Analysis | ‘Always the first’: CK Asset’s history of using discounts to hone its edge, clear inventory to survive Hong Kong’s property market slumps

This week’s Coast Line II sale is far from the first time the property flagship of Li Ka-shing has used low prices to get attention and clear inventory
‘As a developer you want your money back as soon as possible, and also to get a profit,’ expert says

Hong Kong property

Salina Li

Published: 12:45pm, 13 Aug 2023

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Tens of thousands of people queued for hours on Saturday to get their hands on something unseen for seven years in Hong Kong: new flats on offer by one of the city’s most renown developers at prices last recorded in 2016.

The crowd started assembling at 8am, a full two hours before CK Asset Holding began offering the first 626 flats at its Coast Line II apartments project in Yau Tong on the Kowloon peninsula. From the lobby of a shopping centre, the line spilled over a footbridge across a major thoroughfare, ending at a spot in a subway station three hours’ queue away from the sales desk.

By 9pm, CK Asset sold every flat in the current phase for a haul estimated at HK$4.67 billion (US$597 million). The sell-out was almost guaranteed, as 60 buyers had registered to bid for every available flat.

The winning strategy sparked fears among consultants that other developers in Hong Kong would be tempted to follow with even bigger discounts in the third quarter. CK Asset, and the city’s powerful guild of developers allayed concerns that a price war is imminent.

CK Asset’s Yau Tong launch sells out as crowds thronged show room

Still, this weekend was just a page out of CK Asset’s play book; the property flagship of Hong Kong billionaire Li Ka-shing has used aggressive pricing to draw attention and clear its inventory quickly across every property slump throughout the years.

“When the market is uncertain, CK Asset is always the first to cut prices,” said Joseph Tsang, chairman of JLL in Hong Kong. “As a developer, you want your money back as soon as possible, and also to get a profit.”

Developers also need to consider opportunity cost, he said. “If they choose to hold inventory, developers will be burnt from two sides. One is the holding cost and the other is the income return that could have been generated from the cash.”

CK Asset made the first splash in 1998 – hot on the heels of the Asian Financial Crisis -when it sold the first phase of its Tierra Verde project in Tsing Yi at a lower-than-market average of HK$4,147 per square foot. The result: A sensational 1,400-unit sell-out on the first day.

Phase II, which launched two months later, was also offered at a low price, helping the developer sell all 1,781 units, most of them on the first day.

“The aftermath of the Asian financial crisis continued for a few years and spilled over to the property market, as the difficult financial environment weighed on sentiments,” said Sammy Po, Midland Realty’s residential division chief executive for Hong Kong and Macau. “But new launches at low prices were still popular, as homebuyers would come out.”

CK Asset’s Coast Line II is under construction, the project is expected to complete in 2025.

In 2001, CK Asset offered the first 24 flats in the first phase of its Caribbean Coast project in Tung Chung at about 20 per cent cheaper than the neighbourhood’s average price.

Buyers brought their own chairs to camp out at the sales office days before the sale opened on a first-come-first-served basis, Po said.

Phase II repeated the strategy in 2003, with the first eight flats of the 1,240-unit project offered with 34-per cent discounts.

“The developer offered a few units at a much lower price as a way to test homebuyers’ responses amid a sluggish property market,” Po said.

Image of Caribbean Coast in Tung Chung. Photo: Handout

The low-price tactic continued to work. In 2009, CK Asset needed only two hours to sell more than 300 units at Le Prestige, the second phase of the massive Lohas Park residential project in Tseung Kwan O, which had a total of 1,688 units.

The developer priced the units in the project at an average of HK$5,500 per square foot, but launched sales at HK$4,692 per square foot for the first 32 units – a 14.7 per cent discount. More than 1,000 buyers showed up at the sales office hoping to snag one of those 32 flats.

In 2014, CK Asset surprised the market again by launching the cheapest new homes available for sale in Hong Kong: a 194 sq ft studio flat at phase I of Mont Vert in Tai Po, priced at HK$1.65 million.

The first 260 units at Mont Vert launched at a price 30 per cent lower than neighbouring new flats, according to Midland Realty.

In addition to the cheapest new home, CK Asset also went on to unveil one of the city’s tiniest new flats, a 165 sq ft unit – about the size of a parking space – at Mont Vert II.

Earlier this year, CK Asset slashed prices to clear inventory on two of its projects. The company cut prices for 10 remaining flats at Seaside Sonata in Nam Cheong by 10 to 16 per cent in February. The discount immediately attracted buyers, and the inventory sold out overnight.

Later in March, nearly 5,000 people braved a thunderstorm to queue up in Hung Hom to bid for the first 400 flats in the second phase of the Grand Jete project in Tuen Mun by CK Asset and Sun Hung Kai Properties. The price was set at an average discount of 17 per cent.

“CK Asset is a fast-asset-turnover developer,” said Raymond Cheng, managing director and head of HK property at CGS-CIMB Securities. “They price their projects according to the market price and do not hold inventory. This is their general sales strategy.”

Coast Line II apartment project in Yau Tong developed by CK Assets. Photo: CK Assets

Coast Line II is currently under construction, with completion slated for 2025. Its low pricing makes sense given its less convenient location and lack of guaranteed sea view compared to phase I, which has yet to commence selling its 228 units, analysts said.

Coast Line II is about an eight-minute walk to the Yau Tong subway station. Ko Fai Road is dusty and noisy, as the project is located in an industrial area with trucks lumbering in and out of three cement plants that serve several construction sites nearby.

The Kwun Tong wholesale fish market, located in front of Coast Line II, will be demolished for the construction of more residential buildings in the future.

The industrial Yau Tong district has been transforming into a residential area in recent years. Occupied and projects that are about to launch total 2,434 units, according to Centaline property.

The fact that the area is still under development also justifies the low pricing for Coast Line II, said Michael Lo, an agent with Hong Kong Property. “If it is all built, [the Coast Line II] will not be sold at such a cheap price.”

People choosing the area should be prepared to wait a few years for the district to develop, Lo said. “Yau Tong is in reference to the development in Kai Tak, people are betting on it to become the next central business district,” he said.