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 said on Tuesday that it increased the number of homes offered at its Coast Line II project to 626 from 382 previously. Earlier, Ming Pao reported the developer was seeing as many as 25 applications for every unit on sale.
Coast Line II units are being offered at an average price of HK$14,868 ($1,904) per square foot after a discount, the company said. That’s 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 drag prices down further in a market that’s seeing buyers deterred by rising interest rates and a weak economy. Home values have fallen 13% from their peak in 2021, according to the Hong Kong Monetary Authority.
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.”
Asked whether CK Asset was starting a price war with the move, Executive Director Justin Chiu dismissed the notion. “It’s money from our pocket — why should I trigger a price war?”
“We purposely price it down in order to help the younger generation, and at the same time we’re already making quite a reasonable profit,” Chiu said the sidelines of a media event at the showroom on Tuesday.
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 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. The company saw its property sales in the city tumble 66% in the first half from a year earlier.
The project in the Yau Tong area in southeastern Kowloon has attracted mainly local customers rather than mainland buyers, Chiu said.
On Tuesday afternoon, more than 50 people stood in the queue to visit the showroom, and agents interviewed by Bloomberg said that the numbers were in the hundreds earlier in the week.
The city’s recent relaxation of mortgage rules may have helped to spur demand 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.
(Updates with latest units on sale, average price and CK Asset executive comments)
