Complete Property Market Updates of Singapore

June 21, 2008

HK home owners brace for interest rate hikes

Filed under: Financing,General,Hong Kong — Propertymarketupdates @ 6:17 pm

HONG KONG home owners are expecting interest rate hikes as banks in the city attempt to bolster earnings, ending a long run of cheap mortgage costs. But some market factors may militate against such a move.

Banks have been sounding the alarm bells as their margins feel the squeeze amid a succession of interest rate cuts. Last month, lenders failed to match a Hong Kong Monetary Authority (HKMA) interest rate cut, the first time since September that banks did not follow the de facto central bank.

Last week, senior bankers warned that an interest rate rise could be imminent. With competition for home financing fierce, no lender has yet to take the lead and raise interest rates.

Raymond Or, chief executive of Hang Seng Bank, spoke of the pressure facing lenders regarding raising interest rates.

Other bankers have cited an unfeasibly low interest rate for bankers to turn a profit, with home owners being loaned cash at between 2.5 and 2.8 per cent with cash rebates often thrown in. The Hong Kong interbank offered rate is, meanwhile, 1.7 per cent.

Meanwhile, record-high oil prices are unlikely to lead to a further cut in Federal Reserve key rates, from which the HKMA takes its cue as Hong Kong’s currency remains pegged to the greenback.

Banks have also not seen a huge uptake in mortgage financing as external factors bite into potential home owners’ appetites.

Despite low interest rates, property sales in the mass market have remained sluggish. This is partly because of a wait-and-see attitude buyers are taking amid global economic uncertainty.

According to the latest Land Registry figures, the total number of sale and purchase agreements in April was down 0.4 per cent from the previous month to 10,945. The total consideration for these deals was down 23.9 per cent from March, to HK$33.5 billion (S$5.8 billion).

Chief economist at Bank of East Asia Paul Tang, however, remains optimistic that home owners will not face a massive uptick in their financing costs in the next 12 months.

‘I think it really depends on the United States interest rate movements – and that’s a big uncertainty,’ he said.

‘There’s still a lot of room for it (interest rates) to go up and right now it’s at a very low level. The US economy will take one to two years before it recovers to a more healthy stage. Interest rates (in Hong Kong) should remain low despite inflationary pressure,’ he explained.

Developers likewise sounded a more bullish note, perhaps unsurprisingly as jitters about mortgage rate increases took a toll on their stocks last week.

On Thursday, shares in the main developers took a tumble as speculation that Hong Kong lenders would no longer slash interest rates began to spread.

Shares in Sun Hung Kai Properties, Cheung Kong (Holdings) and Hang Lung Properties all fell slightly on the rumours.

Tycoon Li Ka-shing, chairman of Cheung Kong (Holdings), said last week he expects the property market to remain steady amid low interest rates and relatively tight supply in the market.

Source  : Business Times – 26 May 2008

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June 11, 2008

Kwok family woes now tabloid fodder

Filed under: Developer News,General,Hong Kong — Propertymarketupdates @ 4:03 am

A FAMILY feud at Sun Hung Kai Properties, one of Hong Kong’s biggest developers, is shaping up to become a feisty legal battle for boardroom control.

The woes of the Kwok family have taken a dramatic twist after the chairman of Sun Hung Kai Properties, who took leave of absence in February, filed a writ against the company and his brothers.

At the time, Sun Hung Kai Properties said Walter Kwok was taking leave of absence due to ongoing personal and business overseas trips and planned to resume his duties.

Eager to return, Walter Kwok Ping-sheung has secured an injunction preventing a board vote that would see him ousted altogether, challenging an attempt by his two brothers to gain control of the company.

It is believed that cracks first began showing in the family when a friendship between Mr Kwok and a woman became the source of discontent in the family ranks over her role in the company and the advice she was giving the elder sibling.

In the writ, Mr Kwok disputes claims by his brothers that he is medically unfit to return to the helm of the company. He also listed a number of disagreements over company management. The executive claims that measures he took to boost corporate governance at the company led to discord.

