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The property market sees an early sales bump

Property market sales increase

As we enter 2018, the stock market hit a historic high of 32,000 points with the real estate market also heating up. So far this year, the only new entry into the primary market was St. Barths. Despite its relatively remote location in Ma On Shan, the development’s first round of 118 offerings and second round of 110 units all sold out within hours. 

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In the past, new developments tend to attract all the attention from buyers, thus overshadowing the sales of the secondary market. In the case of St. Barths, however, the secondary market performance stayed robust, even experiencing a steady rise in home prices. For example, in Shatin’s City One estate, a 327-square-foot unit with a balcony was recently sold at HK$16,758 per square foot, setting a new record for small two-bedroom units. In saying that, large-size units are doing exceptionally well too; a unit in City One, with a construction area of 980 square feet and saleable area of 820 square feet, was sold at HK$10.45 million, or HK$12,744 per square foot. Outside of Shatin, high home prices were seen in other areas of the city, with an even distribution and covering various sectors in the market from starter homes to luxury homes. It’s likely that there will be a sales bump before the Lunar New Year. Since the introduction of cooling measures in 2010, small starter homes have become the most-coveted commodities, while medium-size units, usually preferred by those looking to switch to bigger homes, have been negatively affected by the rigid housing policies as buyers can’t afford the high down payments. This makes real estate developers the ultimate winners of the situation.

As home prices continue to soar, flats valued under HK$6 million are becoming increasingly scarce, causing the advantage of small units’ high mortgage ratio to gradually disappear. In addition, as a way to prevent investors from abusing the housing benefits designed for first-time homebuyers, the new amendment bill strictly forbids multiple contracts within a single transaction. The first-time homebuyer status boasts more value than ever before, and many of these buyers would want to take more advantage of the policy by purchasing three-bedroom flats with a large area and at a higher price point.

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Take City One as an example, where over 70% of the flats in the estate are two-bedrooms. Before 2010, the per-square-foot price of small units were at least 20% lower than that of three-bedroom flats. However, cooling measures resulted in extremely low down payments for small units, which attracted legions of buyers to enter the market which in turn led to a continuous string of price hikes. At the moment, the per-square-foot price of small-size units is more than 20% higher than that of three-bedroom flats. However, considering that three-bedroom apartments often boast better quality and a higher level of comfort than small-size units, I predict that this phenomenon will come to an end in the next two years, and the per-square-foot price of both unit types will be on the same level. Therefore, I suggest those seeking self-occupied properties to seriously consider buying a three-bedroom unit. You may benefit from this decision in the long run.

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