Posted by
OffThePeak
11 yrs ago
New vs Convenient : Which holds value better?
New: Tseung Kwan O /LOHAS Park
Convenient: Taikoo Shing /Fortress Hill
We can also call this thread: "Ernie's Question".
Because it was inspired by a question on the Main property thread:
Ernie20:
======
I really wonder... Do HKers value newness over convenience? if a crash comes, who will really suffer? The Wings etc in TKO, West Kowloon or older areas like Ho Man Tin or indeed Fortress Hill ?
(Unquote)
That is a good question, which I thought deserved a thread of its own. The question will linger, and we will not have an immediate answer - so maybe a thread to refer back to, will be useful for everybody. This is it.
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Actually, the question is not so easily answered, since there are many complexities :
+ What do you mean by new?
Do you mean properties in the primary market vs secondhand? Or do you mean modern flats versus those which are decades old?
+ What do you mean by convenient?
Convenient for whom? Generally, you might think about a convenient trip to work - and so Fortress Hill is closer to Central than TKO is. But people also work in other places. And many more jobs are likely to come to the old Kai Tak area, as development plans for that area proceed. So in the future, Kai Tak jobs may be more convenient for TKO residents, than it is for Fortress Hill residents.
So I am going to simplify down to a very simple comparison : Which will Hold value better in the Months and Years to come: TS, or PC?
Where:
TS : Taikoo Shing - an old development on HK Island
PC : Park Central - a more modern complex in TKO
PI : Park Island - a ferry ride from Central
Year End comparisons:
Date== : =CCLI= : TaiKoo : ParkCnt : ParkIsl :
Efficiency: ---NA--- 87.32% : 75.17%: 76.95%:
12/30/12 :: NetSF : 13,359 : 10,024 : $8,558 :
12/30/12 : 115.78 : 11,665 : $7,535 : $6,585 :
12/23/12 : 115.18 : 11,429 : ??
01/01/12 : : 95.47 : $9,160 : ??
Change--:+21.3% :+27.3%: ?? coming later ??
I have included Park Island on Mah Wan, since it is an example of a modern property which is seen as "inconvenient" by most people. And I have show year end 12/30/12 prices expressed on both a "Gross" and "Net" basis.
Maybe "just good value for money" (in Park Island) will hold value better than either "New" (Park Central), or "Convenient" (Taikoo Shing). That is my own thesis.
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Reposted from the property thread:
On new vs. 2nd hand: a MAJOR factor in today's market favouring new is the 2nd mortage that can often be obtained through the developer.
If you're buying say a 2nd hand $15M dollar property, and need to pay 50% down, next to stamp duties, agent fees, etc, that's a a huge chunk of cash that many can't (or don't want to) lock into a single property in one go.
But with a 2nd mortage from the developer of a new property you're able to get a total of 75% or even 85% mortaged, making the property alot more affordable. (eventhough interest rates on 2nd mortages are typically 6-7%).
The way I see it, many people are attracted to this btu will never say it out loud, and it's a fantastic gimic the developers have in their pocket to command premiums over secondary market prices.
So in my eyes, as developers are starting to price their new prices at secondary market levels, the second mortage factor becomes very interesting.
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Those buyers using "funny money" from the developer may wind up regretting it in the long run.
When Agents call me about a new property, I always ask them the same question:
How does the price compare with secondhand?
The honest ones will usually tell me something like: "It 10%, 15%, or 20% more." To which I answer: "When I buy it, it is new. When I want to sell it, it will be secondhand. Why should I pay more?"
I rarely get a good answer. Occasionally I do get a good answer that has something to do with proximity to a MTR station, views, or the actual standard of the flat. Then I might ask: "Well, what's that feature worth?"
The ones that give good answers tend to be the ones that I want to deal with.
Those just repeating typical soundites, can find their clients elsewhere.
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Even a small premium for new is often hard to accept when the agents tell so many fibs during the sales process. Quite frankly, I need a good reason to accept the higher priced uncertainty of a new flat purchased from a developer over the lower priced certainty of a flat purchased in the secondary market.
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It's "funny money" when the developer offers a 25% second mortage for a price that's 25% (or more) above secodnary market prices.
When prices are at, or only slightly above secondary market prices, it could really be quite interesting.
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Only the cash strapped, or naive should/would fall for that deception.
"Act in Haste. Repent at leisure."