The elder Kwok detailed an agreement between himself, his mother and his siblings prior to his leave of absence which outlined the process by which he would resume his role at the company.

He claims that an attempt by his brothers to permanently remove him is contrary to this agreement. As part of the deal, he was expected to produce two medical reports showing he was fit to return to work.

The ongoing saga and the prospect of the personal lives of the Kwok family being aired in public have put an otherwise modest family on the front page of every tabloid in the city. The family is well known for its conservative public presence and values, as well as its good standing in the community.

The family manages to stay relatively low key in a city where tycoons are treated like movie stars.

Walter Kwok took over as Sun Hung Kai group chairman in November 1990 following the death of his father, Kwok Tak-seng.

Today, the Kwok brothers are third on Forbes’ list of the richest people in Greater China, with an estimated net worth of US$14 billion.

Walter Kwok remains an executive director on a number of other boards of listed companies, as well as a standing committee member of the National Committee of the Chinese People’s Political Consultative Conference.

However the incident has become fodder for the press, withboth sides speaking publicly about their actions. During the weekend, the press followed family members to a number of engagements in which they spoke of acting for the good of the company.

The English-language Standard quoted rival sibling Thomas Kwok as saying that the decision to attempt to oust Walter Kwok was beneficial to both the company and its shareholders.

He dubbed it a ‘painful decision to make’.

The newspaper cited sources as saying that the brothers disagreed with a number of their sibling’s management decisions, some of which were made without consulting them.

It had previously been reported that the brothers were unhappy that although the daily operations are mainly overseen by the younger siblings, Walter Kwok had been taking an aggressive stance on business matters recently.

The female friend of Walter Kwok had moreover never been employed by the company, but started to show ambitions in certain parts of Sun Hung Kai’s business.

According to sources, this involved a desire to be put in charge of the company’s China operations.

The tycoon was reportedly one of several billionaires kidnapped by notorious gangster Cheung Tze-keung, otherwise known as ‘Big Spender’, in 1997. These reports have never been confirmed by the family.

Source : Business Times – 20 May 2008

May 9, 2008

HK sales fall with fewer luxury apartment deals

Filed under: General,Hong Kong — Propertymarketupdates @ 2:59 am

Hong Kong’s home sales fell the most by value in 18 months in April as the market for higher- priced apartments cooled, according to government data.


Cooler market: Home sales revenue declined 30% from a year earlier to HK$27.6b last month, after gaining 49% in March – the biggest drop since October 2006

Revenue declined 30 per cent from a year earlier to HK$27.6 billion (S$4.8 billion) last month, after gaining 49 per cent in March, the Land Registry said yesterday on its website. The drop was the most since October 2006. April sales fell 26 per cent from March.

‘High-end properties have cooled and dragged transactions down dramatically,’ Kevin Lai, senior economist at Daiwa Institute of Research here. ‘Speculators are more cautious because of the financial turmoil. Plus, luxury prices have gone up quite a lot in the past year or two, so a correction isn’t unusual.’

The price of dwelling units with a floor area of at least 1,000 square feet (one definition of luxury housing in Hong Kong) gained 26 per cent in the 12 months through February, according to real estate agency Colliers International.

The mass market, of smaller apartments, is still ‘pretty healthy and well supported’ because of low interest rates and rising family incomes, driven by Hong Kong’s improved job market, Mr Lai said in a phone interview yesterday.

The number of units that changed hands in April was 9,047, down 5.1 per cent from a year earlier and 5.3 per cent from March, the statement said. — Bloomberg

Source : Business Times – 6 May 2008

December 31, 2007

Going abroad to shop

Filed under: Hong Kong,Japan,Market Watch,Singapore Economy — Propertymarketupdates @ 11:42 pm

If you’ve been priced out of the Singapore property market, don’t despair. You can find good value for money abroad, even in upscale markets like Japan. Jessica Cheam

THERE is no denying that the boom in Singapore’s property market, which has risen to frantic heights during the past six months, is taking a bit of a breather.

But for those whose appetite for properties has been whetted in the recent months, don’t fret, there is a veritable ocean of real estate out there and plenty that can give you a bigger bang for your buck.

