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Property News Weekly Digest
2019/7/27
〈Asian Post, July 27, 2019〉The timing was not accidental. The Hong Kong Monetary Authority (HKMA) announced the promotion of its most senior deputy to head the city's de facto central bank this week as it disclosed a record investment return of HK$170.8 billion in the first half of the year. HKMA veteran Eddie Yue Wai-man will take over as chief executive from Norman Chan Tak-lam, who will retire after 10 years at the helm. As the most senior of the authority's three deputies, Yue is directly responsible for running Hong Kong's HK$4.137 trillion Exchange Fund, a war chest for maintaining the local currency's peg to the US dollar. Just as there is nothing like success for a politician, so it is with record returns for a Hong Kong central banker. The timing was auspicious for Yue, as global capital markets staged a dramatic recovery in the first quarter of the year after a slump late in 2018.

He is the proverbial safe pair of hands, having been with the monetary body since it was set up in 1993. His expertise in financial markets will be invaluable, as is his role in steering Hong Kong to take part in strategic projects in the Greater Bay Area of 11 southern Chinese cities, including Hong Kong and Macau, and the nation's Belt and Road Initiative of global infrastructure investments. Under his watch, the Exchange Fund has diversified into alternative investments, including private equity, real estate and infrastructure. But in his new role, the challenges Yue faces will not merely be technical, or about just making money.

As an open market, Hong Kong is exposed to the volatility of global market conditions. He will need to be alert to regional risks, especially those that are geopolitical, including the trade war between the United States and China. But his greatest challenge may be domestic as the city has become politically charged as never before. The HKMA was forced to introduce round after round of mortgage tightening in the past decade to stabilise the banking system and reduce banks' exposure to bad housing loans. Local banks have, no doubt, weathered the global financial crisis well.

As a result of the tightening, the average ratio of mortgages to property value fell to 51 per cent, from 64 per cent in 2009. But the property bubble, coupled with the mortgage tightening, has turned Hong Kong into the world's most unaffordable housing market. Poor living conditions and the inability of young people to get on the property ladder have helped generate widespread social discontent and malaise. The authority's mandate as a bank regulator has also meant pushing property ownership further beyond the reach of many Hongkongers without heavy savings.

〈Asian Post, July 26, 2019〉Midland Immigration Consultancy received no less than 80 emigration inquiries between July 1 to July 23 amid the ongoing political unrest, while the inquiries it recorded last month surged two-fold month-on-month to sixty.

The consultancy also said a survey showed more than 40 percent of respondents intend to emigrate. The survey was conducted on about 600 respondents and nearly half of those with an inclination to emigrate plan to move out within three to ten years.

Nearly six out of ten respondents want to emigrate through real estate investment, according to the survey. The respondents who hope to emigrate to Asia accounted for 46 percent.

The immigration adviser said that around 40 percent of the recent inquiries came from youngsters aged between 20 to 30 years old, and most of them are interested in Taiwan as well as other locations where immigration thresholds are lower.

Meanwhile, Golden Emperor Properties has received more than 5,000 inquiries about immigrating to Malaysia over the past six months, a five-fold surge compared with the corresponding period last year, due to easier immigration requirements in comparison with Thailand and Singapore.

Hongkongers have also begun scouting for properties in cities including Toronto, Vancouver and London as the unease surrounding the SAR's political future grows amid Beijing's increasing influence. A drop in residential property prices is making some of these cities attractive. As protests continue to rock Hong Kong, real estate brokers in Canada and the UK are fielding a flood of inquiries from investors who are eager to get out.

Dan Scarrow, president of Macdonald Real Estate Group in Vancouver, said many of his Chinese agents saw an uptick in interest for both sales and rentals this month from Hong Kong.

〈Business Daily, July 25, 2019〉The number of mainland property developers going out of business as they find themselves unable to borrow money in the face of credit curbs has gone up by half, according to official figures.

So far this year, 274 companies have filed for bankruptcy, a rise of 50 per cent from a year ago, according to the website of the People's Court Daily, a state-owned publication.

Although the numbers are only a tiny fraction of the estimated 100,000 developers on the mainland, concern is growing that defaults and bankruptcies will only increase.

"Everyone, from homebuyers to savvy investors, is worried about developers' cash flow," said Yan Yuejin, a research director with property services firm E-house China R&D Institute.

A recent high-profile example was Yinyi Group, a developer in the port city of Ningbo, which filed for bankruptcy reorganisation in June after it failed to pay back 300 million yuan (HK$341 million) in debt issued three years ago.

Developers have found it harder to access their traditional sources of credit as Beijing has sought to clamp down on high debt levels.

In May, the China Banking and Insurance Regulatory Commission banned direct financing to developers that have not yet secured all the approvals necessary to start building or all the funding they need for a project. The ban was later expanded to include indirect financing through equity investments and bond subscriptions.

Earlier this month the National Development and Reform Commission said any new offshore bonds issued by real estate firms must be used only to replace medium- and long-term offshore debt maturing in the next year.

〈The Standard, July 24, 2019〉The government sold the biggest plot of residential land at the former Kai Tak airport yesterday at the lowest price in three years, after seven weeks of increasingly violent street protests dampened property firms' appetite for big investments.

Dragon Star H.K. Investments, a consortium of K. Wah International Holdings, Wheelock Properties and China Overseas Land & Investment, paid HK$12.74 billion, or HK$11,841.70 per square foot, for Kai Tak Area 4A Site 1, according to the Lands Department.

That was below the price range of HK$13 billion to HK$16.1 billion expected by valuers and also less than the HK$13,701 per square foot that Wheelock and its partners paid for an adjacent plot four months ago.

"Unless market sentiment and the social [atmosphere] deteriorates further, the land price at Kai Tak should have bottomed out," said Thomas Lam, executive director at Knight Frank, adding that the government was unlikely to sell any large commercial plots at the site in the next two to three months.

Commercial land parcels that require large investment might have to be withdrawn from sale if the government did not adjust the reserve price down to meet market sentiment, Lam said.

The sale of the land, the biggest residential portion in the government's plan to redevelop the site into Hong Kong's second business district, came as business and investment sentiment in the city struggles with a combination of the year-long US-China trade war and deteriorating civic order.

〈Ejinsight, July 23, 2019〉Hong Kong's sky-high land prices are prompting more developers to look beyond the world's most expensive property market for opportunities.

Far East Consortium, Swire Properties and Nan Fung Development are among companies who have recently announced projects in other countries - even other sectors - as it becomes more difficult to buy land at home.

The cost of land in Hong Kong has skyrocketed in recent years because of a lack of supply. At Kai Tak, the site of the city's former airport, the land price has almost quadrupled from HK$5,157 per square foot to HK$19,636 per square foot in the past six years.

"Hong Kong's land is quite expensive. Usually only the big developers can win land tenders," said Sam Chi-yung, strategist at Springwaters Financial Securities. "The relatively smaller developers may turn to other countries to seek opportunities."

Far East said it had bought a 20-acre parcel of residential land in the centre of Manchester in Britain from Network Rail, on which it hopes to build more than 1,000 units. It is the latest move by the developer to improve its foothold in markets outside Hong Kong.

Swire Properties earlier this month said it would develop a luxury residential project in Jakarta in its first foray into Indonesia, Southeast Asia's largest economy.

Nan Fung Development said last week it would deepen its move into health care with a joint venture that will produce and sell cancer and arthritis medicines on the mainland.