Posted by
OffThePeak
13 yrs ago
THIS ELECTION is important, and it could signal a change in HK's "High price policy." Of course, it will take time, months or years, before we know what Mr Leung's real policies will be. But he has shown a willingness to talk about managing HK's property market in a different way.
I know his policies will be discussed on other threads here. But I thought it would be useful for the historical record on AX to collect opinions and comments on his policies. That way, when we look back in a few months or years, we will be able to easily see how perceptions changed.
I will kick this off with some comments from the English language press:
EXCERPTS from newspaper articles:
(SCMP):
"It would be nice to see the Tycoons dislike of Leung... to be well-grounded."
"They fear him because , as a surveyor with 35 years experience in the property sector, he knows to well how they have manipulated it in connivance with weak-minded or ill-informed officials. A fundamental, out-in-the-open reappraisal of land and housing policy, with input from the public as well as experts, would be well-received."
- Philip Bowring
Leung listed five top priorities for his administration:
Tackling the uneven distribution of income, inflation, housing, medical services, and education.
- Page 1 story, SCMP
(WSJ):
"Leung's plan to build more low-income housing and address the wealth gap likely won him support from the public, while the city's tycoons remained highly skeptical of him for such populist rhetoric.
- Page 1, WSJ: Beijing Ally wins vote in Hong Kong
"While Mr Leung is courteous in person, he has an authoritarian streak that worries many in Hong Kong... But the real reason Hong Kong's elite mistrust Mr Leung is land policy... (in CH Tung's time as CEO) Mr Leung's plan of anti-speculation policies and the building of 85,000 units of public housing per year coincided with the Asian Financial Crisis and ended up making the market crash even worse... He has written several articles on the need to adjust government land policy and increase public spending on housing."
- Editorial, WSJ: Hong Kong's New Boss
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Donald Tsang, the outgoing Chief Executive of HK let slip in a recent policy address that there are 250,000 vacant flats in the SAR.
Comparing this figure with previous estimates, it seems that this number has grown quickly, faster than new properties have been released into the HK market. One could come to the conclusion that mainland Chinese are buying properties faster than HK developers can build them. So when 13,000- 16,000 new flats are launched each year, mainlanders buy more than that.
Mostly, they are vacant, sitting a waiting for their owners to visit. Perhaps giving a home to empty shopping bags, rather to HK people. No wonder rents are rising, and HK property prices have soared too.
Mr CY Leung, the new CEO, has spoken of the idea of making some new properties only open for purchase by HK residents. The property developers would not like that, but it might help to ease the housing shortage.
Let's see if that happens.
Another idea would be to tax vacant apartments in a different way from how they are taxed now. Right now, people pay an income tax on rents received. Perhaps vacant flats could be taxed as if they were rented. This would discourage mainlanders from leaving them vacant, and thereby increase the supply of flats in the market.
Comments please ?
====
(Temp):
(Comment from SCMP: MY TAKE, Alex Lo, pg. 2):
.
RE: Democracy is not a panacea
.
IHT article said Street Protests is "one of the few ways that the people can be heard."
.
"Interestingly, Thomas Friedman, the famous columnist, was posting, on the opposite page, a related question by quoting a former Security analyst:
'Why are we seeing so many popular street revolts in democracies.' "
.
Here's the problem: Friedman thinks he speaks "for the people". He does not. He is very wealthy, married to an heiress. And he is part of the group of fashionable columnists who fancy themselves as "opinion makers", thinking they can tell people what to think about the economy, and geo-political issues. Others in a similar vein would be people like Paul Krugman.
.
The public is increasingly less interested in letting these Israel-leaning liberals tell them what to think.
.
Look how Trust in media is falling, especially amongst non-Democrats:
.
x
.
But it seems that even Democrats are beginning to wake-up in the USA.
.
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On another thread here, LTSE asks:
"Tycoons who happen to take risk with their own capital and succeeded should be punished because they happen to be too successful and create too many jobs for young ppl?"
Who is saying that?
I think what some here are suggesting is ending some of the market manipulations which benefit the property tycoons, at the expense of ordinary people.
Frankly, as a property owner, I find it a bit scary that there are so many vacant flats. They could flood suddenly into the market and drive prices down rapidly. That is what we seemed to see in the second hald of 2008. In just over 20 weeks, prices fell by 30%. One of the reasons was that mainlanders turned sellers, when they reacted to weak Chinese stock prices, and also had trouble getting loans for properties that they had bought - and so turned sellers instead.
More enlightened policies may actually lend stability to the market.
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PROPERTY DEVELOPER TRICKS:
Excerpt- from article, see below:
39 Conduit Road luxury high-rise in 2009:
+ lucky floor numbers like 88, even though the building had only 46 storeys. + Henderson announced suspiciously healthy sales at astoundingly high prices. To many, the transactions looked rigged to mislead gullible buyers as to the apartments’ market worth.
...the tycoons could have a lot to answer for. The list of property-related rip-offs goes on and on:
+ Most notorious is undoubtedly the ‘square foot scam’. Here’s how it works: developers advertise an apartment as 700sq ft, yet in fact its internal area comes out at, say, 530sq ft. The missing space is your share of the stairwell, the lobby, the swimming pool and other communal space (the developers are pretty much free to include anything they like). It makes the flats sound bigger – or cheaper per square foot – than they really are. It’s a swindle
+ Land auctions are also notorious. Although developers sometimes appear to compete at land auctions, they sometimes appear not to – even teaming up halfway through the bidding.
+ Their timing can be uncanny, negotiating development rights with officials when the market is down and selling flats when the market is up, typically releasing them in small numbers or even leaving hundreds empty to squeeze maximum profit from buyers.
+ They also focus on building luxury projects aimed at Mainlanders wanting a store of wealth, while ordinary Hongkongers give up hope of affording a home...
/source: http://timeout.com.hk/feature-stories/features/48834/evil-overlords-or-lucky-devils.html
=== ===
As a former Estate Agent, CYL will be familiar with all of these. Will he be willing to stop them?
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CAUTIOUS ATTITUDE
(Not much interest in this thread yet - Perhaps it will grow over time. But I shall continue recording comments, and excerpts from News article. I do think it will make an interesting historical record.)
I liked the Interviews in today's SCMP Property Section. I expect many here will have similar views to the interviewees.
EXCERPTS:
+ Jeff Pao, 34:
... I dont think he will make the market collapse, but I also think he won't take any measure to support property prices if they begin to fall... I think prices will begin to fall as soon as 2014 once interest rates start to rise, and new housing supply increase.
+ Palanka Lik, mid-30's:
I am a mainlander working in HK and recently bought a flat... I don't expect home prices to fall because there is limited supply... and I don't think the new CEO will do anything to cause drastic change... property is the backbone of HK's economy.
+ Matt Burden, 41:
My understanding is that the new CE proposes to increase land supply in the New Territories, where most expatriates wouldn't consider living... Lots of people, like me, who are renting would consider buying if prices fell 30% or so...
