Category: Property

HK must kick its property addiction
Andy Xie warns that Hong Kong’s dependence on the housing sector to drive economic growth is feeding another asset bubble. When it bursts, he says, the government should resolve to kick the addiction

Apr 23, 2012

Hong Kong did not learn from the property crash and economic collapse of 1998. Instead, it has tried hard to reinflate the bubble. After squeezing supply for over a decade and with the help of the US Federal Reserve’s zero interest rate, the bubble is back. But it is a Pyrrhic victory.
Continue reading “HK must kick its property addiction” →

PRSEA | Jun 28, 2011

A seasoned property watcher has a dire warning when he looks at the current property scene in Hong Kong.

“I see history probably repeating itself and a correction looming large for the market,” said Koh Keng-shing, who has more than 30 years under his belt as a property professional.

During that time Koh was in charge of the professional services desk of First Pacific Davies (now Savills Hong Kong), and later served as valuation manager for consultancy Jones Lang Wooton (now Jones Lang LaSalle), according to the South China Morning Post.

His experience now tells him that a repeat of the 1997 market collapse could be in the future.

“Weaker than expected land auctions, tightened government measures on mortgage lending and increased land supply. Does that sound familiar?” asked Koh, noting those events foreshadowed the 1997 market collapse.

Currently running the real estate agency Landscope Realty, which he founded in 1995, Koh has been a member of the Royal Institution of Chartered Surveyors since 1990.

According to Koh a key turning point was the 9 June auction of the luxury residential site on Borrett Road.
The Borrett Road site sold at below market price estimates, and for Koh was a foreboding sign of things to come. The outcome recalled the trigger point for the 1997 market decline when a residential site in Wong Ma Kok, Stanley was sold on 3 June 1997 for HK$5.5 billion (US$706 million), 16 to 34 per cent below estimates and only 6 per cent above the opening bid.

Prior to the auction, sales volumes were regularly hitting record highs, but things quickly slid downwards, driven further by a government plan to increase land supply to increase the source of new homes to 85,000 per annum.

“Now, like then, we are seeing luxury home sales beginning to slow, even though prices remain high.”

On June 10, the government announced the launch of eight sites for sale, on which it expects developers to build 6,000 flats. The move coincided with an order from the Hong Kong Monetary Authority that banks should lend no more than 50 per cent on homes valued at above HK$10 million (US$1.3 million) (down from a cap of 60 per cent).

The authority for the first time also added tougher restrictions on non-resident borrowers. Momentum is also building for the government to revive its subsidised Home Ownership Scheme, suspended in 2002. Koh said the resumption of the scheme would shorten the cycle, bringing the correction forward into the second half of this year.

“Things have certainly taken a turn for the worse,” said Lee Wee Liat, head of regional research at Samsung Securities (Asia). The government’s willingness to resume building subsidised housing for sale, together with measures targeting foreign investment demand, showed a determination to cool the market down, he noted.
“A short-term correction is now possible,”

he said.

The latest data suggest a slowing in demand. Just 21 new homes were sold over last weekend — down from the 47 homes sold over the previous weekend, according to Samsung.

Secondary transaction volumes also fell to their lowest level so far this year, with just 21 flats sold at the 10 largest residential estates tracked by Midland Realty, down from 24 the previous weekend.

Developer Cheung Kong (Holdings) has lowered asking prices at its Uptown apartment block in Yuen Long by between 5 per cent and 8 per cent, putting new average selling prices in the range of HK$5,300 (US$681) to HK$5,500 (US$706) per sq ft, noted Lee in his latest research report.

But the pessimistic views are not shared by all industry players. Among the optimists is Nicholas Brooke, chairman of consultancy group Professional Property Services.

“Although the government intervention is likely to bring about some cooling in the short term, I think once this is absorbed by the market we will see renewed activity, albeit at a slower pace, in that the reality is that nothing has changed so far as the fundamentals are concerned,” Brooke said.

“I honestly do not foresee a bursting of the bubble as many describe it, but rather a gradual calming of the market as result of the combination of government intervention at both the supply and demand end of the equation, as well as a function of the likely hike in interest rates.

“The market will probably plateau by mid-2012 and there may be some downward adjustment thereafter, but I do not see this as major, given the wide international interest in Hong Kong real estate as a long-term investment medium,” he said.

HK’s millionaires up by 164,000, but so is number earning under HK$3,500 a month
May Chan
SCMP Mar 09, 2011

The property boom and market rebound added 164,000 new millionaires to Hong Kong last year – the biggest increase since Citibank started to analyse residents’ wealth in this way eight years ago.

In the same year, Hong Kong reported 1.26 million people making less than HK$3,500 a month.

Together, the numbers paint a stark picture of a big wealth disparity in the city of seven million.

Citibank yesterday announced the latest findings of its annual survey on the number of Hongkongers with liquid asset of more than HK$1 million.

The city had 558,000 millionaires by the end of last month, up 42 per cent on 2009. This is a record high, in terms of absolute number and the growth rate since Citibank started the survey.

