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Property News Weekly Digest
2018/8/18
〈China Daily, August 18, 2018〉Since taking over in July last year, Chief Executive Carrie Lam Cheng Yuet-ngor’s administration has endeavored to meet Hong Kong’s housing needs with a new ladder under assisted ownership. The latest measures, known as “Carrie-6”, will penalize unoccupied new flats and subsidize home starters in private development. These are not merely technical measures but also policy changes in disguise. For almost 180 years, private housing has been a cornerstone of land and property. A paradigm shift in policy would not help resolve impasse and provide housing for all.

The previous administration tried to suppress demand but in vain. The spicier the austerity, the higher is the price of housing. Worse still, new flats are getting smaller but unit price is getting higher amid a developers’ market. Admittedly, Carrie-6 is more a show of will than cards.

As announced in the Policy Address last October, the new housing ladder comprises five steps: Public Rental, Public Purchase, Homeownership, Starter Home and Private. Following reorganization, public and private housing are supposedly segregated with the hybrid Starter Home as demarcation. With public housing, utility (the occupational value of a home) is higher than its value as an investment; with private housing, the opposite is true.

Land in Hong Kong used to be auctioned in undivided lots. Houses were sold in blocks together with divided lots. There were no strata titles until the late 1950s. People either bought a whole block, or leased a whole floor or subdivided cubicle. Public rental housing started with resettlement of victims of the squatter inferno of 1952. The new towns of Chai Wan, Kwun Tong and Tsuen Wan, with their public housing and multistory factories, helped industrialize Hong Kong to become one of the “Asian Dragons”. Homeownership started in the early 1970s, primarily to assist home purchases and stimulate turnover in public housing. The incentive was an option to acquire full title to the property and trade up to private housing.

〈Asian Post, August 1, 2018〉Hong Kong's de facto central bank has continued to intervene in the currency market, bringing its spending for the week to HK$16.76 billion, the equivalent of US$2.14 billion, of its US$432 billion in foreign reserves as it defends the local dollar.

The withdrawal of banking liquidity resulting from the Hong Kong Monetary Authority's intervention also brings a key mortgage rate closer to leaving property owners with higher home loan payments.

The Hong Kong dollar was trading at 7.8496 against the US dollar last night, close to the lower limit of its permitted trading range of 7.75 to 7.85.

A combination of factors in recent days has driven capital out of Hong Kong, including Turkey's lira crisis and the resumption of investors buying higher-yielding US dollars and selling the lower-yielding local currency.

HKMA chief executive Norman Chan Tak-lam yesterday said the authority would provide extra liquidity by adjusting the volume of Exchange Fund bills, currently about HK$1 trillion, it issued if needed, to cope with outflows.

Over the years, the authority has issued Exchange Fund bills to investors to drain excessive banking funds during periods of strong capital flows into the city. It can also let the bills mature without rolling them over, injecting liquidity back into the market.

The market widely expects the United States Federal Reserve to raise interest rates again next month and in December this year, which is likely to be followed by benchmark rate increases by the HKMA to maintain Hong Kong's currency peg to the US dollar.

〈The Standard, August 15, 2018〉In order to get on the property ladder in the world's least affordable housing market, home buyers in Hong Kong are going ever smaller - now looking into apartments that are tinier than two parking spaces.

Residential units no larger than 300 square feet saw a 52 percent jump in transaction volumes year on year so far this year, data from agency Ricacorp Properties show. Such dwellings now comprise 12.4 percent of total apartment sales in the city, up from 9.3 percent last year.

"The rise in property prices has made it difficult for people with less purchasing power to buy a home," said Buggle Lau, chief analyst at Midland Realty.

"So potential home buyers look for low lump-sum prices rather than a low price-per-square foot." Home prices in Hong Kong have increased by 14 percent this year, according to the Centaline Property Centa-City Leading Index.

The rise in demand for super small is also a result of shrinking family sizes, said Wong Leung-Sing, a senior associate director of research at Centaline Property Agency.

"The number of one-person families in Hong Kong has been growing rapidly," he said. "For those who live alone, why do they need that much space?"

〈Asian Post, August 15, 2018〉Sun Hung Kai Properties, Hong Kong's biggest developer, has cut the prices of homes at one of its projects by as much as 10 per cent, its second such action in less than a month, in the latest sign the housing market may be cooling.

The company is offering 119 units at its Cullinan West II development atop Nam Cheong MTR station in Kowloon at an average price of HK$23,893 per square foot after discounts, about 10 per cent lower than a previous batch that went on sale in December.

Other developers are likely to follow suit, according to analysts, as interest rate rises subdue the market's outlook, the trade war between China and the United States brings uncertainties, stock markets struggle and the government's cooling measures start to bite.

"The overall downbeat sentiment is still taking a toll on the market," said Derek Chan, head of research at Ricacorp Properties. "Developers are worried they cannot unload their properties with headwinds ahead."

Most new residential projects in Hong Kong in the past six months have been priced higher than those in the secondary sector, and developers have been able to increase prices with each new batch of a project because of strong demand. But those times may be coming to an end.

The median house price in the city had risen for 27 consecutive months until July, but UBS has predicted prices will tumble as much as 10 per cent from this month to the end of 2019, while Citibank has forecast a 7 per cent fall in the second half of this year.

〈Asian Post, August 14, 2018〉The opening of the Hong Kong-Zhuhai-Macau bridge later this year could further narrow the gap between house prices in Hong Kong and Macau, both of which recently rose to a record high, according to property experts.

Raymond Kwok, associate director at Guo Du Real Estate, said that once vehicles start crossing the bridge, the residential market in Macau could grow between 5 per cent and 10 per cent. Retail property prices could increase by 30 per cent to a half.

"If the traffic is there, we will likely see growth in Macau property prices next year, or a month or two after the opening of the bridge," said Kwok, whose agency handles about HK$30 million in property transactions annually in Macau, most of them commercial deals.

The bridge is expected to cut travel time from Hong Kong to either Zhuhai or Macau to just 40 minutes. The transport firm that holds exclusive rights to run shuttle buses across the bridge will charge HK$80 for a single journey between Hong Kong and Zhuhai, compared to HK$220 needed for a ferry link and HK$130 for coaches using other routes.

In the wake of the global financial crisis 10 years ago, average home prices in Macau bottomed out at HK$1,589 per square foot. The average in Hong Kong at about the same time was HK$4,464 per square foot, about three times more than in Macau, Midland Realty data showed.

Since then, the gap has shrunk and is tipped to narrow further as the Hong Kong market cools off and Macau's property sector benefits from the bridge.