A property agent at Centaline (James Au Yeung) said: "Home seekers will return to the market within weeks once they see there has been no big change in home prices."
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"So that we may move forward with "One Heart" and "One Vision" I humbly seek the support of the Members of the Election Committee and of all my fellow citizens.
Thank you!
LEUNG Chun Ying
Manifesto for the Chief Executive Election 2012
ONE HEART, ONE VISION
Wait a minute, isn't that song by Queen?
http://www.youtube.com/watch?v=-PVad_8Atoo&feature=related
"No wrong! No Right! I'm going to tell you there's no black and no white!"
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Most will be in the New Territories. Tsuen Wan, Fanling and Tung Chung may get a lot more flats so I wouldn't be in these areas. I still think owning Hong Kong-side is a no brainer. Can't see many people wanting to leave HK for more space in the NT.
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There is a reason that so much building is occurring in those areas, they are the ones growing the most. For many years Hong Kong has been expanding into new territories and there is plenty potential for profit making in this environment.
"Can't see many people wanting to leave HK for more space in the NT."
I'm not sure why you "can't see this", its a very common tale. Jobs, Schools, Family, affordability, all are causes for people to live in kowloon/NT.
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School would be the last reason to leave HK side for Kowloon - unless we are talking about DGS. Also in my 16 years in HK, I have never met anyone who has sold a small property HK side to buy a bigger one in the NT. Of course these people exists - and I probably don't get out enough - but I don't think most HK-side residents would leap at the chance - even for a flat doube the size.
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Actually, just reading CY Leung's manifesto and it seems reasonable to me. I agree with his views on maintaining the current public health system. The current administration is trying to bale out because of cost concerns. See
http://www.cyleung2012.com/media/policy/en_manifesto1_en.pdf
for a bit of light reading over the weekend.
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"I still think owning Hong Kong-side is a no brainer. Can't see many people wanting to leave HK for more space in the NT."
I dunno, Lloyd.
What doesn't get older and more rundown, will instead get more crowded.
It puzzles me that people would pay more to live in Scruffy Taikoo Shing at $10,000+ per sf, when they can buy something newer and nicer near Olympic Station, and have a 7-8 minute commute into HK Central.
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I wonder if the CYL administration will back the (expensive) monorail in the Kai Tak area, or something sensible (and cheaper) like electric buses or even tram/street cars.
Electric buses can make money, while a monorail is expected to have an annual deficit.
The main thing in favor of a monorail is if they are going to build it eventually, they should build it sooner (& cheaper) rather than later (& more expensively.)
Anyone here buying property in the Kai Tak area?
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The Standard asks: Which way now?
Victor Cheung - March 29, 2012
Contrasting responses from the residential property market greeted the election of Leung Chun-ying. Shares of developers retreated and rebounded; sellers held back; buyers held back; sellers made few compromises; and analysts diverged on the policy direction.
At some estates, deals achieved record prices shortly after the chief executive election on Sunday.
A flat at Island Resort in Siu Sai Wan changed hands at HK$11,483 per square foot - a record for the estate - according to Midland Realty. In Sceneway Garden, Lam Tim, a top-floor flat in Block 11 was sold for HK$8.8 million, or HK$9,670 psf, the highest at a leading private housing estate in Kowloon East since 1997.
. . .
A Midland poll found that 43.7 percent of homeowners or potential buyers are less willing to enter the market since the election. Of the 178 polled immediately after the result, 60.1 percent said property prices will be stable, while 79.6 percent said they will not budge from their asking price.
A surveyor by training, Leung vowed to make more affordable homes available to the middle class.
Goldman Sachs noted that Leung's more "hawkish" stance on housing policy may dampen investor sentiment slightly in the short term. Deutsche Bank said there will likely be more new homes supply in the next few years, which should help cool the market.
Shares of big developers retreated nearly 10 percent after the election but partly gained back lost value earlier this week. Leung, who had little support from top developers, branded himself as a reformer, but his aspirations for change could raise fears among the public.
/more: http://www.thestandard.com.hk/news_detail.asp?we_cat=16&art_id=121131&sid=35893528&con_type=1&d_str=20120329&fc=7
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http://www.ft.com/cms/s/0/f5055f20-628b-11e1-872e-00144feabdc0.html#axzz1rOBpBVlE
Hong Kong’s Tsang faces corruption probe
By Enid Tsui in Hong Kong
Hong Kong’s anti-corruption watchdog has launched an investigation into Donald Tsang, the territory’s chief executive, following allegations that he received inappropriate favours from local business tycoons such as overseas trips on private jets, staying on luxury yachts and leasing an apartment for below market price.
Mr Tsang said that he had never acted against the law nor breached internal rules, and that he would fully co-operate with any investigation if contacted by the Independent Commission Against Corruption.
Avery Ng, vice-chairman of the League of Social Democrats, a pro-democracy party, said: “The ICAC has informed us that they are looking into the trips and the leasing of the apartment after we lodged a complaint against Mr Tsang.” The ICAC refused to comment.
The investigation comes at a sensitive time for Hong Kong. On March 25, Mr Tsang’s successor will be elected by a group of 1,200 eligible voters. Of the two most favoured candidates, Leung Chun-ying is leading the opinion polls because he is seen to be more detached from local conglomerates than his scandal-hit rival Henry Tang.
A group of Hong Kong legislators is also agitating to impeach Mr Tsang before he steps down in June over the same allegations, although it has almost no chance of succeeding.
Reports of the chief executive’s cosy relationship with the business elite have triggered a public outcry as Hong Kong people are increasingly angered by the widening gulf between the rich and the poor as well as the lack of transparency over the way big business influences government policies.
Mr Tsang became chief executive in 2005 when his predecessor Tung Chee-hwa was forced to step down in the middle of his second term after a million people took to the street to protest against unpopular policies.
A career civil servant since the colonial era, Mr Tsang had seen his popularity plunge in recent years as the public became disillusioned by the perception of growing collusion between government and business, said Ma Ngok, professor of public administration at the Chinese University of Hong Kong.
Last week, the Oriental Daily newspaper reported that Mr Tsang and his wife recently took an overnight trip to Macao on one of three luxury yachts owned by Charles Ho, the owner of Sing Tao News Corp and Thomas Lau, a property developer. Since then, other reports claimed that the couple flew to Phuket in a private jet owned by mainland Chinese property tycoon Zhang Songqiao.
He has also agreed to rent a three-floor, 6,500 sq ft penthouse owned by Wong Cho-bau, a mainland Chinese businessman, allegedly below market rate.
Mr Tsang has admitted to taking a number of private jet and yacht trips offered by friends but said he did nothing wrong as he had paid the costs of standard commercial fares for the journeys. He also insists he is paying market rate with no concession for the penthouse, which he and his wife will move in to upon his retirement.
