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〈Asian Post, August 19, 2017〉Hong Kong could take a hit as State Council slaps restrictions on dealmakers and sets out new conditions for offshore investments

Chinese investors will need special approval from Beijing to put their money in overseas property and sports clubs under tough new restrictions released yesterday.

Amid fears of broader financial insecurity, the State Council said companies would also need regulatory approval for outbound investments in hotels, the film industry and other forms of entertainment on its new formal restricted list.

Similar restrictions apply for companies setting up overseas equity funds or investment vehicles not tied to specific projects. Authorities have launched a campaign to curb "irrational overseas investment", and aggressive dealmakers such as Anbang Insurance Group, Fosun International, Dalian Wanda Group and HNA Group have been under pressure. The list formally sets the boundaries for outbound investment.

Tao Jingzhou, managing partner of Dechert law firm, said the rules marked a major retreat from the overseas investment push promoted over the last few years.

"It indicates the government is very worried about capital outflows and that many private businesses are transferring assets abroad," Tao said.

The fallout from the rules might also be felt in Hong Kong. "There is an estimated HK$50 billion worth of investment properties, including hotels and grade-A office buildings available, for sale on the market now. These are targeted at mainland corporate buyers," Vincent Cheung, from Colliers International, said.

Among those up for sale are The Excelsior hotel in Causeway Bay and the Langham Place office tower in Mong Kok.

Amid the raft of new restrictions, Beijing signalled strong backing for its "Belt and Road Initiative" and pursuit of high technology. It supported stronger tie-ups with foreign hi-tech and advanced manufacturing firms, and encouraged local firms to set up research centres overseas. The country's top planner, the National Development and Reform Commission, fleshed out the thinking behind the State Council's decision, saying some companies had incurred huge losses through poor planning of overseas investment.

Such investments, particularly in property, had triggered capital outflows and endangered financial security, it said. The commission also said companies had ignored environmental, energy consumption and safety standards offshore, tarnishing China's reputation. Such investments would be restricted.

The new rules already appear to be taking effect, with investment bankers at state-owned banks in Hong Kong notified in recent days about tightened restrictions on cross-border investment. One banking source said yesterday that investment in overseas office property was off limits. The State Council's restrictions were likely to stay in place for longer as they had greater weight than earlier directives.

On December 6, the State Administration of Foreign Exchange teamed up with the NDRC, the Ministry of Finance and the central bank to warn that they would "closely monitor irrational investment in real estate, hospitality, movie theatres, entertainment, and sports clubs".

〈Asian Post, August 18, 2017〉Competition among banks in the mortgage loan market is heating up, with some lenders partnering with mortgage brokers to offer this year's lowest loan rate to homebuyers at two new developments in Tsuen Wan.

Centaline Mortgage Broker said yesterday it would provide buyers of Cheung Kong Property Holdings' Ocean Supreme units a rate as low as 1.68 per cent for the first year, followed by 1.28 percentage points above the Hong Kong interbank offered rate, or 1.7 per cent, for the rest of the loan period.

"It should be the city's most affordable mortgage payment plan," said Ivy Wong Mei-fung, the managing director of Centaline Mortgage.

The plan slightly undercut mReferral Mortgage Brokerage Services' 30-year loan at 1.3 percentage points above Hibor for buyers at Parc City, which is designed for loans exceeding HK$4 million. The rate is only offered to buyers through mReferral's parent company, Midland Realty.

With the one-month Hibor at 0.4217 per cent yesterday, buyers will get loans at an effective mortgage rate of 1.72 per cent per year, compared with the market rate of 1.82 per cent.It should be the city most affordable mortgage payment planIvy Wong Mei-fung, Centaline Mortgage BrokerThe two mortgage brokers have teamed up with banks to offer such preferential terms, but they declined to identify which banks were involved.

The mortgage plans come after Chinachem Group released on Wednesday its price list for the first 191 units at Parc City, which is next to West Rail's Tsuen Wan West station. The average price is HK$14,449 per square foot, after a discount of up to 20 per cent. It was the lowest launch price for new flats this year, and 10 per cent below the secondary market. More than 2,000 people signed up for the units yesterday, sources said.

Chinachem's launch price was also 14 per cent below the HK$16,877 per square foot price that Cheung Kong Property set in May for Ocean Supreme, a development next to Parc City. Cheung Kong has also stepped up the sale of the remaining units at its project. William Kwok, a director of wholly owned subsidiary Cheung Kong Real Estate, said 80 units would be released for sale on Saturday and another 80 units on Sunday from HK$15,066 per square foot.