These people now make up 10.8 per cent of the city’s adult population, and the millionaires are getting younger. The average age of the group went down by five years to 46, and the average age of the 164,000 new additions to the list was only 40.

The surge in personal wealth can be attributed to the city’s booming property market. Of the new millionaires, 29 per cent said they made their first million dollars through property transactions – compared with only 8 per cent in 2009.

Most of the newly rich, about 47 per cent, made their fortune last year from investments in the capital market – such as stocks, funds, currency trade and yuan-related investment products. A year ago, the figure was 55 per cent.

Simon Chow wing-charn, Citibank Global Consumer Group’s deputy country business manager, expected the number of millionaires would grow in the next few years because of a strong economy.

He noted the millionaires generally were positive about this year’s property market, with 20 per cent saying they planned to buy property this year, up 8 per cent from 2009.

“The new millionaires tend to be younger, and they are still in the workforce,” Chow said. Twentysomethings should be optimistic about the future – 4 per cent of the new millionaires were aged 21 to 29, he said.

The survey also showed a positive relationship between the level of wealth and the level of happiness. Respondents with less than HK$100,000 of liquidity averaged 5.75 on a scale from 0 to 10 in terms of happiness, while those with HK$5 million or above scored 7.83.

The survey was conducted by the Social Sciences Research Centre of the University of Hong Kong, with 4,626 adults interviewed by phone from December last year to February.

The number of millionaires in Hong Kong, according to survey data, had increased from 260,000 to 558,000 during the period of 2003 to 2010, with a sharp decline in 2008 from 414,000 to 348,000 due to the global financial crisis.

At the same time, the number of Hongkongers earning HK$3,500 or less a month grew steadily in the past decade, from 1.186 million in 2001 to 1.26 million in the first half of last year, according to a study of Census and Statistics Department figures by the Council of Social Service. The projected percentage of poor people went from 17.2 per cent in 2005 to 18.1 per cent in the first half of last year.

According to the latest statistics from the United Nations, Hong Kong’s Gini coefficient – a measurement of social inequality – stood at 0.53, the highest in Asia last year.

Chua Hoi-wai, the council’s business director for policy advocacy, said he was worried that the income gap would escalate with inflation.

“The increase in salary of the poor can hardly catch up with the inflation rate,” he said. “They can hardly manage to pay for their basic needs, so it is next to impossible that they should have spare money for investment and build up their wealth.”

Thursday
Inspect property – done

Friday
Collect keys- done
Visit new home to tailor furniture location – decide which furniture to stay in old home- done
Clean new home and remove debris- done
Do laundry- done

Saturday
Change Locks- done
Visit and clean new home, register Octopuses – done
Locate handover manuals and documents
Decide what to hand carry and pack into rimowa
Decide what clothes and items to give to charity
Pack Home – Kitchen, Bookshelves, Tea, Records and CDs, Clothes, Toilets
Indicate what items are fragile, and label each box as to where it should be placed in the new house
Dismantle TV and Hifi and Computer
Dismantle Fish Tank

Sunday
Make a final inspection of the house checking for any left items
Move in the morning
Set up Fish Tank
Set up Computer
Set up TV and Hifi
Set up boxes
Hang clothes in wardrobes
Visit drycleaners
Enjoy

Hong Kong’s incredible shrinking flats revealed
Olga Wong and Joyce Ng
SCMP Sep 27, 2009

Buyers of flats in Hong Kong are getting less and less for their money as common areas included in the floor area quoted by developers eat into their living space.

Because of this practice – described by the head of a leading property agency as a “trick” to lower flats’ price per square foot – their actual size has shrunk by as much as 22 per cent since the 1980s. For example, a new flat listed as being 700 sq ft has only as much space as a 530 sq ft flat built in the 1980s.

In many cases buyers do not know what common areas they are paying for. While price lists and sales brochures list lift lobbies and clubhouses as examples of common areas, others are never disclosed. They include architectural features, planters, space for watchmen, rooftops, pathways to car parks and covered walkways, say architects and surveyors who have worked in the field for more than 20 years.

Some developers are even charging buyers for “green” features the government has exempted from a building’s gross floor area in an effort to make developments more environment-friendly.

The efficiency rate of new flats – gross floor area divided by internal floor area – is as low as 68 per cent.

Shih Wing-ching, chairman of property agency Centaline Holdings, described the practice as a developers’ trick to lower the apparent price of the flat.

“The larger the flat’s size, the lower the per-square-foot price,” he said.

Consumer Council chief executive Connie Lau Yin-hing said it was time to tell consumers exactly what they were buying.

“After all, buyers expect to pay only for what they can enjoy, and they need to pay for the maintenance of the common areas too,” Lau said.

The Sunday Morning Post commissioned a study of the efficiency rates of 23 housing estates built since 1980. The estates covered were built by several big developers, and include the city’s 10 biggest residential developments.