With less than a month to go until the vote for Hong Kong’s next leader, the field of potential chief executives has been narrowing. On Wednesday, legislator Regina Ip announced that she had failed to secure enough nominations, while Jasper Tsang, former head of Hong Kong’s largest political party, also bowed out of the race on Monday
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CYL needs to find a way to get rid of the "property give-away" in the NT, where male villages at the age of 18 are given the right to build a house.
This may have made sense once-upon-a-time when it helped to keep people in the village. Now it is simply a wealth-transfer allowing villagers to have the free right to convert farm land to residential land.
My opinion is that HK needs to hold onto some farmland. Presently HK grows only about 5% of the food it consumes.
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Be cautious, I would recommend.
The market now is not cheap, and is highly vulnerable to a correction, if rates rise. If you have a very good reason to buy, it may make sense. But in general, I think it is better to wait.
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Specific answers to questions like these are mere speculation. Nobody really knows what's going to happen in the near future. What's true in Hong Kong however is that prices go up and down. We're in the up cycle right now...
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How soon will rates rise substantially?
I do not know for certain when. Do you?
For sometime, I have believed that Hong Kong property would make an important peak between 2015-2017. That is based upon a recurrent 18 year cycle, which shows up in many property markets.
But it is possible it will peak this year, with a shadow peak in 2015-17.
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Offthepeak. I don't think we have a market any more in HK property - at least not like we used to - thanks to the special stamp duty. All past data is now irrelevant. Most people now paying down their mortgages and not trading. It's quite hard to prise a flat from someone in the secondary market. I see our financial secretary, John Tsang, is making a fool of himself again on his blog talking about a property bubble. Flats rise 5% over a fifteen year period shock (ie they are now slightly more expensive than in 1997). I don't think that qualifies as a bubble when the vast majority of owners have been paying down their mortgages for 15 years.
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LGMV,
There is a market. But it is thinly traded and characterised by wide bid-offer spreads, and much fewer people looking. It is very frustrating for sellers. And I am one of them. I have a flat to sell, and I think it is priced bang-on fair value after I cut the price in December, and the market has risen since then.
My frustration is that the idiot Estate Agents here are too busy trying to force over-priced new properties on their clients where they make 2x to 5x the commission, and they do not want to take their time trying to sell something that is not a quick an easy sell. Here's the dilemma: On line bank valuations do not take into consideration the view, they are based on a formula which looks at recent sales in the same building and then adds a few thousand dollars for each floor. A new property has been put up next door, and the building does not block my near-top-floor view. But it blocks all the flats below. So the agents simply look at the valuations in their computers and ignore the better view that is worth maybe 3-5% more, or even a greater premium to what their computers say.
In a stronger market with lots of buyers, someone would come and have a look and see the advantage. But it is a challenge in a market with few buyers, who are still hunting bargains, and looking too much at distorted "bank valuations."
There's a market, but it remains a challenge.
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OffThePeak. That's my point. If you hold property then you're only going to sell at a realistic price and HK mass market flats not that expensive when compared to standard housing in Europe and the UK. Yes, they may be smaller here but that's the situation. A standard house in Boise Idaho is going to be larger, than say, a standard apartment in NY or London. So basically no incentive to sell as if you want to get back, it's almost impossible. The special stamp duty has the speculators and the liquidity out the market. Just going to pay my flats down and then hand them on to my daughters. Will only sell at 15% back from the primary market - which is about a 50% premium to bank valuation. I think many HK flat owners think the same way.
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I think in about 12 months, the penny will have dropped that property prices aren't going to fall and that inflation is well on the up. Ed will then have to commit ritual hari-kari.
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Ed
13 yrs ago
Lloyd... you taunt me into a response... :)
I actually agree with you - to some extent - I believe asset prices will rise because Central Banks will continue to print ad nauseam because they have no other options (i.e until Bernanke and Dragqueen choke to death on their vomit).
The problem is... printing money eventually will lose it's effectiveness... and you get this effect http://arkbuilders.blogspot.com/
And then things will come apart at the seams.
How many trillions have been printed so far?
The EU is crashing into recession... Japan is fried... China is slowing... India is slowing... Brazil is slowing... the US is on life support ...
It isn't working. It won't work.
Timing is the only issue...
Doesn't mean don't buy property - I see the mega rich are buying in London and NY... perhaps they are thinking better to have physical assets rather than bonds, stocks, cash --- at least with physical assets you own something even if the value crashes?
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Printing Money will only help HK property, if it shows up in Higher Incomes, and/or High Rents. That is reasonably likely, but my no means guaranteed.
If money printing instead creates inflation in the US, and that in turn raises rates, then it might have the opposite effect. Rising interest rates could force HK property prices down.
So far, I would call it: A Standoff, with some upwards pressure coming back into the market this year.
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I don't think it is showing up as higher incomes.. Since 2010 and the printing presses have been in action, YoY incomes for most industries have not been scaling with inflation and in many cases where you look at total compensation (inclusive of bonuses) they have gone down.
Most of the money from the printing presses is going into buying up more bad government debts / poor investments to bail people out. This money has not been realized in the real world and will never trickle down. They are inflating inside of a closed market and without private enterprise/markets to make decisions that are in their best interest, it will be inflation without correlated growth to pace alongside it.
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Headline in today's SCMP:
C.Y.'s FINANCE CHIEF TO OVERSEE HOUSING
"Leung wants to send a political signal ... that the housing issue will be top priority for his administration."
Elsewhere (a Hong Kong Business magazine interview), he has said that he doesn't want to forces property prices down, but he is willing to subsidise housing to make it more affordable for those with lower incomes.
This latest move (combining two ministries) suggests that he will charge a single person with developing a Housing subsidy, and also finding the money to pay for it.
There are two main choices:
+ Raise taxes on Hongkongers to pay for new housing subsidies, or
+ Make land available at a lower cost to builders on the condition that they will they sell properties at cheaper prices to less-well-off homebuyers.
I am hoping that he opts for the second rather than the first, since higher taxes would erode one of HK's competitive advantages.
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I wrote correctly:
I don't earn a salary. My income comes from my investing activities. And Stamp Tax has been one of the largest parts of my tax bill.
I am not "talking my own book", but rather what I think is good for HK (believe it or not.)
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What I am personally hoping for is that there will be subsidies for the "sandwich class" group ie the middle class. Those who earn more than the maximum threshold to qualify for low income housing but too little to afford the more expensive properties. I would say this would be for many of the young families or those in their 20's/early 30s.
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Young couples right at home as buyers
The Standard
Tuesday, April 24, 2012
A new generation of homeowners is stepping into the property scene, a developer claims.
Sino Land (0083) made the point about younger buyers as it claimed to have sold another 200 flats at Park Summit in Tai Kok Tsui.
That would mean Sino Land has since Friday sold about 400 flats, or 90percent of the 462 units at Park Summit, at an average HK$9,761 per square foot.
