Hong Kong developers’ cash rebates of up to 50% draw regulator’s scrutiny
- Housing authority says it has noticed developers’ high commissions to agents to boost sales and that it could launch an investigation should the need arise
Social media has been abuzz with discussions on how developers are offering cash rebates – a form of under-the-table discounting through private negotiation – to attract buyers. These incentives, in some cases, can reach as much as 50 per cent of the value of a new property.
The Sales of First-hand Residential Properties Authority (SRPA) said it had noticed some developers were offering very high commissions to property agents to boost the sales of new homes, while agents were passing on such rebates to their clients.
Although both these practices are commercial arrangements, the authority said it could investigate “to see if there is any misrepresentation or dissemination of false or misleading information by the vendor to induce another person to purchase any specified residential property”.
The SRPA noted the registered transaction prices were much higher than the actual purchase prices paid by the buyers.
One social media post said a 28 per cent cash rebate was given to buyers of homes in Chill Residence in Yau Tong, jointly developed by Poly Property and L’Avenue International Holdings.
Other developers such as Top Spring International Holdings and Chun Wo Development Holdings were offering up to 50 per cent for the 128 Waterloo project in Ho Man Tin, according to a senior executive at an international property consultancy, who requested anonymity.
Poly Property and Chun Wo did not reply to requests for comment.
The SRPA has been distributing leaflets on the risks associated with high rebates at developers’ sales offices to remind prospective buyers how the rebates may affect the bank mortgages and the stamp duty payable.
“Buyers should conduct risk assessments and be prepared in case promises of rebates do not materialise in the end,” the pamphlet said.
Analysts also cautioned that buyers of such heavily discounted flats could fail to secure mortgage loans.
“Banks take a cautious approach and offer extremely low loan-to-value ratios for properties with cash rebates, limiting the ability of buyers to obtain financing,” said Eric Tso Tak-ming, chief vice-president of mortgage broker mReferral.
Only buyers with strong financial capacity will be able to apply for mortgage loans in such cases, he added.
But the transactions slowed down considerably in May and June as the excitement wore off.
Centaline estimates there will be a 50 per cent month-on-month increase in first-hand sales in June, the lowest since February.
Meanwhile, the Centaline City Leading Index, a widely followed gauge of secondary private residential property prices in the city, fell to a 14-week low in mid-June.
Additional reporting by Enoch Yiu and Yulu Ao
