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Property News Weekly Digest
2018/10/27
〈China Daily, October 26, 2018〉The Policy Address, recently delivered by Chief Executive Carrie Lam Cheng Yuet-ngor, provided not much detail on how the local economy can benefit from the ambitious Belt and Road and Greater Bay Area initiatives. It also did not assess how Hong Kong would be affected by obvious changes in the global economic climate.

Hong Kong has the world’s most open economy. It is at the same time a small economy, which means that it is highly susceptible to even the slightest changes in the external economic and political environment. Therefore, we must always glue our eyes over the horizon.

On the home turf, there are clear indicators that the economy here — and globally — is dipping at an alarming rate.

On the real estate front, in moves not seen in many years, the Hong Kong government had to turn down offers from developers to buy an upscale site in the Peak as all the tenders submitted were below the reserve price. The cancellation of the sale has confirmed market expectations that developers are preparing for a market downturn. Before the withdrawal of the tender, one valuation had put the value of the site at a figure as much as HK$48.5 billion. Meanwhile, the fact that the plot only attracted five bids was also indicative of the changed outlook among local property developers, who were previously keen to replenish their land banks. A land sale of this kind would have attracted at least a dozen or so enthusiastic bids.

This failed land tender certainly did not bode well for what might have been installed for the local economy.

One underlying factor affecting the market is of course a new round of rising interest rates, and that means stock markets worldwide will take a hit. So far, some early victims have emerged; as we see drops in the stock markets in the United States, Japan, and needless to say Hong Kong.

〈The Standard, October 25, 2018〉The project will be expensive and take a long time, but it’s the only way forward to resolve HK’s housing shortage, Peter Liang argues

The proposed reclamation project off the coast of Lantau Island, creating artificial islands of 1,700 hectares of reclaimed land, was born out of the major shift of the government housing policy initiated by Chief Executive Carrie Lam Cheng Yuet-ngor.

Objections to the proposal centered on questions of financing. Critics charged that the mega project could exhaust Hong Kong’s fiscal reserves, which amounted to about HK$1 trillion in the latest count, enough to cover more than 30 months of government expenditure. They argued that the money could be better used to improve the social security of the projected increase in retirees in coming years as the population is fast aging.

These are valid arguments. A project of such large scale would certainly put a strain on the government’s future budget. But critics of the proposed plan have ignored the fact that it is essential to the success of the new government housing policy, which, according to results of the recent public debate, is widely supported by the public.

As the debate on the government housing policy is settled, further debates should focus not on the project itself but rather on the best way to finance it without draining the fiscal reserves and to minimize its possible damage to the ocean environment.

In the past, the government housing policy focused mainly on building subsidized apartments for rental to the neediest families. The sharp rise in home ownership demand in recent years, fanned partly by abnormally easy credit, has pushed up property prices to levels that fewer and fewer people can afford.

〈Asian Post, October 25, 2018〉China's 400 wealthiest people have lost a combined US$130 billion of their fortunes in the past year, as a worsening trade war with the United States exacerbated a slowing economy and the worst stock market rout in four years.

The nation's richest people are estimated to be worth a combined US$1.06 trillion, down from the total wealth of US$1.19 trillion, according to Forbes' 2018 China Rich List. Their median net worth shrank by US$300 million to US$1.4 billion, from US$1.7 billion, according to the list.

"The world has come to associate China with wealth creation, and it is startling to see the extent of wealth destruction this year," Forbes China editor-in-chief Russell Flannery said.

The turmoil on Asian equity bourses underscored the wealth destruction, as stock markets from Seoul to Wellingtonyesterday took the cue from New York's overnight plunge.

Forbes had to lower its bar for making the China Rich List to US$840 million, as the number of dollar billionaires on the 2018 list fell to 344, from all 400 last year.

Tycoons in manufacturing were the hardest hit, in a sign that the trade war - ostensibly to close the US trade gap with China - is beginning to bite at the top.

Real estate fortunes were also wiped out, with China Evergrande Group's founder and chairman Hui Ka Yan losing 28 per cent, or US$11.7 billion, of his estimated worth to US$30.8 billion, putting him third on the list. The shares of Evergrande, one of China's largest property developers, have plummeted by 29 per cent this year, touching a 52-week low of HK$18, amid concerns of its 144 billion yuan (HK$162 billion) inoutstanding debt.

〈Asian Post, October 24, 2018〉Chuang's China Investments sells just 35 per cent of the Esplanade flats on offer while the tender for 138 units at The Horizon in Tai Po is postponed

A two-day property sale that kicked off yesterday failed to draw crowds, with only about 35 per cent of the flats on offer by Chuang's China Investments in a Tuen Mun project sold by 5pm.

Just 62 flats were sold seven hours after the sale started, market sources said, while in the morning, during "priority sales" for buyers of more than two units, no deals were recorded.

"The result was not good. There were a lot of cheap flats [available] but not many buyers sealed deals ," said Sammy Po Siu-ming, chief executive of Midland Realty's residential department.

Po said he did not expect sales to exceed 70 flats by the end of business yesterday.

Chuang's China Investments has put on sale 175 of the 371-flat Esplanade, a 20-minute walk from the Tuen Mun MTR station, at prices starting from HK$2.88 million, or HK$17,832 per square foot. Four of the units on offer cost less than HK$3 million.

The developer was expected to have sold 40 per cent of the flats on offer yesterday.

At the beginning of this month, China Vanke saw just 58.3 per cent of the flats on offer at its Le Pont development, also in Tuen Mun, bought.

Such figures easily exceeded 90 per cent just two months ago. On August 26, Sun Hung Kai Properties sold about 350, or 96 per cent, of a tranche of 364 flats at its Cullinan West II project in Kowloon.

〈The Standard, October 23, 2018〉UBS forecasts home prices to fall up to 15 percent in the next 12 months while Centaline Property said it has lost HK$70 million this month, as 200 agents failed to record any transactions over this year.

UBS wealth management global chief investment officer Mark Haefele said Hong Kong property prices are highly dependent on the macroeconomic environment.

He pointed out that prices kept surging in the past few years due to low interest rates and tight property supply, but now the ongoing Sino-US trade war amid a downturn in China's economy will lead to price drops.

However, the UBS report added that prices won't plunge deeply because of limited flat supply.

Meanwhile, Centaline residential chief executive Louis Chan Wing-kit said the company's recorded commission revenues of HK$85 million from October 1, while its average monthly operating cost is HK$250 million. He said Centaline will see its first monthly loss since February.

Chan added the firm sent a warning letter to 200 agents who did not make any deals over the year, and may be sacked at year end.

Separately, Centaline mortgage broker and mReferral mortgage brokerage is collaborating with TransUnion to offer one-month free credit report checking service to their customers.

TransUnion Hong Kong's director of consumer interactive, Lawrence Lo Shui, said the regular price of credit report checking service was HK$280 per month, with 14,000 people using the service last year.