The project consists mainly of one- and two- bedroom flats sized between 330 square feet and 743 sq ft. The unsold flats consist of upper-floor and specialty units.
"A lot of flats were sold to young buyers, including some newlyweds," said Victor Tin Siu-yuen, Sino Land's general manager of sales.
Eight units are expected to be offered tomorrow at an average HK$10,795 per sq ft.
As for other new projects, Soundwill Holdings (0878) reports it has sold 50 of 54 available flats at Park Haven in Causeway Bay.
"The average per-square-foot price amounted to HK$21,960," said executive director Grace Chan Wai-ling. "The units have generated HK$700 million."
Park Haven will have 190 flats sized between 500 and 1,200 sq ft. The project is set for completion by the fourth quarter of 2013.
Around 80 percent of buyers are said to be local residents, with most of the others from the mainland, Singapore and Australia.
--------------------------------------------
Apparently, it's the sandwich class buying based on this article.. which I have a hard time believing, what kind of local HKer can afford to buy a ~10k/psf HKD property in their 20s and 30s? It simply doesn't add up.. Most of them make between 10-20k HKD a month.
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Really? I didn't know HK moms and dads were doing so well. That's an interesting factor.
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Regardless, paying roughly $3.3m + stamp duty and commission for a 330sq ft flat does not sound like a reasonable solution for the sandwich class. That's over $435,000 in the initial payment for 330sq ft in the middle of TKT where its more of a 10-15min walk to MK or to Olympic and with no bus stops near by.
Doesn't seem viable for majority of the middle class, plus as a middle class, they shouldn't even be buying brand new.
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I agree, somebody has to be crazy to accept that 330sqf is a good livable space. Hong Kong has done a good job in training its people, that is to accept this "truth/fact" of life in Hong Kong.
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"My goodness. 330sq ft! Who would live in a place like that?"
From my experiences looking for a flat to rent or buy at around the 400-and-something sq ft mark on the HK side, it's not uncommon for a local family of, say, four, to live in flats of around the size I mentioned. I've been amazed about how a couple can squeeze into a tiny bedroom, with a couple of kids in a bunk in another room. Some space-saving ideas I've seen have been pretty cool :P
As for buying places, I hate to make a big generalisation, but I've noticed that a lot of locals are very diligent savers (some of my colleagues make me feel like a huge spender just from what I spend on lunch and going out). Buying a flat may not be possible for one, but doable for a married couple who has saved well all their lives.
But, yeah, ~10k/psf HKD properties does not seem to quite compute for those in the struggling or middle classes, given what's available out there for less
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SCMP - Number of new flats sinks to four-year low
Yvonne Liu
Apr 28, 2012
The number of new flats completed in the first three months fell to a four-year low, prompting warnings of further price rises.
Only 600 apartments were finished, a drop of 77.8 per cent compared with the 2,700 in the fourth quarter of last year, Transport and Housing Bureau statistics show.
Sales of new homes remain strong, with only 4,000 flats at completed projects still unsold at the end of last month, 42.8 per cent fewer than at the end of last year.
Property analysts believe the supply shortage will continue for two or three years, despite the efforts of chief executive-elect Leung Chun-ying to increase land supply and bring prices for the average Hongkonger down.
The government forecasts that the number of completed flats will increase by 25.8 per cent this year, to 11,890. But Alva To Yu-hung, head of research at DTZ, said supply was still far below the average of 25,000 completed each year in the 1990s.
"We will continue to face a shortage of supply in the short run, and if the economic performance is positive, property prices will increase steadily," he said.
Centaline's Centa-City Leading Index, which tracks average selling prices at 100 large housing estates, shows that property prices remain close to the market peak in 1997. The firm's senior associate research director, Wong Leung-sing, expects the index will exceed the market peak for 1997 in the second quarter.
This month Financial Secretary John Tsang Chun-wah warned of a property bubble and urged buyers not to dash mindlessly into the market. He said prices had risen 74 per cent since early 2009 and were 5 per cent higher than in 1997.
The government has begun to increase land supply to cool the market. Yesterday it announced it will invite bids next month to develop the HK$10 billion site of the former North Point Estate.
The increase in land supply meant the number of flats under construction increased to 4,900 in the first quarter, the most since the third quarter of 2010. The government estimates the housing supply in the next three to four years will climb to 64,000 flats, a three-year high.
"But it takes times to complete the flats, and the housing shortage will continue until the supply of private housing increases," said Eddie Hui Chi-man, a professor in the department of building and real estate at Polytechnic University.
Professor Chau Kwong-wing of the University of Hong Kong's department of real estate and construction said future land supply would rely on Leung's political skills.
"The new government should increase land supply substantially by zoning more sites for residential development," he said.
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You don't need completed flats to increase to have a negative effect on the market. Some big land sales at cheaper prices will already do the job.
It is ridiculous that the average HKG person must live like an animal in a cage and save his lunch money and make who knows what kind of sacrifices for a lifetime in order to support the tycoons getting richer all the time.
Unfortunately HKG people are so blinded by $$$ that they have lost all sense of what is important in life. They have no sense of quality of life anymore - except if you think quality of life means hanging out in malls all day cause there's no space at home....
Housing should be about quality of life - not about profit.
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There's another way - that CYL should consider.
There's an OVERSUPPLY OF INDUSTRIAL SPACE in Hong kong, and so it is much cheaper than Residential Space.
Why not loosen the laws, and allow people to live inside that space, after an inspection, and payment of an annual "upgrade tax"?
This has the advantage of immediately releasing new space, and also gives the government a new source of revenue that it can use to subsidise "new property for the sandwich class."
It would be both Wise and Popular IMHO
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Obviously, MORE SUPPLY of places to live
will reduce prices (ie bring lower Rents and lower Property Prices.)
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Have you heard of the "Georgia Guidestones"?
If you implement their Rules, then house prices would fall dramatically. But most folks reading and posting here, are not in favor of genocide, or putting restrictions on people arriving in HK for work.
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It will be very interesting to see if CYL and his colleagues will get behind the idea of a Second Metropolis in the Northwest NT.
See thread: http://hongkong.asiaxpat.com/forums/hong-kong-property/threads/146691/will-hk-get-a-second-metropolis-in-nw-nt?/
Developing that area might be a great way to hold down property prices in HK, without actively undermining the prices of existing property. If jobs are created in the new Metropolis, then people can move there and not suffer the long and expensive commutes into Central.
Perhaps CYL etc will aim to establish new industries to grow jobs in the new Metropolis. Example: Green Energy, and Environmental sciences. (There may be a strong desire to improve the air quality in the NW- NT.)
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I am almost out of property now, so your comments don't apply to me much anymore.
You ask:
"......so why does hong kong need more flats?"
I am sure many would say: HK does not need a huge number of flats. Afterall 15-20K new flats is a tiny percentage of the existing population.