Global statistics show that Asia-Pacific markets are leading the boom in housing prices worldwide. In contrast, prices in Europe are growing at only a moderate pace.

Singapore, Hong Kong and Japan

ALL three of these markets have enjoyed strong surges in property prices.

Online research house Global Property Guide said home prices in Singapore shot up 21.05 per cent for the 12 months to June, up from 6.08 per cent in the previous year.

In Hong Kong, they rose 8.78 per cent during the same period, after suffering a decline of 0.65 per cent in the year before.

Land prices in Japan’s six major cities increased by 7.75 per cent over the period.

In fact, prices have hit record highs in all three markets.

Condos have been sold in Singapore for $5,000 per sq ft (psf) while Tokyo units average around $3,400 psf. Hong Kong’s luxury apartments average $3,100 psf, although those at the very top of the range have fetched more than $7,800 psf.

To track down investment homes that are easier on the pocket, investors have been flocking to emerging markets such as Malaysia, Thailand and Vietnam.

Opportunities even in developed markets

EMERGING markets might seem like an obvious choice for home-seekers, but even in developed markets, there are investment opportunities.

As Mr Tim Murphy, the managing director of Hong Kong-based investment firm Intellectual Property, puts it: “Some markets will give you growth because they are emerging. Others will give you growth because of where they are in their property cycles.”

He points to Japan, generally considered a mature market with not much price growth. Recently, prices have swelled, especially outside Tokyo. On the outskirts of the city, it is possible to find good properties that are likely to appreciate in value.

Australia, in contrast, has enjoyed several years of solid appreciation.

Homes in Melbourne and Sydney have become very expensive and rental yields have dropped.

The market in Perth in Western Australia has been even more frenetic, with prices climbing 30 per cent on average over the past 12 months.

Thus, even though analysts expect further price increases, growth might moderate, with less potential for upside.

For foreigners, who are allowed to buy only new developments from developers, the relatively high interest rates and rising Australian dollar will make Australian homes more costly.

“Whichever market you’re interested in, look for cheap interest rates and high rental yields,” advised Mr Murphy, whose company has transacted properties worth more than US$85 million (S$123.5 million).

Tips for overseas homebuyers

IF YOU are keen to invest in foreign properties, note the following points:

– Do your research, understand the market and do not jump on the bandwagon to follow current trends as these might change.

– Remember these key words when researching a market: legals, borrowing, liquidity, yields, tax and currency.

– Buy homes from established developers with good track records.

– Look for properties that the local people will want to rent as these will offer higher rental yields.

– Always look through all legal documents and hire a trustworthy lawyer.

– Be an early bird. Invest early if you can, to take advantage of launch prices, which are typically lower.

Source : Sunday Times – 18 Nov 2007

November 30, 2007

Average Grade A office rents here on par with Hong Kong

Filed under: Commercial,Hong Kong,Rental News — Propertymarketupdates @ 9:03 pm

AVERAGE island-wide Grade A rents are currently just a shade under those of Hong Kong, but the highest rents achieved by Hong Kong Grade ‘AAA’ office buildings are still about 1.8 times higher than the top rents achieved in comparable buildings here.

A report by Savills reveals that in the CBDs of Hong Kong and Singapore, Grade A rents are now the equivalent of $9.80 and $9.70 psf respectively.

However, top rents in Hong Kong’s Grade ‘AAA’ buildings like the International Financial Centre, Chater House and AIG Tower are closer to $32 psf while those in Singapore’s Republic Plaza, One Raffles Quay and 6 Battery Road are at about $17.50 psf.

Rising business costs have come under scrutiny recently and Savills Hong Kong senior director (research and consultancy) Simon Smith does say that there is the perception that Hong Kong and Singapore are in direct competition to attract businesses for this segment of the property market. However, he added: ‘I have not come across any financial institutions that have chosen to relocate from Singapore to Hong Kong yet.’

Indeed, Mr Smith believes that the financial institutions that are so important to the economies of both cities are more likely to set up offices in both cities to service different markets.

