his week, news that local developer Cheung Kong was selling all 360 units in its Apex Horizon hotel prompted hundreds of buyers to line up for the chance to plunk down cash. The units were all sold, netting the company—controlled by local billionaire Li Ka-shing—nearly $181 million.
Two-bedroom units sold for prices starting at $425,000, a good value for the area, despite rules that prohibit redecoration or other alterations to the unit, according to Ricacorp Properties’ Andy Jim. “It’s all investment,” said Mr. Jim, adding that speculators were keen to jump on a low-priced opportunity.
In addition to restrictions on redecoration, a Cheung Kong spokesman said, occupants are also barred from flame or barbecue cooking.
Apart from the low price, rooms in the hotel might not seem to be the most obvious investment opportunity, given the Apex Horizon’s location near the city’s container port in Kwai Chung, an industrial area filled with large swathes of public housing.
But the Apex Horizon sales come on the heels of government efforts to tame the city’s property market, which has seen residential prices double since late 2008. In October, Chief Executive Leung Chun-ying slapped the city’s most draconian taxes on transactions yet, levying a 15% stamp duty on residential properties sold to non-locals, and a 20% tax—intended to deter speculators—on residential properties resold within a short period of time.
Since the Apex Horizon hotel is a commercial property, a Cheung Kong spokesman said, buyers aren't liable for such additional duties.
Still, Vincent Ho, vice president of the Hong Kong Property Institute of Surveyors, said buyers are rushing into murky legal territory and opening themselves up to potential prosecution through these purchases, which he called unprecedented in the city. A number of local politicians have also echoed this concern. The government says that if a buyer tries to occupy a unit as though it was a normal residence, they could be subject to fines of $13,000 and jail stints of up to two years.
Mr. Ho said that the government will have trouble ensuring whether owners of the units are using the hotel rooms as regular residences. Still, he says, “They may need to do so. They can do things like keep a very close surveillance of the building.” Mr. Ho says he doesn’t anticipate many other developers will try to mimic Cheung Kong’s sales tactics—at least not until the legal gray areas associated with such sales are clarified.
Since the government enacted its latest round of cooling measures, investors have poured money into everything from parking spots to shops, as well as the industrial sector. In the last quarter of 2012, the number of strata-title deals—in which buyers purchase individual units of a building—leapt to highs not seen since 1999, according to brokerage Colliers.
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