Maybe what is needed is LARGER flats - ie more square feet per person. This would require more space, and provide work for developers. Certainly, many would feel is if their quality of life was better, if they had more living space.
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CYL has a strange idea.
He thinks ke can improve the "efficiency" of the HK government, by adding a new layer to the Org Chart. That rarely works.
And adding a new Deputy Chief Secretary and Deputy Financial secretary plus two new Ministries and all the associated hangers-on, will add HK$72 million in staff expenses. All those new people involved in decisions, trying to "add value" is leikly to slow things down, unless CYL himself is a very special guy, with wisdom and very efficient decision-making himself.
Here's what Prof. Dixon Sing Ming, of HKUST says: "If more bureaus are created and the division of labor is unclear, it might reduce the efficiency of government." (pg 4, Today's SCMP)
Perhaps if he is a big risk-taker with a real knack for getting the big decisions right it will work. But I have my doubts.
This seems to me to be a prelude to higher taxes - which will be needed to feed a bigger government.
Another Prof., Li Ku-wai of CUHK, thinks HK's efficiency comes back to land prices: "The administration should ensure sufficient land supply and affordable offices so that more companies and industries will be drawn to Hong Kong."
Maybe it is as simple as easing up on the restrictions on Industrial space - which remains in surplus. Make it easier to use these spaces for living and for commercial purposes and you may bring down rents. THAT would help to improve returns on business investments - making for better "efficiency" in a way that counts.
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The Timing of Joseph Lam's Paper on Removing the Peg
Yam was an adviser to Henry Tang's campaign as Chief Executive. Some think his paper was designed to put pressure on the new CE (CY Leung) to address the issue of the peg. "Leung is already embarrassed" ... by other issues, like the delays in forming his government.
Addressing the peg might be part of the larger issue of addressing what HK will do with the money accumulated in the exchange stabilisation fund. CYL has said in a recent interview that he would like to use the HK$600 Billion to "invest and build up a social safety net."
Removing the peg could hit HK property prices, if: "with the shackles removed... the HK dollar strengthens" - and the price volatility scares off mainland* property investors. A strong currency might also undermine the HK economy, making it less competitive. Also, a de-pegged currency would leave HK with control over its own interest rates, and that might mean higher rates (and pressure on property prices) when the HK economy is booming.
=== ===
*Buggle Lau Ka-fai, of Midland Realty has said:
"With the strong yuan, mainlanders feel like they are getting a 20 percent discount when they buy HK property."
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I have been betting on the depeg for probably over a year.. Unfortunately, I don't know if this bet is going to pay off. =[
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I suppose "betting on a de-peg" would mean:
+ Selling your property, and
+ Holding cash in Hong Kong dollars
I still own my most valuable property, but you could say that I have made a similar bet - I'm long HKD, having sold several properties about 2 years ago. (Yeah, I know, too early!)
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CY Leung said the peg isn't going so it isn't going. Maybe he could wiggle a revaluation against the US$.
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Mallani. I also think the 'Chinese investor' stories are overdone. Most of them buy here because it's better than the mainland, less corrupt, they are money laundering, they are ultra-rich or they want easy access to the rest of the world and a chance for their kids to get more international exposure. They won't upsticks and go. A lot of people in the press and on this site equate them with the average Mr and Mrs Wong of Shamshuipo. If the HK$ floated, then the HKMA could ramp up interest rates which could drag down the market. However, the government would have a revolution on its hands so probably not going to happen. Revaluation is possible but CY Leung probably won't want to rock the boat immediately.
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If the HKD revalues, this will adversely affect the earnings of Hong Kong companies, Hong Kong's appeal as a regional headquarters and the value of overseas investments held by Hong Kong people (as well as the factors mallani points out) - bad news all round. If it happens the best things to hold in the short term will be Hong Kong dollar deposits. After that, who knows?
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I would like for CY Leung to help ordinary people to be able to afford to buy their own box to live in. A bigger box is more desirable than the disgustingly small ones in public housing right now. Have anybody looked into the effects of living in very small quarters?
This will only happen if prices go down, or when the government builds more housing for the public that can't afford overpriced flats. I really hope CY Leung will have the political will to do this.
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Yes, sold off properties in 2011.. Holding HKD now.
Whether you call it a depeg, or a repeg, or whatever you want.. It's a necessity I think to stop the silly inflation of the HKD due to the USD link. I'm not the only one who sees it this way.
It'll impact the housing market negatively because the HKD will immediately appreciate in value, which makes foreign investment in HK not as attractive.
As mentioned in this thread as well, it permits the HKMA to allow people to save money again and not force them into the housing market with their 0% interest rates on bank deposits. Rising interest rates would force a number of people out of the housing market, as their rental yields will be killed, or people marginally paying (not many but enough to start a landslide) will be forced to sell.
It'll make buying a pain as well as mortgage rates will trend up with interest rates.. Effectively, It'll force people to live within their means..
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mallani,
Perhaps there's something I'm missing here.. A repeg/depeg would effectively increase the purchasing power of the HKD, and decrease the purchasing power of every other currency relative to the HKD. One of the major reasons we see foreign investment in HK today is due to the fact that it's unnaturally inexpensive compared to the relative strength so we would realize less of that. It's less attractive because it'd be relatively more expensive for foreign currencies to invest in Hong Kong, hence a lower demand to do so.
2) Rising interest rates would allow the people to hold their money in bank deposit savings again and have a 'safer' vehicle for their money. Right now, the inflation rate is way out of wack with the interest rate. You typically see a correlation between these values in a 'normal' environment, and we've experienced a larger decoupling of the two in HK for the past few years.. The US needed zero interest rates because they simply cant afford to raise it, HK can. It's forced many people to invest their money in asset classes that they may originally not of, and have greater exposure to things they initially know nothing about.
In terms of the repeg.. It comes down to what we're pegging to I think.. If it's the USD again, I'd say the HKD is easily 10% undervalued right now against the USD.. if it's a basket of currencies, depends on the basket I think.. But, I expect a 10-20% appreciation at the very least, and should be at parity with the RMB again.
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mallani,
1: Not necessarily sell at a discount, but sell to lock profits in and hedge against interest rate hikes. Smart ones, at least. If depeg/repeg to anything not the USD, I expect interest rates to go up. If you have enough 'smart' investors selling in this wake, its simply supply and demand after that causing a 'discount'.
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In the SCMP today, developers ask CY Leung not to flood the market with HOS and public rentals. Why is that?
I actually like the comment that the government should serve the people...
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Haha why is that? Because it will kill their profits as they will not be able to monopolize supply in Hong Kong anymore..
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I can't see HOS and public rentals affecting the market that much. Firstly, it will be years before they come through and anyone looking at these kind of properties wouldn't earn enough to buy urban property.