In terms of new supply of office space, Mr Smith does point out that Hong Kong will see some ‘AAA’ space become available next year in areas like West Kowloon where the 2.5 million sq ft International Commerce Centre (ICC) is set to open. The ICC is said to have attracted some major financial institutions already.

In contrast, Savills notes that the recently awarded commercial development sites including those at Marina View and Beach Road are expected to generate a combined 3 million sq ft of office space, scheduled for completion between 2010 and 2012.

But competition actually could come from more unlikely quarters.

Savills’ survey of regional office rents includes the emerging Vietnamese cities of Hanoi and Ho Chi Minh City and already average Grade A office rents in both cities have outpaced those in Shanghai and Beijing (but are still less than Tokyo, Hong Kong and Singapore).

Mr Smith believes that rising rents and 100 per cent occupancies in Hanoi and Ho Chi Minh City are largely due to the shortage of quality buildings in these cities, and hence adds: ‘There is a huge potential there for developers.’

Giving an insight into the pace of development there, he said: ‘Vietnam is much like China was in the 1990s, where companies were running their businesses out of hotel rooms. But when the market matures, rents will settle down.’

Savills believes the outlook for Singapore office sector remains positive, with rents continuing to rise, although at a slower pace for Grade A space due to ‘resistance from tenants’.

‘Demand from multinational companies for offices in suburban areas and high-tech space is expected to increase, especially by those who are more conscious of their bottom-line,’ it said.

Source : Business Times – 22 Nov 2007

November 13, 2007

Hong Kong property sector set to grow up to 30% in next 12 months

Filed under: Hong Kong — Propertymarketupdates @ 2:45 pm

HONG Kong’s property market is tipped to see growth of up to 30 per cent over the next 12 months amid a flow of hot
money into the city and a favourable interest rate environment.

This week saw HSBC cut its prime lending rate by a further 25 basis points to 7 per cent, following a rate cut only
last week on the heels of one in the US. Other banks are expected to follow suit, fuelling a mortgage war among
banks in the city.

As well as cheaper financing options for home buyers, the property sector is benefiting from a flow of cash into
Hong Kong, in part due to an expectation that China will soon relax restrictions on capital inflows into the city.

This is expected to bring significant gains to Hong Kong’s stock market, which has already risen 55 per cent over
the past two months in anticipation of fresh fund flows by mainland investors.

This week, Standard & Poor’s Equity Research outlined its bullish outlook on the residential property sector,
reflecting what it sees as a return of confidence to the sector.

It cited recent record prices for luxury apartments, increased volume in residential transactions and the higher
than expected bids for government land at auctions as indicators of confidence among developers and buyers.

The research arm of S&P said it expects a rise of 20 per cent to 25 per cent in the prices of residential properties
over the next 12 months, as prices in large and small residential units remain well below 1997 prices.

But Colliers International director Ricky Poon believes property prices could increase by as much as 30 per cent.
‘The market is very different from 1997,’ he said. ‘There’s not too many people speculating.

‘Also, some people have been playing the stock market and have come out – and are investing in the property market.’

He said he had recently revised upwards projections of a 15-20 per cent rise over the next 12 months.

This would narrow the gap between the luxury sector, which has been powering ahead over the past few years, and the
mass residential sector, which had been lagging.

‘The luxury sector has been going up a lot over the past two years,’ Mr Poon said. ‘It has even gone up by 10 per
cent just in the past few weeks.

‘Now I think the market is moving to the mass residential sector – so the gap will be narrowing.’

Adding to the ‘feel good’ factor in the property sector were figures this week from the Hong Kong Monetary Authority
on the number of residential mortgage loans in negative equity – where the property is worth less than the sum
owing.

The number of these mortgages fell by about 1,200 cases to 3,500 cases in the three months to the end of September.
They had an aggregate value of HK$6 billion (S$1.1 billion).

It represents a 97 per cent drop from the peak of the negative equity phenomenon which was in June 2003, just as
Hong Kong was recovering from the Sars outbreak and an endemic slump in property values since 1997.

