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Property News Weekly Digest
〈Asian Post, February 2, 2019〉HNA Group has sold its last plot of development land at the former Kai Tak airport site to local developer Wheelock and Co, as the one-time high-flying mainland conglomerate disposes of assets to repay debts.

The company said yesterday Wheelock would pay HK$6.89 billion for the site, which, based on the HK$7.44 billion paid for the plot nearly two years ago, would result in a loss of HK$550 million.

The listed unit of the Hainan-based company, Hong Kong International Construction Investment Management Group, had been seen as likely to sell at a loss to Wheelock, reflecting the slowdown of the residential property market, according to two sources familiar with the matter.

HNA bought the plot in March 2017 for HK$13,500 per square foot on the basis of a gross floor area of 551,134 sq ft.

Shares in Hong Kong International Construction were suspended from trading yesterday morning, with the company saying it was related to a major transaction.

As late as Thursday night, a couple of other bidders had wanted to compete for the parcel in an area widely expected to be a new central business district for Hong Kong, the source said.

In March last year, HNA sold its third plot of Kai Tak land to Wheelock for HK$6.36 billion. The previous month, it sold two pieces of land to Henderson Land Development for HK$15.91 billion, giving the developer its first foothold in Kai Tak.

HNA made a profit of HK$1.7 billion from that sale. "Overall, HNA made a decent profit from the Kai Tak sites," the other source said.

〈Ejinsight, February 1, 2019〉Residential properties in negative equity have made a comeback in Hong Kong for the first time in two years as home prices suffered a correction amid the trade war between China and the United States.

The Hong Kong Monetary Authority (HKMA) said on Thursday its survey found 262 cases of residential mortgage loans (RMLs) in negative equity – the value of the property fell below the outstanding balance of the mortgage used to buy the property – in the fourth quarter of last year. That's the first time the surveyed institutions has reported negative equity cases since the end of December 2016, the HKMA said.

The combined value of the RMLs reached HK$1.189 billion as of the end of last year, with the unsecured portion of the loans amounting to HK$58 million, the Hong Kong Economic Journal reported. The HKMA said most of the cases involved bank staff housing loans and those under the mortgage insurance program, which have higher loan-to-value (LTV) ratios.

The Hong Kong Mortgage Corp. said there were 60 negative equity cases connected to the insurance program it offers. All of them had a loan-to-value ratio of 90 percent and their combined outstanding amount was HK$200 million, which accounted for 0.18 percent of the amount that has not been paid back to the program. Some industry insiders estimated that the actual number of negative equity cases could be higher than that unveiled by the HKMA, which only covered first mortgage loans but and did not include second mortgages.

〈The Standard, February 1, 2019〉Investors in the Asia Pacific are the most optimistic compared to those from other areas such as Europe, the United States and Middle East, according to an investors' sentiment survey conducted by UBS.

The survey was based on interviews covering more than 3,000 high net worth respondents around the world, canvassing their attitudes, expectations, and worries in the 2019 market, as well as whether they are confident of achieving their targets.

Asia-Pacific investors are relatively optimistic to the short term and the future 10 years, as they adopted a more active investment strategy, according to the survey. Two out of three Asia-Pacific respondents expressed their confidence in their financial situations in the coming 12 months. Overall, 62 percent of all investors are positive on their home market's 10-year outlook, while only 51 percent are positive on the next 12 months market outlook. Their views on the global market are the same.

Investors are overall most worried about trade, politics, healthcare costs, cybersecurity, and tax increases. The most worrying issue for US investors is the political environment, but this is the least worrisome for Asia-Pacific investors, which indicates the stability of government policies and political parties in the Asia Pacific region.

The highest anxiety among Asia Pacific investors centers around global risks, while they are still relatively calmer than investors in America, Europe, the Middle East, and Africa.

〈Asian Post, January 31, 2019〉The property market recovered earlier than expected, with an increase of more than 80 percent in transactions over the weekend in the secondary market, while some developers have sold out their projects quickly.

Hong Kong's 10 major housing estates recorded 43 deals over the weekend, 86 percent more than the previous weekend, data from four major real-estate agencies showed - Ricacorp Properties, Centaline Property Agency, Midland Realty and Hong Kong Property.

And transaction prices have increased. A three-bedroom unit at Kingswood Villas in Tin Shui Wai, with a sellable area of 551 square feet, was traded at HK$5.68 million or HK$10,309 per square foot, which is 20 percent more than the deal for a similar flat in November.

A 735-sellable-square-foot flat at Caribbean Coast in Tung Chung changed hands for HK$8.15 million, or HK$11,088 per sqft the highest level among the similar units.

Another same-sized unit in the housing estate fetched HK$7.35 million earlier this month, reflecting an increase of HK$800,000 in the selling price.

However, some price-cutting deals were reported as well. A vendor cut the price by HK$1.92 million for a two-bedroom unit at Mei Foo Sun Chuen. The 679-sellable-square-foot flat was finally traded for HK$9.38 million, or HK$13,814 per sqft.

The primary market also saw improvement. Downtown 38 in To Kwa Wan, developed by Sun Hung Kai Properties (0016) and the Urban Renewal Authority, sold a batch of 66 units in 90 minutes last Saturday.

〈China Daily, January 31, 2019〉The first commercial plot to be tendered on the runway of Hong Kong's old airport at Kai Tak was withdrawn from sale yesterday, after the Lands Department announced it had rejected all nine bids received for the site.

That all tenders failed tomeet government requirements suggests developers are still cautious about the Hong Kong commercial market, despite analysts' predictions that home prices in the city would rise this year.

"The tendered premiums did not meet the government's reserve price for the site," the Lands Department said.

"Developers are very cautious amid a gloomy economic outlook. The trade war is still the biggest concern and has kept them from bidding aggressively," said Derek Chan, head of research at Ricacorp Properties. "The failed bid will sour the market sentiment further."

Earlier this month, Sun Hung Kai Properties paid HK$11.26 billion, or HK$17,360 per square foot for a plot of residential land on the same site.

"This will set a new benchmark," said Vincent Cheung, a veteran surveyor. "If the government uses Sun Hung Kai's winning price as reference, and if it does not lower the expected price, the tender will fail once more. Under current circumstances, it may take a very long time for a hotel in Kai Tak to be profitable."

The plot is valued at between HK$7.96 billion and HK$9.49 billion, or between HK$13,000 and HK$15,500 per square foot, according to global real estate consultants Knight Frank and Colliers International.