CCL falls 0.59% as nearly 80% of transactions were signed before rate hike; developer says first post-hike new project sells out

The Centaline City Leading Index (CCL), released on September 25, fell 0.59% week on week to 161.17 points, but mainly measures transactions completed before the rate hike.

The index is based on Centaline transactions involving formal sale and purchase agreements signed between September 14 and 20. Nearly 80% of them followed provisional agreements signed between August 31 and September 6. The Hong Kong Monetary Authority only followed the US Federal Reserve in raising its base rate by 25 basis points to 4.25% on September 17, meaning even the latest provisional agreements in the sample were signed 11 days before the rate hike. New-project activity during the period included all 101 units in the third price list for Round 1 of Grand Mayfair I being sold on September 5, while 86 of the 100 units offered from the price list for K. Summit II in Kai Tak were sold. Centaline senior associate research director Yang Ming-yee said new projects had drawn away considerable purchasing power, putting pressure on secondary-market prices. Centaline also noted that the impact of the launches of Grand Mayfair II and The Harmonie would only start to be reflected in the CCL released in mid-October.

The rate hike has also yet to feed through to mortgage pricing. HSBC, Bank of China (Hong Kong), Standard Chartered and Hang Seng all announced on the day of the HKMA's base-rate adjustment that they would keep their best lending rates unchanged. The rates at HSBC, Bank of China (Hong Kong) and Hang Seng remained at 5%. Hang Seng subsequently launched a mortgage plan on September 22 offering a fixed rate of 2.93% for the first three years, while Standard Chartered raised the cash rebate on selected mortgages for high-value properties to 1.5%. For mortgages priced against the best lending rate, the repayment benchmark remained unchanged. Yang described the secondary market as being dominated by a wait-and-see mood, with prices continuing to move sideways. The CCL has remained within a narrow range of 161 to 162 points for seven consecutive weeks, and the 0.59% decline did not alter that pattern.

The first transaction sample genuinely recorded after the rate hike was The Pavilia Bay in North Point on September 26. Located at 1 Hei Wo Street, the project offered 140 units in its first price list at an average discounted price of HK$21,666 per square foot, with the cheapest unit priced at HK$5.956 million. It received about 9,000 registrations by the September 24 deadline, reportedly representing an oversubscription of about 63 times. The developer said all units on the price list were taken up within about two hours. Including earlier sales, the project sold 156 units in eight days and generated more than HK$1.6 billion. The profile of buyers varied according to different agencies: Centaline said about 60% of buyers who attended on the day were investors, while Midland Realty put the split between investors and end-users at roughly half and half. The developer said the biggest buyer purchased six units in a single transaction.

The impact of the rate hike cannot be assessed from this project alone. Grand Mayfair II in Cheung Sha Wan, south-west Kowloon, went on sale on Sunday, September 27, offering 153 units from its first price list at an average discounted price of HK$18,976 per square foot, as well as 35 units by tender. It received 30,678 registrations by the deadline. The developer said its first price list was about 5% below the latest price list for Grand Mayfair I. It subsequently raised prices by about 1% in its second price list, excluding differences in floor level and orientation. Pricing itself is a factor affecting subscriptions, meaning that even if the units sold out on the day, it would still be difficult to isolate the effect of the rate hike.

According to Centaline, the CCL figures released in mid-October will be the first to begin reflecting secondary-market transactions completed after the rate hike.