Hong Kong Property Tycoons Are Offloading Super Call Options

Investments Events

Posted by NewAdmin on 2025-01-29 09:39:49 |

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In Hong Kong, a growing debate is emerging over whether residential properties should be viewed as a utility or as an investment. Property developers are scrambling to answer this question, with some pushing innovative strategies to gauge buyer interest.

Take Uptown East in Kowloon Bay, for example, developed by Wong Sun Hing Ltd. The latest pre-sales offering includes a "super flex stage payment plan," where buyers only need to make a 5% deposit, with the remainder to be paid upon completion, slated for 2025. This payment plan was introduced recently, and within the first 30 minutes of its launch, 50 of the 132 units were sold. A recent survey revealed that more than half of Hong Kong’s homebuyers are accelerating their purchasing decisions due to concerns about potential price increases.

Wong Sun Hing’s strategy is akin to writing a call option, offering potential upside exposure to buyers. Property prices have fallen by about 25% since their 2021 peak, and the first batch of Uptown East units sold for an average of HK$14,808 ($1,893) per square foot, which is 31% lower than a neighboring complex that went on sale in December 2021.

The transaction benefits both sides. Developers like Wong Sun Hing are eager to sell, especially after the government’s recent removal of long-standing home purchase restrictions. This move aims to demonstrate to banks that their projects remain viable, alleviating concerns that lenders might pull financing. On the other hand, if the property market doesn’t improve within a year, buyers can walk away, while developers retain the forfeited deposits, which helps reduce their cost base.

With uncertainty surrounding the city’s future, developers in Hong Kong are adopting aggressive tactics, even if they may not make sense from a cash flow perspective. In contrast, investors are leveraging the market for higher returns, employing strategies that reflect the city's shifting dynamics. The government’s past policies have drained liquidity and transparency from the market, making it more difficult for people to invest in assets like property. Nevertheless, Hong Kong’s market remains attractive to those with substantial wealth, particularly non-permanent residents exempt from additional stamp duties.

This trend reflects the limited wealth management options for the middle class, as Hong Kong’s private banking sector largely ignores the mini-millionaire population. As a result, more people are turning to physical assets like real estate. It appears that Hong Kong's property tycoons are finding some relief in this trend, as the demand for residential property as an investment continues to soar.

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