CK Asset's Bold Pricing Strategy in Kowloon Sparks Debate Among Experts

The recent aggressive pricing approach adopted by CK Asset Holdings, the property flagship of Hong Kong tycoon Li Ka-shing, for its Coast Line II development in Kowloon has ignited discussions among experts.

The move, characterized by discounts that have drawn substantial interest from potential buyers, has prompted debate about whether it signals the beginning of a property price war or is simply a strategic move to clear inventory.

Over 22,000 prospective buyers have shown keen interest in purchasing flats at Coast Line II, with prices averaging HK$14,686 (US$1,880) per square foot after discounts. CK Asset expanded the sale from initially 254 units to a total of 626 available flats due to the overwhelming response.

Stewart Leung Chi-kin, Chairman of the Executive Committee of the Real Estate Developers Association of Hong Kong, suggests that CK Asset's decision to offer discounts is a strategy aimed at expeditiously selling the units rather than an indication of a market downturn. He emphasizes that as long as the developer is making a profit, concerns of a property market crash are premature.

Experts like Eddie Hui Chi-man, Associate Head of Polytechnic University's Faculty of Construction and Environment, explain that aggressive pricing can be a shrewd approach to prevent accumulating inventory costs. Selling at a faster pace in a high-interest rate environment can be financially prudent, as it minimizes the burden of monthly interest payments.

While some consultants speculate that CK Asset's discounts may influence other developers to offer larger discounts in the third quarter, potentially triggering a decline in home prices, CK Asset's Executive Director, Justin Chiu Kwok-hung, asserts that the pricing aligns with prevailing market conditions. Chiu emphasizes that the discounts offer an opportunity for the younger generation to own homes and clarifies that the move is not intended to incite a price war.

Raymond Cheng, Managing Director of Property Management at CGS-CIMB Securities, highlights that while the gross margin for the project is expected to be around 25 to 30 per cent—lower than historical yields—it remains reasonable and profitable.

Chau Kwong-Wing, Chair Professor of Real Estate and Construction at the University of Hong Kong, adds that the impact on the broader market will depend on the actions of other developers and their pricing strategies. He suggests that a domino effect is unlikely and anticipates a cautious observation period.

Hong Kong's property market has faced challenges due to high interest rates affecting buyer sentiment. The response to projects such as Coast Line II provides insights into how developers are navigating these dynamics.

An on-site lottery is set to determine which of the eager participants secure the Coast Line II flats. The sale proceeds from the 626 units are projected to be HK$4.67 billion. As the market continues to evolve, CK Asset's pricing strategy remains a topic of interest among industry experts and observers alike.

By fLEXI tEAM