mainland investments amid a credit crunch, he said.
The units were bought at HK$2,500 to HK$4,000 per square foot and were sold at about 5 per cent below their transaction prices.
Meanwhile, residential rents in the development have dropped 25 per cent to HK$9 per square foot as more units are being offered for lease.
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