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One good thing about this though (if CY Leung is going to be strong/brave enough) is that ordinary Hong Kong people who don't have the capability to buy a private home in their lifetime will have the opportunity to have (buy or rent) a home of their own. That's good for society.
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Valid point. It comes down to whether or not change manifests on tangible flats or just the news. My old flat went up 25% in value on the news of an MTR station 6 years pending.. The gain after the MTR actually was built and opened was negligible compared to the news.
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Elsdon. I agree with you but only up to a point. I still think there is some money to made in these circumstances because some people (not all) think they are selling high, when actually they are not. This is because they can't envision how the place is going to be transformed. The risk for the buyer is that MTR turns out to be a damp squib - ie not as convenient as originally thought (cf frequency on Tung Chung Line and West Rail not having a station at Canton Road because of a dispute with Wharf.
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Elsdon's case is very understandable. The effect of the MTR was already priced into the value of the property when the news came out. So when the actual openning happened, there's no more upside. It's the same with other places where future MTR stations are to open, prices now already have priced in the supposed added value.
This however is not CY Leung's making.
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Of course. What I'm saying is that the market already reflects value based on news, and not on delivery.
It was in response to Loyd's statement regarding it taking years for the supply to be realized, but I am saying the moment CY Leung mentions anything along those lines, it'll be enough.
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"not as convenient as originally thought (cf frequency on Tung Chung Line)"
Interesting comment. Frequency on the Tung Chung line will increase in the future as traffic grows - that seems likely as the population in TC grows, and the Line extends
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CY Leung has nothing to do with Tseung Kwan O but prices for a new dev has gone down (compared to secondary market). What if more will be built there (over what's already scheduled to come)? Only in a few more decades, the current dump sites will be available for building...
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Punter. It's Lohas Park not Tseung Kwan O. Big difference. Check the address on Google Maps. Beaumount will be at No.8, Shek Kok Road, Tseung Kwan O, New Territories.
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So, look at the address itself. Doesn't it say TKO, NT? Lohas Park is in TKO.
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Yes, I agree my above post does look a bit silly. I should have said the property market in Lohas Park Tseung Kwan O is completely different to the parts of Tseung Kwan O which are much closer to the Tseung Kwan O MTR station.
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I live close to Fortress Hill MTR but my address says North Point. From a property investment perspective, they are a bit different.
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You must be using the MTR station as reference then, not the actual district name.
The Beaumont is just a short distance walk from existing residential buildings at Lohas Park. Cheung Kong priced Beaumont lower than older/existing properties. These older properties therefore are going to face downward price pressure.
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Punter. Yes, I agree. But I'm not really bullish on NT. There is only upside with inflation in my view. Better than renting but no gain in real terms.
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I think he just have to be thick skinned to survive. Nothing in HK laws that will invalidate his election win.
What's the alternative? Henry Tang, or the other guy making all the noise?
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Agreed that he's going to be affected by the accussations (i.e. reputation and popularity). But I also believe the accussations are not enough to stop him from taking office. No effects too on his policies, imho.
This is another reason that will spur him to "do good" for HK people.
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The HK establishment has just given him a hazing.
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What is the HK establishment? If CYL wants to ingratiate himself to the public, he will do populist actions and support populist projects. He may push down property prices in doing so.
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If he hammers property prices, where will the government get its revenue from? GST? He is basically taking on the tycoons and the civil service. He can only win with help from the PLA and most of them can be bought by the tycoons. Hope it doesn't come to that.
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He's not going to hammer the property market, on purpose. But once more government housing is built, and the prospect of more coming will have the same effect. People who can get their hands on these properties will love him...and he's going to be able to put behind him these illegal structures (in his Peak home) problem.
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Ballerz. You can't buck the market. Too much money in HK, very few people over-extended, low tax rate, on the border of the world's biggest growth stories. Look how HK has been developing. Not so long ago, Jardine House was the tallest building in HK. Cheap housing ultimately affects civil service pensions, and that will never do, will it?
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(FRom the Main property thread - for the RECORD here):
Tai Wai: "The government wants to build smaller, mass residential flats here but there is not enough profit in it for the developers given the large amount of supply anticipated in the New Territories." - LGMV
This does tend to confirm our idea on AX that the NT will get hit by massive building projects, while built-up parts of HK Island and Kowloon will see more stable supply.
Nam Cheong (1 stop past Olympic Station) got cancelled once, but SHKP wound up buying there, and it looks now like it will be one of the last areas within 3 stops of Central, where large new property projects will go up.
So maybe we see : pressure on NT property prices, while "established areas" in HK and Kowloon hold value well.
If I were CYL, I would be thinking of moving some HK Govt jobs to Tung Chung, or even TKO. Move the jobs to where the (cheap) new flats will be built.
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Ernie20 (1 day ago) said:
"Up strongly I would say Loyd, the CY effect is wearing off. Strap yourself in and wave good bye to Ed's believers on the quayside...."
Yes.
We cannot rule out a BREAKOUT and BOOM now. CYL may have trouble stopping it. Certainly the agents around me, in the Olympic area, seem to be getting busier and more excited now.
Personally, I don't think this "thrust" will go on beyond August. But I cannot rule it out.
It will be interesting to see how Imperial Cullinan does when they hand over the keys next week. Certainly, there are loads of punters eager to rent there, if they can negotiate rentals that are low enough.
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Please bear in mind that the often cited justification for paying our civil servants so very much more than equivalent private sector workers is to ensure that the government can attract "top talent".
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"CYL is in an extremely difficult position"
========
The main option available to him is to:
Build like crazy in new areas, where land is available. This releases flats for those who will be happy to buy a cheaper flat, and accept a longer commute.
He can leave the established areas mostly alone, since there is not much room to build there anyway.
Another obvious "fix" is to convert more INDUSTRIAL SPACE to residential use. This is happening already, but could be speeded up.
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GETTING HOSED by the HOS Lottery
C.Y. stirs up flat price fear
===========
An article in today's SCMP explains how the new policy is pushing up HK flat prices, especially on the lower end.
People with certain income levels (ie no more than HK$5,000 /mo.) will be allowed to buy HOS flats without paying the normal land premium to the government. There will be a random selection of 5,000 families for this "give-away."
The policy is already pushing up prices, since Buyers will have to pass on (most of) the discount to sellers in a higher purchase price. So the prices of HOS flats is booming.
+ In Shau Kei Wan's Aldrich Gardens, a 3BR flat was sold for HK$4.53 mn (that's HK$6,500 psf)
+ A 3BR flat in Charming Gardens in Tai Kok Tsui was sold for HK$4.18 mn (that's HK$6,023 - a record HOS flat price in Kowloon.)
Properties in Ma On Shan, which were previously selling for $2 mn, are now changing hands for $2.1 - 2.2 million.
In the first 6 months of 2012, there were 877 transactions involving, HOS. That's up 48 percent from 592 transactions in the second half of 2011.