Data collected from developers, banks and the Rating and Valuation Department show the efficiency rates of estates built in the 1980s – including Taikoo Shing in Eastern district, and Whampoa Garden and Telford Garden in Kowloon – are as high as 90 per cent, meaning a flat’s internal floor area is 90 per cent of its gross floor area. (Gross floor area – a flat’s interior plus an apportioned share of common areas – is crucial because developers and buyers alike base their calculation of a flat’s price per square foot on it.)

The efficiency rate began to drop in the 1990s, when it fell to around 80 per cent, and the trend has continued. Flats built in the past 10 years are only 70 to 75 per cent efficient. The rate is even lower on some of the newest estates. At Victoria Towers in Tsim Sha Tsui, developed by Cheung Kong (Holdings), the rate is as low as 68 per cent; at Island Resort in Chai Wan, developed by Sino Land, it is as low as 69 per cent.

Using the latest definition for saleable area endorsed by the government, the efficiency rates of estates sold this year are just above 70 per cent.

It ranges from 71 per cent to 73 per cent for the flats of Silver Lake at Wu Kai Sha, in the northeastern New Territories; at Le Prestige in Lohas Park, part of the new town of Tseung Kwan O, the rate is 75 per cent. If balconies and utility platforms are taken out of the calculations, the efficiency rates at these estates are between 68 per cent and 72 per cent.

While the government has endorsed guidelines issued by the Real Estate Developers Association concerning the definition of a home’s saleable area, no attempt has been made to standardise the meaning of gross floor area.

The government and the association admit there is no standardised definition of gross floor area, meaning developers are free to include whatever they want in a building’s common area. Although developers are now required to inform buyers about the amount of common area included in a flat’s gross floor area, they are not required to provide an exhaustive list of the common area’s constituent parts.

Common areas account for as much as 22 per cent of gross floor area in newly completed estates, our research shows.

“Having controlled the saleable area, it’s time for the next step,” said Raymond Chan Yuk-ming, chairman of the public and social affairs committee of the Hong Kong Institute of Surveyors.

He proposes limiting the types of common area that can be included.

“It would be more reasonable if owners were asked to pay for facilities that they really appreciate and enjoy,” he said.

Louis Loong Hon-biu, secretary general of the developers association, said common facilities add value to estates and therefore to flats.

Shih, of Centaline, said the government should set a definition of gross floor area.

Developer Swire Properties said it would welcome a standardised definition of gross floor area since it would enhance transparency and consistency.

A spokeswoman for Cheung Kong (Holdings) said the company followed association guidelines.

Despite the controversy, owners who buy flats “off plan” – meaning before they are built – and only find out later how small they are seldom complain.

Sai Kung district councillor Chan Kai-wai said he had received complaints about flats sold in Tseung Kwan O, but the buyers refused to talk to the media.

“Who would undermine the resale value of their own property,” he asked.

Yvonne Liu
SCMP Sep 15, 2009

A one-bedroom flat in a luxury development in Tsim Sha Tsui has fetched a whopping HK$30,025 per sq ft, setting a record in Hong Kong.

A Hong Kong businessman who owns a trading firm has paid HK$24.5 million for an 816 sq ft flat on the 56th floor of The Masterpiece for his own use, according to Centaline Property Agency, which concluded the deal. The price is a record for a one-bedroom flat.

The useable area of the apartment is just 590 sq ft, similar to flats in mass residential projects.

Thomas Chan, Centaline sales director, said the buyer was willing to pay the high price because the flat offered views of Victoria Harbour and was centrally located.

In 2007, the average price of one-bedroom flats at The Arch, above Kowloon Station, was HK$17,000 per sq ft.

The 64-storey The Masterpiece in Hanoi Road was developed by New World Development and the Urban Renewal Authority.

It is the second-tallest residential building in Hong Kong after The Cullinan, above Kowloon Station.

The one-bedroom flat is the smallest unit in the project.

“The buyer could get a second-hand luxury flat with at least 1,500 sq ft and three bedrooms in Mid-Levels” for the price, said Koh Keng-shing, managing director at Landscope Surveyors and Landscope Realty.

Even though average prices at housing estates such as Taikoo Shing are still down from their 1997 peak, property agents said luxury residential prices had already exceeded their 1997 levels. The city’s most expensive flat is a 7,088 sq ft unit at Branksome Crest in Mid-Levels, which sold for HK$240 million, or HK$39,786 per sq ft, in December 2007.

Flats previously peaked at about HK$20,000 per sq ft in 1997, Koh said.

The most expensive residential property in the city is a 3,300 sq ft house at 8 Severn Road on The Peak, which sold for HK$285 million, or HK$56,800 per sq ft, in June last year, making it the most expensive residential dwelling in Hong Kong and also Asia.

The new luxury developments in non-traditional luxury residential areas such as Tsim Sha Tsui and Kowloon Station are fetching higher prices than apartments in Mid-Levels and other high-end residential areas.

“Those projects have attracted new demand from mainland buyers and local investors, not the local end-users,” Tsang said. “Some of the projects are overpriced. It may be risky for the buyers.”

Tsang had confidence in the market outlook for luxury residential developments in traditional luxury areas as the supply was expected to remain low in the next few years.