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Hong Kong is a fallen angel while Macao has been reborn

 

Damon Ho

18th November 2023

Hong Kong and Macao are both special administrative regions of China, Macao is small and has much less residents, and it is geographically close to Hong Kong, so many policies have always referred to Hong Kong related legislation. Until recent years, Macao has made every effort to promote the gambling industry, and finally made Macao's per capita GDP ranked third in the world in 2018.

After Macao's return to the homeland in 1999, the gambling industry was still in small scale and the influx of black-market laborers, this unfriendly environment caused the instability of the society. During those years, a large number of local laborers protested on Labor Day every year. In 2008, Macau government has been launching a wealth partaking scheme to distribute cash allowance each local resident. Since then, there had been no more public protests against the government policies. Early of this year, Hong Kong was still confined to internal general affairs, while Macau is fully engaged in economic development. 

Macau did not promote night economy, but Macao's cumulative gambling revenue in the first ten months of this year reached MOP$150 billion, a three-fold increase over the same period of last year, and the Macao government predicted that the city’s revenue and expenditure in the coming year will be close to reach a balance. This year, Hong Kong's land sales and land premium proceeds are about Hk$ 9.8 billion, only 11% of the total projected revenue of $85 billion. HKEX's daily trading volume in the first 10 months of this year was $106.6 billion, a slightly decrease from the same period of last year. During the past two years, the trading revenues had not increased significantly. Hong Kong government expected its revenue to reach a balance in the year of 2024. Is it possible? 

Macao focuses on the gambling industry and tourism, and since the beginning of the year, gambling revenues and the amounts of tourists have rebounded sharply. The Hong Kong property and stock market has failed, but the Hong Kong government has no way to save it, and only symbolically cancelled partial property spicy measures, and the stamp duty of the stock market had also only been slightly reduced, and these policies’ effects are minimal. When will the relevant industries bottom out. In this way, Hong Kong has been sluggish, while Macao has been rebounding rapidly. 

In recent years, Hong Kong government officials have often held exchange activities with Greater Bay Area local government, but not to Macao, which is also understandable, because Hong Kong, which used to be the big brother, now wants to use the night economy to attract local residents to stay in Hong Kong for consumption, and Macao tourists have rebounded sharply, and they are overwhelmed. Hong Kong's real estate, stock market, and financial sector are recovering indefinitely, while Macau's gambling industry has been reborn. Being a Macao person is more pleasant than being a Hong Kong person.

 
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1. Property market needs time to adjust 2023-11-18 12:19:09

Chief Executive John Lee said the property market needs time to adjust to the easing of property measures announced in the Policy Address last month.

The government announced adjustments to the demand-side management measures for residential properties, including the shortening of the applicable period for Special Stamp Duty payments from three years to two years. 

The measure resulted in Buyer’s Stamp Duty and the New Residential Stamp Duty rate reduction to 7.5% from 15% and suspension of the stamp duty for residential property acquisition by incoming talent to Hong Kong.

2. Developers likely continue to increase land bank 2023-11-18 20:49:04

Four residential sites have been withdrawn from the government tender since 2022, exceeding the total of three sites in the past seven years (2015 - 2021), according to JLL’s Residential Market Monitor.

"Such reflects that the developers are losing their appetite for land acquisition," JLL said.

JLL expects this trend to continue as market sales failed to improve following relaxed cooling measures.

According to the expert, the average first-day sell-through rate of major projects launched in the two weeks following the Policy Address was 24.6% only, lower than the 73.9% rate from major project launches in 3Q23.

" If there is no significant improvement in the primary market, developers will continue to give the cold shoulder to the tender. The prevailing market conditions could pose challenges in achieving the long-term private housing land supply target," JLL said.

3. Property market needs time to adjust 2023-11-20 12:04:51

Chief Executive John Lee said the property market needs time to adjust to the easing of property measures announced in the Policy Address last month.

The government announced adjustments to the demand-side management measures for residential properties, including the shortening of the applicable period for Special Stamp Duty payments from three years to two years. 

The measure resulted in Buyer’s Stamp Duty and the New Residential Stamp Duty rate reduction to 7.5% from 15% and suspension of the stamp duty for residential property acquisition by incoming talent to Hong Kong.

4. Are developers losing appetite for land ? 2023-11-21 10:19:06

Four residential sites have been withdrawn from the government tender since 2022, exceeding the total of three sites in the past seven years (2015 - 2021), according to JLL’s Residential Market Monitor.

"Such reflects that the developers are losing their appetite for land acquisition," JLL said.

JLL expects this trend to continue as market sales failed to improve following relaxed cooling measures.

According to the expert, the average first-day sell-through rate of major projects launched in the two weeks following the Policy Address was 24.6% only, lower than the 73.9% rate from major project launches in 3Q23.

5. DHL launched newly expanded Central Asia Hub 2023-11-21 22:35:39

DHL Express launched the newly expanded Central Asia Hub (CAH) in Hong Kong. 

The total investment for this expansion is €562m (approx. $4.77b). This supports DHL’s aim to develop Hong Kong as an international aviation hub.

The CAH has increased the total warehouse space by 50% to 49,500 sqm and the hub’s handling capacity by 70% to 125,000 shipments per hour.

6. Office market recorded lower net effective rent 2023-11-22 21:23:02

The office market recorded lower net effective rent in August at $53.4 per square foot, translating to a 0.7% drop from July.

Data from JLL showed that major office submarkets such as Central and Wanchai / Causeway Bay also witnessed rental drops, with rents falling 0.8% MoM and 0.3% MoM, respectively.

Tsimshatsui, on the other hand, saw a rise of 0.6%. Vacancy in Tsimshatsui has dropped by 0.6 percentage points in August. Wanchai / Causeway Bay likewise recorded a vacancy rate drop, recording a 0.7 percentage point decline.

7. Finance chief eased negative essets fear 2023-11-23 09:36:33

Mortgagees should not be too worried about banks calling in their loans as long as repayments are made as planned, officials said, after negative equity cases tripled quarter on quarter in the three months ended September.

"Even if there is a decline in the value of the properties that are pledged as collateral, banks, in general, will not request early repayments so long as the borrowers are able to make payments on their residential loans according to schedule," said Secretary for Financial Services and the Treasury Christopher Hui Ching-yu in a reply to Legislative Council members.

Hui's comments were echoed by Eddie Yue Wai-man, chief executive of the Hong Kong Monetary Authority. Mortgage loans are the best assets for lenders and those who can pass the stress test have proven abilities in the area of repayment, Yue noted earlier. "If these borrowers can make the payments and there is no indication that they might default, why should [the banks] call in the loans?"

8. Time to clear excess stocks 2023-11-24 14:04:11

Despite uncertainties present and future, developers are launching sales of their latest projects this month in a race to offload the many homes weighing down the need-to-sell side of their balance sheet.

Sun Hung Kai Properties (0016), for one, plans to upload the prospectus for Yoho West in Tin Shui Wai before November 20 and then follow up on that by unveiling the first price list for a project that is the largest residential launch for this year with 1,383 units.

In Tuen Mun, SHKP embarked on a new round of sales on Saturday for 154 flats in price lists and 32 units by tender at Novo Land 2A.