Source : Business Times – 10 Nov 2007

October 31, 2007

High rents drive big firms out of HK’s Central

Filed under: Hong Kong — Propertymarketupdates @ 4:27 pm

BLUECHIP tenants are retreating from Hong Kong’s central business district as rents climb beyond reach.

The latest move away from the high-rent Central area is by lender DBS Bank (Hong Kong), which has just leased more than 220,000 square feet of office space in the Quarry Bay district, a 30-minute subway ride from Central.

The bank signed a 10-year lease for 11 floors at One Island East, a Grade A office block developed by Swire Properties. Relocation from DBS’s existing Central and Wanchai locations will be in phases, to be completed by the end of 2009.

Investment bank Morgan Stanley recently turned heads with its decision to relocate from Exchange Square in Central to the International Commerce Centre across the harbour in Kowloon.

It is leasing 10 floors for its Asia-Pacific headquarters, double the existing 150,000 sq ft it occupies in Central.

The decisions to move come as Central continues to command exorbitant rents, due to hot demand and tight supply. Rents in the area have gone up by more than four times since 2003.

The iconic International Finance Centre 2 building, which dominates the city’s skyline, is now fetching a record HK$160 (S$30) per sq ft (psf). When the building opened in 2003, rents were just HK$20 psf.

The shift to cheaper office space also reflects a demand for more space as many companies have benefited from a capital markets boom and seek to expand.

Simon Lo Wing-fai, director of research and consultancy for Colliers International, estimated that rental growth in Central will be up to 20 per cent in 2007.

But he expected the monthly figure to start falling if companies move out in search of cheaper rents.

‘Rental growth is tapering off quite substantially, especially after Morgan Stanley decided to move,’ he said. ‘Current rental growth is about one per cent a month. Next year, there might be a downwards adjustment.’

With no new supply coming online in Central, numerous building owners are preparing to renovate to expand their space and lure new tenants.

According to property firm Savills, Grade A office buildings in Central have risen for the past 15 consecutive quarters, surging 6 per cent in the second quarter of 2007.

However, new supply such as One Island East in Quarry Bay and some key buildings in Kowloon will continue to put pressure on prices, Savills reckoned. The One Island East project takes up a massive 1.5 million sq ft and has 70 storeys.

New developments in Kowloon, such as One Kowloon and Enterprise Square, are beginning to attract a critical mass of tenants. Both have hit an occupancy level of 70 per cent.

Meanwhile, other financial institutions are moving to the periphery of Central. China Construction Bank, for example, has taken up around 17,000 sq ft of Two Pacific Place in the nearby Admiralty district, according to Savills.

Sun Hung Kai Securities has likewise leased space in Admiralty Grade A buildings.

The overall office space vacancy rate in Hong Kong remains low, at just 5.3 per cent in July.

Source : Business Times – 22 Oct 2007

October 23, 2007

Justin Chiu: Property’s rock star

Filed under: Hong Kong — Propertymarketupdates @ 12:21 pm

Cheung Kong Holdings’ Justin Chiu talks to ARTHUR SIM about revealing his wild side in the marketing of the Hong Kong conglomerate’s property developments

MILD-MANNERED businessman by day, and the property-trade equivalent of a rock star by night, Justin Chiu has single-handedly made property launches glamorous affairs in Hong Kong, and some say in Singapore too, attracting the paparazzi frenzy usually reserved for movie stars.

For his elaborate efforts that go towards creating memorable events with each launch, Mr Chiu – an executive director of Li Ka-shing’s Hong Kong conglomerate Cheung Kong Holdings and head of its property arm – is affectionately known in Hong Kong as ‘The man with a 100 faces’.

In a recent incarnation, he dressed as an Arab sheikh to launch one Hong Kong development, simply because, ‘everyone was saying that Middle East investors were coming’. (Units went for $5,300 per square foot, by the way.)

In Singapore, he has at various times led a bevy of beauties while dressed as James Bond and a convoy of Harleys in Easy Rider costume, all in the name of creative marketing.

Amazingly, Mr Chiu, 57, has only been in marketing and property development for 10 years with Cheung Kong. Before this, there was a four-year stint at Sino Land, and 15 years at Hang Lung Development Co. At these jobs, he was responsible for retail and commercial leasing as well as property management.

