(March 27): Hong Kong homebuyers are snapping up new properties after the government cut taxes last month.

Following the removal of property levies, developers have sped up project launches and set competitive prices to capture the increased demand. That appears to be working as Wheelock Properties Ltd sold 368 units in just a few hours on Saturday — the best single-day sales since the tax policy change — after pricing the apartments at a discount.

It’s a sign that Hong Kong’s property market, which has suffered from the worst slump in more than two decades, is finally seeing relief. As part of its budget released late last month, the city’s government removed measures originally designed to cool an overheated market.

But the strength in the primary market is also putting pressure on used homes, with transactions weakening after an early rebound. Sales at the city’s 10 biggest estates, which serve as a gauge for secondary market performance, declined for the second week to just 19 this weekend, according to Centaline Property Agency Ltd.

“Buyers are more interested in the primary market as developers can offer financing plans for buyers at a time when interest rates are high,” said Martin Wong, head of research and consultancy for Greater China at Knight Frank. “Firsthand inventory is also high, so there’s not much room for price increases. Developers’ strategy is mostly to sell homes with discounts.”

Secondhand home sellers, in contrast, can’t do much to lure buyers besides cutting prices, he added.

Future outlook

Roen Yeung, senior associate director at Centaline’s research department, estimates there will be about 800 new home transactions in March, more than double the number last month. She expects sales to further accelerate in April to 2,500 transactions, the highest monthly tally in almost five years.

The city’s property developers are under pressure to offload their inventory, after the past year’s weak market led to the accumulation of unsold apartments. In the fourth quarter of 2023, residential units available in the primary market rose 6% to 91,300, compared to the prior three-month period, according to Jones Lang LaSalle. By comparison, only 13,000 new homes changed hands on average annually from 2021 to 2023, government data show.

Builders are attempting to entice buyers with discounts. The first batch of units available at Wheelock’s project was priced at the lowest in the area since mid-2019 and 8% cheaper than secondary units in the neighbourhood.

However, the glut of homes means that prices likely won’t recover until more supply is absorbed over the next few months. Analysts estimate prices will weaken this year, with UBS Group AG expecting values to decline 5%. Secondary home prices are down 0.19% since Hong Kong scrapped the extra property taxes last month, according to data from Centaline.