〈Economic Daily, August 17, 2017〉Swire Properties, one of Hong Kong's oldest and largest builders of luxury homes and grade A offices, yesterday said better sales and higher margins on luxury property sales helped it post interim earnings that surpassed analysts' expectations.

Underlying profit rose 30 per cent to HK$4.6 billion in the six months to June, while sales increased 46 per cent from a year earlier to HK$11.5 billion, beating the HK$11.3 billion consensus forecast of analysts polled by Bloomberg. Net profit, including valuation gains, more than doubled to HK$14.8 billion. Revenue from property sales jumped 170 per cent to HK$5.26 billion, after the company handed over pre-sold units at its Alassio development in Mid-Levels.

Swire said demand continued to "remain resilient" in the high-end residential market segment, despite government measures to cool the market and the expectation of a gradual increase in interest rates. "Demand is strong in Hong Kong and we expect that is going to continue in the second half," said Guy Bradley, the company's chief executive.

After selling all the units of Alassio, the company's remaining unsold stock in Hong Kong is the villa project Whitesands, on Lantau Island.

Leasing income from offices, including the landmark Pacific Place in Admiralty, edged up to HK$3.04 billion from HK$3.03 billion in the same period last year.

Full occupancy of its Pacific Place offices prompted Swire to raise rents by 15 per cent in the second quarter for leases that had expired by the end of June.

"In the Central district, high occupancy and limited supply would continue to exert upward pressure on office rents," chairman John Slosar said in the company's stock exchange filing.

On the retail side, the city's improved sales momentum in the first half boosted the leasing performance of the company's shopping malls. "[Tenant] sales have slightly picked up," Bradley said.

〈Business Daily, August 16, 2017〉Guangzhou, the mainland's third largest city, has seen a whopping 35.6 per cent increase in luxury home prices over the 12 months to June 2017 - recording the highest growth among 41 major cities tracked globally by Knight Frank. Luxury home prices rose on average by 23.4 per cent for the 12-month period in the mainland's three primary cities of Guangzhou, Beijing and Shanghai, the property consultancy said in a report.

Luxury home prices in the mainland also rose from a relatively low price base, which leads to sharper gains when compared with other most expensive locations around the world, the report said.

Globally, luxury residential prices advanced by an average of just 4.4 per cent in the first six months of this year from the same period in 2016.

Even most of that upturn can largely be attributed to gains in the mainland's three primary cities, which has led the index for three consecutive quarters. But price gains slowed in the three cities when compared on a quarterly basis, the report said.

Beijing recorded the sharpest slowdown with luxury home prices rising 15 per cent year on year in the second quarter compared with a 22.9 per cent upturn during the first quarter, it said. Mainland policymakers have imposed strict cooling measures in most urban centres and the huge price gains of the past are unlikely to last much longer, said Kate Everett-Allen, head of international residential research at Knight Frank.

"We expect the rate of growth in Chinese cities to slow as cooling measures take effect. The number and type of regulations vary from city to city, but broadly speaking, buyers now need to put down larger deposits, and there are often limits on the number of properties that can be bought by individuals or families," she said.

〈Shanghai Daily, August 15, 2017〉Appetite for real estate investment around the world rose in the second quarter of this year with Asian buyers playing a vibrant role, data released yesterday by JLL, an international property advisor, showed.

Inter-regional investment in real estate totaled US$19.5 billion between April and June, up 71 percent from the same period a year earlier.

In the first half of this year, the Chinese mainland was the third biggest source of cross-border capital in real estate globally at US$6.2 billion, behind Germany and the UK. The other biggest spenders in the region were Hong Kong at US$4.9 billion, Singapore at US$4.1 billion, South Korea at US$1.9 billion and Japan at US$1.6 billion, according to JLL.

In what could be the biggest single asset deal of the year, Chinese mainland’s HNA Group bought 245 Park Avenue, a Midtown office tower in the US, for US$2.21 billion in May.

“The purchase underscores the continued prominence of Chinese capital in global real estate markets despite capital controls,” said David Green-Morgan, director of global capital markets research at JLL. “Given this is the first wave of Chinese capital going global, it remains concentrated on the biggest, most liquid markets in the world.”

Asian investors actually allocated almost all of their capital into the world’s three largest and most liquid real estate markets during the first six months of this year, namely the US, UK and Germany, which received US$10 billion, US$6 billion and US$2 billion, respectively.

Even as they channeled more capital into real estate overseas, Asian investors were still keen to hunt for deals within their own countries, with domestic investments totalling US$49 billion in the second quarter in Asia Pacific. In particular, domestic demand continued to drive the Chinese mainland real estate market with foreign buying interest on the rise, taking up a third of total transaction volumes in the second quarter.