So when did he discover his wild side?

Mr Chiu joined Cheung Kong in 1997 and started doing sales and marketing in 2000. It was not the best of times for the property market and he knew he had to create buzz for an upcoming launch or there would be the real possibility that no one would come.

‘I thought what we needed at the time was a spokesperson, or a movie star … a sort of icon,’ he recalls.

Celebrity endorsements are not a new concept, especially in Hong Kong. One only has to think of the many products that Jackie Chan has put his name to.

Mr Chiu, on the other hand, decided to create his own spokesman, and initially he had intended the position for his manager of the sales team. ‘We were launching a seafront development at the time so I told my manager to come dressed as a naval commander.’ Understandably, his manager refused.

Leading by example

So like any good boss, he decided to lead by example, and get into character himself. ‘Anything is better than seeing another old man in tie,’ he says.

The response, from the press at least, was unprecedented. And Mr Chiu’s launch event occupied the covers of the property pages in the local media. A star was born.

‘What we did was a great way of soft selling. People don’t read ads but they do read the news. We also saved money on advertising, and we didn’t need to pay for movie stars.’

Mr Chiu’s instincts about marketing a product were right, a feat made more impressive by the fact that his educational background is founded on staid degrees in sociology and economics. But as he understands: ‘What you study at university does not always relate to what you do for living.’

So far this year, Cheung Kong has earned up to HK$14.6 billion (S$2.8 billion) from the sale of 4,200 residential units. The turnover was more than double that for the same period last year and has already achieved the company’s full-year sales target.

Selling property these days is a lot easier.

And Mr Chiu also does not really need to get dressed up any more, but he still does. ‘The Hong Kong people have come to expect my ’special image’ and reporters even want to know what I will be wearing next,’ he says.

Now, Mr Chiu gets recognised in the streets. And overseas too.

He recalls how once, at the Changi International Airport, his Singapore staff was led to him by a small commotion from tourists shouting: ‘Hey it’s the Cheung Kong guy!’

Another time in a Chinese restaurant in New York, the waiter recognised him from the Chinese tabloids and Mr Chiu was seated immediately.

The going has not always been easy though, even for Easy Rider.

Cheung Kong’s residential forays into the Singapore market began back in 1996 with acquisition by Li Ka-shing of a site in Thomson Road for $130 million. A year later, Cheung Kong bought an East Coast site for the then astronomical sum of about $680 million, 30 per cent higher than the next highest bid. The two purchases came just before the Asian financial crisis. The developments came under considerable media scrutiny, not least because everyone wanted to know how Li Ka-shing, Asia’s richest and shrewdest businessman, would get out of this one.

The task of moving units in a stagnant market fell on Justin Chiu and Cheung Kong’s Singapore property arm, Property Enterprises Development. Mr Chiu got creative.

For starters, he devised an incentive scheme for the 390-unit Thomson project – Thomson 800 – something that had not been done before.

Under its Guaranteed Appreciation Plan, Cheung Kong was prepared to offer buyers a 10 per cent capital appreciation in about five years for units at Thomson 800 as well as protecting buyers against price falls of up to 10 per cent. If the valuation increased by less than 10 per cent above the purchase price, the developer would pay buyers the difference.

In essence, it was a kind of discount but unlike other developers who were offering outright money-off, this sounded more like a value-add. Clever.

The Asian financial crisis and its repercussions sent all property markets in the region into a tailspin. Only about half the units of Thomson 800 were sold, with City Developments finally buying the remaining units in 1999.

For the East Coast development – Costa del Sol – the situation was more dire because there were 906 units to move. Even the help of the bikers on Harley Davidsons could not stir the market, and only a third of the development was sold.

Amazingly, Cheung Kong went on to buy another site, this time in Cairnhill for $370 million, and again the property market dived with the aftermath of the terrorist attacks in the US on 11 September 2001.

The 248-unit Cairnhill Crest was launched in 2004 and Mr Chiu remembers how selling 40 units – after putting on an extravagant launch party with him dressed as James Bond – was quite an achievement at the time.