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We did take advantage of a 25% interest free (for 4 years IIRC) second mortgage from a developer when we purchased on property back in 2001/2002. Even though it was effectively priced in to the purchase price, it enabled us to buy a property without having to sell the only other property we owned at the time. With the benefit of hindsight, it was a very good deal for us.
Doing it when the market is high is something else alltogether.
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I don't know if people have bother to focus on the Table of figures that I provided:
Date== : =CCLI= : TaiKoo : ParkCnt : ParkIsl :
Efficiency: ---NA--- 87.32% : 75.17%: 76.95%:
12/30/12 :: NetSF : 13,359 : 10,024 : $8,558 :
12/30/12 : 115.78 : 11,665 : $7,535 : $6,585 :
To summarise:
Park Central (in TKO) is priced at 75% of Taiko Shing
- and
Park Island (on Ma Wan) is priced at 64% of TS
I see those differentials narrowing over time, and people value less highly the supposed "convenience" of TS. TS is also about 40 years old, if I am not mistaken. And the other two are a decade or less old.
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Convenient always wins in HK. Look at the prices of the beautiful Park island flats - almost like living in a Thai resort - compared to a smaller flat in the local area. People here will pay twice as much per square foot for an extra 20 minutes in bed.
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"Convenient always wins in HK"
Or perhaps:
They have now reached a price level which reflects their relative inconvenience, and they can now keep pace, or rise from here.
Remember, there was a time where people used to whine about the "inconvenience" of Properties in Tung Chung, even though it was on the TC Line. So what happened?
In 2012,
Caribbean Coast rose by about 30% while, the averge price rise in HK was about 20%.
Lloyd, I am sorry to say that many of your old rules of thumb just do not work. What happened to: "Prime Locations wiull always outperform." A major hole was blown in that one in 2012, as properties priced below $5 Million surged in value, while those over $10 or $15 Million languished, and over $25-30 Million properties were almost unsellable.
You keep saying there is "no market". That's not true. Just go visit "steamy" TKT where what was once a $2 or $3 Million property would sell in a day or two, if it was priced under $4 million.
If "convenience wins in HK", then TKT should be trading above "remote" Mid-Levels areas. By "remote", I am referring to the time in getting to a job in Central, and especially IFC-1 or IFC-2.
Convenient to what?, in other words...
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What makes a good location:
1. noise
2. pollution levels
3. views
4. transport/commuting time
5. school zones
6. local amenities
TS does better than Park Island on 5 out of 6 for many people so I would expect a signifcantly higher price (on net area psf) all other things being equal. Of course, all other things are seldom equal - TS is older and lacks some of the club facilities.
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"TS does better than Park Island on 5 out of 6"
That's debatable on several points.
On which 5 do you think it wins?
What about the quality of furnishings and living inside the actual flat?
I think PI will win most of the time on that measure.
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School networks trump everything else followed by convenience
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@ OffThePeak
Views is the only area where Park Island clearly wins for me. 1 is debatable. The rest clearly favour TS.
The points relate soley to location and go to whether an equivalent property would or should sell for more in one location or the other. The size and quality of the flat itself are different points and newer, larger flats with better layouts and ceiling heights should sell for more psf than older, smaller flats with poorer layouts and lower ceiling heights.
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I think it's to each his own. I would go for convenience. Having said that, almost all of HK is convenient anyway (except islands accessible only by ferry).
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(I think this 5-day old post fits this old thread better -
Is it answering this old question?):
New vs Convenient : Which holds value better?
New: Tseung Kwan O /LOHAS Park
Convenient: Taikoo Shing /Fortress Hill
======================================
xx
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(I think this 5-day old post fits this old thread well -
Is it answering this old question?):
New vs Convenient : Which holds value better?
New: Tseung Kwan O /LOHAS Park
Convenient: Taikoo Shing /Fortress Hill
======================================
The Pounding in TKO / What happened in the Tsueng Kwan O area?
Why did these specific estates get so hard-hit?
Changes over the past Month - in Centaline's Data
----------
04/14 : 120.12 119.35:
03/17 : 123.66 122.98:
change: -2.87% : -2.96%
Areas:
=====
HK Isl : - 1.84%
Kowln : - 5.26%
NT- E : - 1.79%
NT- W : - 1.70%
compare:
Ocean Shores : -13.54% : $ 7,779 : TKO
Laguna City-- : -12.30% : $ 6,654 : Cha Kwo Ling, nr. TKO
ParkCent/CHt : -11.13% : $ 7,712 : TKO
Whampoa Gd : - 9.39% : $11,446 : Hung Hom
Resid . Bel-Air : - 9.11% : $15,177 : HK Isl.
