What Hong Kong developers must do to repeat 2012's primary sales performance

A 'steep hill to climb,' says analyst.

According to Nomura, given that primary sales have only reached HKD31bn through end-April, in order for primary sales to reach the same level as 2012, developers would have to sell HKD100.8bn over the next eight months.

Nomura noted that this works out to roughly HKD12.6bn per month. Over the past five years (or 60 months), developers’ sales have only exceeded HKD12.6bn 17 times.

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And with various property cooling measures reducing speculative, investment, upgrading and foreign demand, the chance of this is now less likely.

We believe with every passing month, it will be increasingly unlikely that developers can repeat the HKD131.8bn of private primary sales that they recorded in 2012 and inevitably the Street’s contract sales targets will have to be revised down.

Hong Kong’s April property sales and purchases have recently been released. In April 2013, developers sold 833 units, down 22% m-m, and generated HKD6bn in presale proceeds, down 25% m-m. Taking the first four months in aggregate, total primary sales has only reached HKD31bn.

This is down 30% y-y and has only reached 24% of 2012 full-year sales. With the recent new primary sales rule likely to continue to impact on primary sales in May, we believe developers are facing a steep hill to climb if they are to achieve the same level of contract sales in 2013 as they did in 2012.

As each week ticks by, time is starting to run out for Hong Kong developers.