But even then, Mr Chiu did something that was not often done here, and that was to go direct to his buyers by flying them in from Hong Kong and China.

Following his own advice

Today, properties do frequently sell out within weeks. But then, who can predict property cycles? And how important are they? Mr Chiu says: ‘Whether the market is good or bad, developers must buy land.’

Fortunately, he heeded his own advice.

In 2001, Cheung Kong, together with joint venture partners Keppel Land and Hong Kong Land clinched a site in Singapore’s New Downtown at Marina Bay for $462 million. Many sniggered behind their backs. ‘At the time, everybody was saying that it was too risky,’ remembers Mr Chiu.

But we all know what happened. The economy turned and the office building, One Raffles Quay (ORQ), went on to become one of the most talked about developments of the time, with all the big financial institutions clamouring to get in.

In July this year, Cheung Kong and Keppel Land each sold one-third stakes in ORQ to their sponsored real estate investment trusts (Reit), Suntec Reit and K-Reit, for $941.5 million each. Incidentally, Mr Chiu is also chairman of ARA Asset Management, which manages Suntec Reit.

In 2005, the same consortium won a tender for a commercial mega-site at Marina Bay to become major stakeholders in Singapore’s new growth story.

Both ORQ and the newly dubbed Marina Bay Financial Centre have gone on to register ‘over 100 per cent profit margin’ for Cheung Kong. Indeed, as Mr Chiu reveals, ‘all our projects in Singapore made money’, although profit margins for the residential developments were considerably slimmer. For Cairnhill Crest, this was about 10-12 per cent.

On a philosophical note, Mr Chiu says: ‘You cannot be winning all the time.’

But because Cheung Kong has very, very deep pockets, it can afford to hold off selling units, such as those at Costa del Sol and Cairnhill Crest, until the property cycle swings up again. The last block of Costa del Sol was sold in August for about $200 million, or $820 psf.

But this is only slightly higher than the launch price in 2000 and you do not need to be an expert to know that property prices are still rising.

Perhaps this is the real lesson here. All developers know that having the resources to hold on to property until prices pick up is the key to survival. Only a certain kind of developer believes that making a killing isn’t everything – even when dressed up as 007.

Source : Business Times – 13 Oct 2007

August 9, 2007

Hong Kong property market gets hotter

Filed under: Hong Kong — Propertymarketupdates @ 5:20 pm

Properties in HK$50m-HK$100m range particularly popular now

LUXURY rents in Hong Kong are soaring to new highs, with monthly payments hitting as much as HK$500,000 (S$97,000), as demand from financial services professionals shows no sign of abating.

Prime residential sites on the Peak and the south side of the island are being leased for up to HK$500,000 a month, with the luxury sector already up around 10 per cent in the first six months of the year.

According to property experts, there is still more room for growth this year as supply remains tight and professionals in the financial services industry with very large budgets continue to flood into the city.

As Ricky Poon, a director at Colliers International, explains, it used to be that the top-priced properties were standalone houses on individual plots.

However, today, houses that are part of a larger complex of properties are able to hit the HK$500,000 range. ‘It’s lack of supply,’ Mr Poon says. ‘If you want something very grand and super luxurious – and a house – there’s no supply at all.’

Developers have been fast to buy up land on the Peak over the years and they place up to five or six individual houses on the plot, rather than just one mega structure. ‘They can call this a single number plot, but it still has five houses on the lot … but these are still very expensive houses,’ adds Mr Poon.

The property firm is forecasting a rise in rents of 10 to 15 per cent this year as a whole. There’s also a lot of expatriates coming to Hong Kong, ’so we are seeing a lot more demand’, he stresses.

Summer is traditionally the busiest time for luxury leasing in Hong Kong as families move to the city in time for the new school year starting in September.

The issue of school places, however, still remains a thorny one for policy-makers, as international supply is tight and families are forced to put their children on waiting lists.

There have also been reports of million-dollar dividends being paid to secure a place as Hong Kong struggles with its supply of international school places. The options for families are either to enrol their child in a private school, or secure a place at the English Schools Foundation, which is subsidised by the government.