These higehr prices are pushing up prices all around the SAR, since those who can sell at a higher price, can take the money and buy something pricier that is not an HOS flat.
There is pressure now to open more land for sale by the government. But Land banks are limited in some areas.
YauTsimMong district : has only 6 hectares in its bank
Yuen Long district---- : has 490 h's, the largest
Other districts*------- : each have about 200 h's
Those others are:
Sha Tin, Tuen Mun, Sai Kung, and North district
The big impact of the policy surprise some, because it involved only 5,000 flats, versus the annual average of 97,000 flats sold in the secondary market
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Yep - CY Leung is doing his bit to push up the price of low income housing. The market response to this iniative was readily predictable so one has to wonder why he did it?
The other obvious fix is to demolish the village houses - many of them should never have been built and were just an electoral bribe from the people of Hong Kong to the Kuk. Pull 'em down and use the land more efficiently (or return it to our county parks) - problem solved and justice done.
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CYL does seem blunder-prone.
Didn't he design CH Tung's Overbuilding policy?
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You can either destroy the market or let it find its natural level. Manipulating the market or setting levels by fiat always end in tears. We're in this situation because of the fixed exchange rate. As the HK$ is now pegged to a crock of sh*t, it is not surprising that flat prices have risen. Let the HK$ and the property market find their natural levels. Oh what a tangled web we weave, when first we practise to deceive.
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Prices keep getting higher! I wonder if this is CY Leung's plan from the beginning?
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The effects of recent moves by the new admin remains to be seen. Kudos to CYL's team though for at least doing something. Hopefully the effects will be good for the majority of "homeless" HK people, down the line.
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So far, he's not looking too good:
1. prices on low end flats have been pushed up as a result of the measure he adopted
2. most of the "ten measures" are simply restatements of existing measures - only a small amount of new supply
3. no steps taken to address the other serious issues HK faces: cutting civil service pay down to private sector rates, air and water pollution, abolishing new territories land policy (and the Kuk), cracking down on monopolies, broadening the tax base so more people contribute to the cost of running of HK, selecting a site for the new waste landfill (this is now urgent), expanding the number of places in English medium schools and so on.
So far, he has all the makings of yet another useless poltical hack.
God help us if we ever get full democracy in Hong Kong.
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TI, it's so easy to say what wrong one is doing. What suggestions do you have for CYL?
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Confining myself to the issue of making entry level home ownership more affordable:
1. two tiered stamp duty: a rate of zero for owner occupied homes priced at less than HK$5-6 million and higher rates for all other purchasers. It should be a one time deal - each HKPR should be eligible once and once only. On a flat costing $6M, the saving is $180K.
2. LTV ratio set at 90% for owner occupied homes priced at less than HK$5-6 million and higher rates for other buyers. On a $6 million flat, the deposit requirement is $600K (instead of $1.8 million). I do not favour a deposit of zero - people should be requried to have some skin in the game.
3. abolish the practice of handing over NT land to indigenous New Territories males - leaving aside the total lack of historical or legal justification for the current policy and all the other things that are wrong with it, it is chewing up land that can be more efficiently used for building homes for all
Three measures that get over the biggest hurdle to home ownership (saving for the deposit and other initial costs) and free up more land for development without destroying more of our remaining countryside.
It's not rocket science.
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Very sensible ideas. Thanks.
Can the government actually make sure that one family can only buy one property? The question is premised on the idea that Rich Dad can buy one for him, one for the wife, and one for each child...
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The key words are "owner occupier" and "one time" - I wouldn't be too concerned about where the money comes from, but there would need to be anti-fraud measures and the government would have to strictly enforce them (unlike current policies).
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"LTV ratio set at 90% for owner occupied homes priced at less than HK$5-6 million and higher rates for other buyers. On a $6 million flat, the deposit requirement is $600K (instead of $1.8 million). I do not favour a deposit of zero - people should be requried to have some skin in the game"
That sounds highly dangerous.
Wasn't high LTV lending percentages experimented with in tbe US a few years ago.
Anything over 60 or 70% should be treated as "higher risk lending", and require a greater capital backing IMHO. It doesn't matter who the borrower is, and the cost of the property
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@ OffThePeak - yes risk would go up but not by that much and the situation would be different from many of the loans that caused the US housing market to fall apart:
1. it is for owner occupiers only - much lower default risk than for investment properties and no speculators
2. borrowers would still have to satsify the lender that they can service the loan - no liars loans
3. HK does not have "no recourse" statutes like some parts of the US - people cannot simply walk away from their mortgages
4. 10% is still meaningful skin in the game - I would not propose "nothing down" finance or HELOC type products
5. morgages should be conventional P+I - no teaser rates, balloon payments or interest only deals
This would remove many of the practices that caused problems in the US off the table. The object is to help people into their own homes - not create a new generation of speculators.
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Excluding Non-Locals from Buying certain new properties would probably:
1) Reduce the Land premium developers would pay, and
2) Still allow developers to earn huge prices on new properties
Part of the problem is the "out of control enthusiasm for new properties" by HK buyers...
== ==
the extra cost of new properties, which is often 10-20% above comparable secondhand.
...And sometimes MORE than that. From today's SCMP:
"Prices for Century Gateway (in Tuen Mun) were up to double the current HK$5,500 to HK$6,100 per square foot transaction prices in the area..."
What's that old saying about Fools and Money??
The property next to me (Imperial Cullinan in the Olympic station area) is now being occupied as owners get their keys. If you check prices, it is "OFFERED" at prices equal to or below where it was sold one year ago, despite the uplift in the market.
BEWARE, Gentlemen and Ladies !
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INTEREST RATES, CY.
Look at Interest Rates.
I have suggested a surcharge on loans in excess of $4 million (+1%) and $8 million (+2%) ... to put rates closer to levels they would be at, if the HKD was not tied to the USD
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@ OffThePeak - no thanks. No new taxes. This government is one of the most wasteful in the world (recently put on par with Brunei). They should have less money, not more.
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Softy. Have you been sniffing the ether-soaked rags again?
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A lot of people who were bullish on HK property were against CYL. Now it looks like he was their friend after all.
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Issuing bonds and paying interest when they have billions in reserves?
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In response to this:
"OTP, I am still wondering what the advantage of higher interest rates would be. Except of making everybody (who has a mortgage) in HK poorer."
Yes and No.
It would serve the same purpose that a sensible monetary policy in HK would- to make borrowing more expensive, and thereby discourage speculative purposes at high prices.
THey could use the money so generated to pay a "bonus" to those who sell their flats, if you do not want to give the money to the government - The payment could be called a "refund of stamp tax" or something.
Raising borrowing costs, while giving a cash incentive to those who sell would help to bring down prices.
Does anyone have a better idea? Overbuilding in 2-3 years time may NOT be a better idea
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OTP. Yes an original idea but not a cat in hell's chance of working unless the government wants to buy homeowners out at some ludicrous premium (4 times valuation) and push inflation through the roof. Hong Kong is just expensive and getting more expensive as China develops. It's a Chinese Monaco and barring some political meltdown or war in China - which is not impossible - it isn't going to change.