Caribbean Cs. : -10.04% : $ 5,795 : NT-W, Tung Chung ... ..
http://img820.imageshack.us/img820/2128/parkch.png
Historically, Park Central was a very big gainer
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Late 2008 / 2013-H : $3,500 - $8,700 : +149%
Early 2012/ 2013-H : $5,900 - $8,700 : + 47%
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Here's one bit of recent news : A counterpoint to the Wings hype, perhaps?
Wheelock pays HK$2.5b for Tseung Kwan O site
Wheelock Properties yesterday outbid eight developers to win a residential site in Tseung Kwan O for HK$2.45 billion for what is to be its third development in the district.
The developer also sold its new office tower in Kowloon Bay to Manulife (International) for HK$4.5 billion, or HK$8,789 per square foot, in the largest single office-tower transaction in Kowloon this year.
Wheelock acquired the Tseung Kwan O site for HK$4,301 per square foot, in line with market expectations.
Alvin Lam, a director at Midland Surveyors, said: "The price, in line with market expectations, reflects developers still have confidence in the market outlook."
Wheelock chairman Stewart Leung Chi-kin said the company would spend HK$5.5 billion to HK$5.8 billion to develop the project.
"The project will be released for sale as early as within 2-1/2 years. The prices will be fixed at more than HK$10,000 per square foot," Leung said.
"We are interested in the site as it is one of the last few available in Tseung Kwan O."
===
/more: http://www.scmp.com/business/companies/article/1211823/wheelock-pays-hk25b-tseung-kwan-o-site
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BETTER EXPLANATION? - This may be it :
With the big gains of recent years:
xx
...owners may now be taking profits. That's rational enough.
But upon further reflection, I have a new theory: Big Supply is Coming, especially in LOHAS Park, but not only there, as the Wheelock development (see above) demonstrates.
There was a time when New Projects in your area would LIFT prices.
Here's how it worked: the developers would price the new project at 20-30% above secondhand. Then they would open a beautiful showflat, and market the project hard. If the high prices for the new project "stuck", as they usually did in 2009-2012, then the new development would lift prices of nearby secondhand projects.
But a NEW dynamic is now at work.
A large number of projects under development in an area will now tend to LOWER prices - as classical exonomics would prediction: If Supply swamps Demand, it lowers prices. Developers will now have to launch their new projects at less than a 15-20% premium to secondhand.
Now, as the new project comes out the more competitive prices may FORCE secondhand prices lower, due to the fact that people would rather buy a new flat when the price is competitive.
Just saying...
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UPDATE : No Clear answers
Date== : =CCLI= : TaiKoo : ParkCnt : ParkIsl : PkAv/CP : CaribCst
Efficiency: ---NA--- 87.32% : 75.17%: 76.95%: 74.31% : 74.58% :
01/01/12 : 095.47 : $9,160 : $6,139 : $5,457 : 10,399 : $4,631 :
12/30/12 :: NetSF : 13,359 : 10,024 : $8,558 : 15,020 : $8,116 :
12/30/12 : 115.78 : 11,665 : $7,535 : $6,585 : 11,161 : $6,053 :
12 mo chg : +21.3% : +27.3% : +22.7% : +20.7% : + 7.33% : +30.7% :
04/14/13 : 120.12 : 11,936 : $7,713 : $6,578 : 12,198 : $5,795 :
16 mo chg : +25.8% : +30.3% : +25.6% : +20.5% : +17.3% : +25.1% :
from 1/13 : +3.75% : +2.32% : +2.36% : - 0.11% : +9.29% : - 4.36% :
==========
Over the 15 1/2 month period, "Convenience" won,
with Taikoo Shing, outperforming "newer" TKO.
But not on the West Kowloon side,
where less convenient CC outperformed PkAve by a large amount.
However, CC fell by more than the other Estates during 2013 so far.
I say: "No clear answer" here to the original question.
But maybe the "convenient" location (near XRL) and
modernity of the Park Avenue, will allow it to outperform as we approach
the completion of the XRL in 2-3 years time.
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