Hong Kong flat sale collapse knocks Henderson

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Hong Kong can no longer boast of having the world’s most expensive apartment after the collapse of a $57m flat sale, in a sign that the territory's property market is cooling.

The prospective buyer of the penthouse at 39 Conduit Road in the heart of the city, also failed to complete five other purchases in the building, according to Henderson Land, which developed the property. The company said a total 20 transactions had been cancelled, a huge embarrassment for Lee Shau-kee, Henderson’s high-profile chairman.

Henderson’s disclosure this week followed months of scepticism by local media over sales at the project. When Henderson announced it had sold the duplex for a record HK$88,000 per square foot last October, local newspapers questioned whether the buyer had purchased other flats in the building at a discount to offset the record-setting transaction.

Some analysts said the sale played a part in pushing up Hong Kong property prices, which rose 30 per cent last year.

Henderson drew heavy criticism after marketing the penthouse duplex as being on the 68th floor of 39 Conduit, even though the building only has 40 storeys.

The company took the common Chinese practice of skipping “unlucky” floor numbers – such as four, which sounds like the word for death in Cantonese and Mandarin Chinese – to the extreme.

In addition to not having any floor with the number four, the building’s storeys jumped from the 39th to the 60th floor. While six is a lucky number in Cantonese, there is no obvious reason not to have floors starting with the number five.

The cancellations of the apartment sales should prompt calls for more transparency in the Hong Kong real estate market. They also come as the property market is cooling after the government announced a range of measures to tame prices including raising the stamp duty on property sales and holding more land auctions.

The government also announced rules restricting developers’ sometimes over-the-top sale tactics. While buildings can still avoid having unlucky floor numbers, they cannot go to the extreme that Henderson did.

“Clear market information and transparent sales arrangements and transaction records are important to flat buyers,” the government said on Tuesday. “The government is determined to create a fairer and a more transparent environment for flat purchasers.”

The cooling of the market has been compounded by a drawing back by mainland Chinese buyers, who account for as much as half of transactions in some luxury projects, due to tightened liquidity at home.

Henderson, one of Hong Kong’s biggest developers, booked the sale of 25 units in 39 Conduit last year. The company, which said in March only one of the transactions had been completed, announced on Tuesday that a buyer had completed the purchase of four other units before a June 16 deadline.

Buyers in the 20 scrapped deals forfeited deposits of HK$133.36m, or 5 per cent of the agreed purchase price. Henderson will take a HK$734m charge on its results for the first half of this year. On Tuesday, the company said it would put the unsold flats back on the market, but would not lower their prices.

“The group remains confident in the prestigious location and the superior quality of the development, and intends to continue to be sparing in considering any sale of units in it,” Henderson said.

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