Firstbatchof50unitslaunchedataverageASPofHK$22,539/sf
CheungKongofficiallylaunchedtheDIVAonElectricRoadinNorthPoint,itsfirstnewprojectin2014.Basedonthepricelistrevealed,unitpriceforthefirstbatchof50unitsaveragedatHK$22,514/sf,withtherangebeingHK$21,229/sftoHK$23,593/sf.TotallistedpriceforthefirstbatchrangedfromHK$10.6mntoHK$16.6mn.Amongthe50unitslaunched,amajoritybeingtwobedroomunits(withatotalof38units)whilethreebedroomlayoutswithmaid’sroomarealsooffered.Buyersofthefirstbatchareentitledtomaximumdiscounts/rebatesofupto25%ofthelistedprice.
ASP20%belowmarketeffectivelyafteradjustedfordiscounts/rebates
Intandemwithothernewlaunchesoverrecentmonths,aggressivediscounts/rebatesareofferedbyCheungKong.Inparticular,buyerscanenjoydiscounts/rebatesofupto25%ofthelistedprice,namely7%discountforcashbuyersandbuyersimmediatelyarrangingmortgages;rebateonstampdutiesof7.5%oflistedprice;anextra7.5%discountforSalesandPurchaseagreementsignedbeforeJan14and3%discountfor“ClubLifestyle”membership.Adjustedforthesediscounts/rebates,theeffectiveASPisaveragedatHK$16,886/sf,orabout20%belowHenderson’sTheHemisphersprojectnearby,launchedinNov-13ateffectiveASPofHK$21,423/sf.
Aggressivepricingstrategytherightstrategyinlightofsoftfundamentals
CheungKonghasagoodtrackrecordinpreviouscyclesofbeingthepriceleader,i.e.amongthefirstdeveloperstoadjusttheirpricingstrategytosuittheprevailingmarketconditionsandwasabletoachievestrongsalesperformanceintheirprojectlaunches.Inlightofdeterioratingfundamentalsincludingpotentialtighterliquidity,increaseinnewsupplytogetherwithasofteconomy,webelievetheaggressivepricingofDIVAistherightstrategytoadoptandwillhelptoensurestrongsalesperformance.
CautiousoutlookonHongKongpropertymarketin2014
Theprimarymarketsawamarkedvolumerecoverysincemid-Octboostedbynumerouslaunches.However,wearenotseeingthecorrespondingrecoveryinthesecondarymarket.Inourview,themixedperformancesuggeststhatrecentstrengthintheprimarymarketsimplyimpliesbuyingdemandflowingfromsecondarytotheprimaryonvariousincentivesofferedbydevelopers.
Withupto33,489primaryunitsavailableforsalein2014,developersarelikelytoadoptacautiouspricingstrategy,whichislikelytodepresssecondaryprices.Weexpecttoseeupto20%declineinresidentialpricesin2014.
PrefernameswithbiggerexposureinChina:SHKP/Wharf/HangLung
WeareincreasinglyconcernedontheoutlookoftheHongKongpropertymarket.OurtoppicksareSHKP,WharfandHangLungbecauseoftheirgoodexposuretoChina.WealsolikeCheungKongasacheapproxytobuyintoHutchison.WehaveaSellrecommendationonHongkongLand.Risks:swingsinHKeconomy,interestratehike,unexpectedfluctuationsintheChineseeconomy.