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Seize the day
Is now the right time to buy property or are you better off waiting for prices to bottom out? Jane Drew takes a look and shares some tips for those seeking to get on the ladder
Anyone who made a mint during either the Asian financial crisis of 1997 or SARS (2003) will attest that buying property when the market is down is a not-to-be-missed opportunity. But with the world in economic meltdown, it’s more essential than ever to buy right. Not buying right during a downturn punishes a homeowner more severely than at any other time. Home seekers need to know the market inside out in order to get their timing absolutely right.
The state of the economy has scared a lot of people away from the housing market. But of course the news isn’t all that bad. The decline in the market has reduced prices and made housing affordable both to first-time buyers who may not previously have considered home ownership, and to those already on the property ladder who are recognising the opportunity to upgrade.
From November to December 2008, house prices fell 20 percent to 30 percent, but this coincided with a drop in transactions: the number of homes sales dropped to the lowest in 17 years. It’s clear that prospective homebuyers are waiting for the market to really bottom out before they sign on the bottom line. But when will this be? How long should you wait before making the most of reduced prices?
The first thing to note is that if you see a property that’s right for you, at a price you can afford then it’s always the right time to buy. Analysts are predicting that the market will continue to fall in 2009 by another 20 percent to 30 percent but this need not hold you back if you are in it for the long haul. Now is a good time to buy if you are prepared to see value fall in the short term but recover in the long run. If you buy property today, it’s on the understanding that you will have to wait some years for any real growth to occur.
First-time homebuyers are already taking advantage of low interest rates to get on the property ladder. Developments seeing the highest number of transactions include One Sha Tin and Kingswood Villas in Tin Shui Wai, where homes sell for HK$1 million to HK$1.5 million. The monthly mortgage on a HK$1 million home is likely to be around HK$6,000 per month, the same as you would be paying in rent on a similar property.
One new development seeing a lot of first-time buyer interest is Sun Hung Kai Properties’ La Grove in Yuen Long, where homes start at HK$1.61 million. Here the developer has arranged for all would-be buyers to get mortgage loans of up to 95 percent of the bank valuation. Of the 542 units launched in November last year, 400 sold within six days.
Now is also a good time to take a look at some of the newest luxury developments that have been discounted at the time of coming on stream. The luxury sector has been the hardest hit by the downturn and it is here that we are seeing the sharpest correction. Take The Sail at Victoria, a HongKong Land residence in Kennedy Town, and Kerry Properties’ The Belgravia in Repulse Bay. At both of these properties the developers are selling homes well below the price points they were expected to reach.
At The Sail at Victoria of the 20 apartments launched the week before Chinese New Year 15 sold at an average of HK$9,703 per square foot. In building the property HongKong Land had suggested it would command, on average, HK$12,000 per square foot. The Belgravia also launched at a lower price than initially projected. Kerry Properties expected homes to sell for between HK$13,000 and HK$15,000. The 24 apartments sold in early January averaged at HK$13,803 square foot.
On the secondary market too, buyers are in a position to start looking for bargains. This was clear as early as December 2008, when Tony Chan Chun-chuen sold his luxury Peak home for a meagre HK$110 million - analysts felt that had Nina Wang’s former feng shui guru not been desperate to sell, his home could have fetched HK$150 million.
Buyers in all sectors are now asking for discounts of 30 percent to 40 percent off the peak price of a property. Distressed sales are being noted in some of the big luxury complexes, like Bel-Air in Cyberport, The Legend in Tin Hau and The Belcher’s in Pokfulam. Second or ‘holiday’ homes in the outlying islands have also been selling at radically reduced prices, often at auction.
In the current market, home seekers have the upper hand so now is a prime opportunity to negotiate well. When searching for your next purchase, it’s a good idea to search in a number of areas and select six or so homes that you are prepared to buy. This gives you leverage to negotiate without emotion. Take your time and always wait before counter offering. In past years you could buy property anywhere and be almost sure of doing well. These days a commercial approach to buying is going to separate successful investors from the unsuccessful ones.
There’s little doubt however that prices will continue to plunge in the year ahead, so unless your heart is set on a property or you spot an opportunity that’s too good to be missed, there’s no harm in sitting on the fence. Now is not the time to panic buy, there will be plenty more opportunities going forward.
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