In the past year in particular, as more expatriates come to the city, places have become scant.

Office rents in the city are likewise still on a roll: the iconic International Finance Centre 2, which started leasing at the height of Sars in 2003 at just HK$25-35 per square foot, is now fetching rents of more than HK$100 per square foot.

Luxury sales are still rising, with properties in the HK$50 million to HK$100 million range particularly popular at the moment. ‘We’re still seeing a lot of buyers out there who like a good location and get these properties for their own use,’ Mr Poon explains.

In terms of the mass residential sector, the market is slowly improving but still remains up to 30 per cent off the prices in 1997, when the property sector as a whole last saw its major high.

According to the Land Registry of Hong Kong, property transactions in July were valued at a total of HK$38 billion, up 118.8 per cent from a year earlier but still down 3.4 per cent from June.

The number of transactions was up 67 per cent from a year earlier at 11,121, but down 7.2 per cent on June’s figure. Of the 11,121 sale and purchase agreements in July, 9,188 were for residential units – a drop of 4.8 per cent compared with June, but a rise of 70.2 per cent over the past 12 months.

Source : Business Times – 4 Aug 2007

July 31, 2007

HK: Housing and office rents pushed up by limited supply

Filed under: Hong Kong — Propertymarketupdates @ 7:03 pm

By Vince Chong, Hong Kong Correspondent

IT’S a common refrain from property agents these days, but one that irks flat-hunter Shen Man Yan.

‘Better view that apartment soon or risk losing it to someone else,’ they would advise Ms Shen, a 31-year-old lawyer who is looking for a flat in Happy Valley, a prime district for professionals and expatriates.

‘I don’t know if that’s a marketing ploy, or if the market is really that hot, but I hate it when I hear that,’ she said.

Analysts say it is a combination of both factors, with housing rents for professionals and expatriates here now among the priciest, if not the priciest, in the world.

Add that to similar double-digit rental increases over the past year for office space – bolstered by the promise of more mainland investment funds – and the city’s property industry looks pretty rosy.

A recent report by human-resource specialist ECA International showed that the cost of renting an expatriate apartment in Hong Kong is the world’s highest, at an average of US$8,592 (S$13,000) a month.

The figure was 17 per cent higher than for Tokyo, which ranked second, and 150 per cent over that in 15th-placed Singapore.

According to Mr Lee Quane, ECA general manager in Hong Kong, apartment rents in executive districts such as the Mid-levels and Happy Valley have jumped 25 per cent over the past two years.

The main reason for the spike is a limited supply of homes in the top districts.

A similar situation exists in the office space market, where a 17-year-low vacancy rate is pushing up prices in the prime Central district on Hong Kong Island.

US giant Morgan Stanley, for one, is said to be considering moving some operations from its Central address – traditionally de rigueur for the financial services trade – to less expensive Kowloon on the other side of Victoria Harbour.

Rents in the Kowloon hub of Tsim Sha Tsui average about HK$30 (S$5.80) per sq ft (psf) to HK$40 psf – less than half of the HK$90-HK$100 psf in Central.

For now, such increases in housing and office rents are hardly denting Hong Kong’s ability to attract investors. The city’s gross domestic product is expected to grow by 5.5 per cent this year.

One reason, noted Ms Karen Choi, research head of property firm Vigers, is that the average cost, while high, remains about 10 per cent off the peak in 1997 before the economy was ravaged by the Asian financial crisis and 2003 Sars outbreak.

‘Also, prices everywhere from Singapore to Shanghai are rising too,’ she told The Straits Times.

Said Mr Quane: ‘In the future, more companies will certainly consider moving to Shanghai, where housing costs are 50 per cent lower.

‘But then, tax rates there may also run as high as 45 per cent, which could prove just as costly for firms that pay taxes for their employees.’

The next logical option, he added, would be Singapore, which shares Hong Kong’s attractive tax regime but not its physical and political intimacy with China.

‘Hong Kong remains, for now, worthwhile for the large multinationals despite high property rents,’ Mr Quane concluded.

Source: The Straits Times, 30 July 2007

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