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"buy homeowners out at some ludicrous premium"?
I am talking about :
+ Borrowers pay more interest, through a "HK Mortgage borrowers interest premium", so someone borrowing $5.0 mn might pay 3.00% instead of the current 2.00% interest rate. And someone borrowing $10.0 mn might pay 4.00%, instead of 2.00%. The point of this would be to make those who borrow pay the same sort of rate that they might, if HK was in control of its own monetary policy
...Instead of putting the money into its coffers, the government should:
+ Pay a "reverse stamp tax", or "stamp tax refund" to those who sell a property. The size of this might be about the same as the present Stamp Tax, but capped at the $10 million property price level
The idea is that these measure, when taken together, would reduce HK property prices somewhat, in the same way that a normal rise in interest rates would. But HK cannot raise rates on its own, because of the peg to the US dollar.
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CYL FORCED TO TAKE ACTION...
Lloyd, with reference to your comment:
"OTP. I thought we were an open economy. The UK, for example, doesn't penalise non-citizens."
CYL is under Huge pressure, after his campaign promises - he had to do something.
And taxes like this exist in Singapore, and many other countries.
Here's what he SHOULD have done IMHO:
+ Make it easier for people to live in old Industrial properties
+ Impose a Tax on empty flats (to get them rented)
+ Consider an interest rate surcharge to counter ultra-low rates
The first two of these suggestions would have helped to add new supply quickly, easing the upwards pressure on rents and prices. But HK govt officials are not creative, they prefer to copy Singapore. It seems less risky to them, and they do not fully grasp the market dynamics (and maybe I don't either, since I am not omniscient.)
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I agree with OTP old post from way above - perhaps govt should consider imposing tax on those who own a property but keep them vacant. I have recently sold and happy to rent for a while to see how this mess sorts itself out, but I am astounded by the number of flat available that are so crappy and run-down, which have been vacant for months (even years??) on end, yet the owners still demand $60K++++ per month but refuse to do anything to update/renovate/clean up the flats so that anyone would be interested to rent them.... it is just shocking how much money some people have that they can afford to leave these flats empty instead of doing a basic renovation so people would be happy to pay their ridiculous asking prices of &60K++ per month!!
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They can do much better with that much money in West Kowloon, and have a quicker and easier commute to Central !
We are seeing more expats here at The Long Beach, near OLympic Station, so people are realising it... if slowly
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BSD / Buyers Stamp Duty (of 15%) =
Rising Xenophobia,towards Mainlanders ?
A mainlander who works in Hong Kong, but is not a permanent resident said the move was unfair to expatriates, who also contributed to society.
"The initiative to cool the property market is good, but there has not been enough consideration," posted the member of Sina Weibo, the most popular microblogging service on the mainland. "Non-permanent residents, like permanent residents in Hong Kong, pay taxes and contribute to the economy, but their needs to buy a property are neglected."
Expatriates living across the border saw the tax more as a way to ease anti-mainland sentiment among Hongkongers than as an effective tool to cool the market.
"This is just an act of the politicians trying to ease the rising xenophobic sentiment in the city," went one posting.
Political analyst James Sung Lap-kung believes that while the objectives of the move were primarily financial, it may also ease Hongkongers' ambivalence towards mainlanders and boost Chief Executive Leung Chun-ying's popularity.
/more: http://www.scmp.com/news/hong-kong/article/1071453/new-15-cent-stamp-duty-may-hit-expatriate-homebuyers
Someone else has said it was also designed:
"To get more of the many single HK women married"
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‘De-Sinofication’ debate re-emerges in HK
Wednesday, 26 September, 2012, 1:22pm
Protesters in Sheung Shui last week wave the Union Jack. Photo: David Wong
Attempts to “de-Sinofy” Hong Kong are becoming all too familiar, according to a Beijing-loyalist businessman who warned on Wednesday against efforts to turn it into a city-state.
Lew Mon-hung, ... said it was increasingly obvious that many Hongkongers are opting for “de-Sinofication”. He cited the British flags that were waved recently by demonstrators protesting against the government’s national education programme, and during protests in Sheung Shui against cross-border mainland traders.
One former Beijing official said he was “heartbroken” to see Hongkongers waving the flags.
“Before and after the [September 9 Legislative Council] election, many candidates chanted ‘down with the Chinese Communist Party’,” Lew said.
“Article 1 of the Basic Law states that Hong Kong … is an inalienable part of [China]. That is so whether or not you like China.”
Lew called it “theoretically ridiculous, and practically dangerous” for people to talk about Hong Kong as a city-state...
. . .
Hong Kong, he argues, is too small to accommodate the vast numbers of mainlanders who may want to move here. It also requires a higher standard of order and civilisation than the mainland, he said.
As for the current controversy over teaching national education in Hong Kong, Lew said western countries have long taught the subject in their schools, asking citizens to be loyal to their country.
But Chin questioned whether Hongkongers are really Chinese nationals, since they do not pay mainland taxes to help pay for the military.
/more: http://www.scmp.com/news/hong-kong/article/1047697/%E2%80%98de-sinofication%E2%80%99-debate-re-emerges-hong-kong#comments
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(For the record here):
Elsdon, I saw your comment:
"For purchase, asking prices have come down 5-10% from last week. The agents I was working with have already called me to see if I'm still interested.."
=======
I don't believe the prices are down 5-10% at all, and would be interested in hearing any specific information on that.
I think you might get a few sales at lower prices, and then once the panic sellers are done prices will creep back up over the next few weeks. (I have said this about a previous quick drop, and my supposition proved correct, so it may be right again.)
Here are the main reasons I do not expect an enduring price drop:
+ The new tax only impacts on a tiny percentage of the buyers for secondhand flats (maybe 10%)
+ I have spoken with some agents, and they are telling me that very few sellers are cutting prices. What has happened is buyers ahve pulled back their bids, and are waiting to see if prices will fall
+ Interest rates are low, and with money flooding into HK rates could actually dip lower
HERE's the BIG ONE (not yet mentioned here):
+ RENTS ARE STILL RISING FAST (look at the chart in Wed's SCMP):
Average rents for 100 estates, up from maybe $19.60 psf perhaps six months ago, to about $22.90 now - that's a 16.8% rise.
Why should anyone sell while rates are low and rents are rising ??
The phony drop will be ending soon, within a few weeks IMHO, unless rents fall or rates rise.
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A clear antidote for Bearishness?
+ Print this image:
http://img213.imageshack.us/img213/5391/hkrentsep12.jpg
+ Look at careful
+ Chew on it slowly, thinking about what you saw
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In my experience over the past 2 months looking at rentals in the Olympic/Kowloon Tong areas.. I can verify for you that rents are not rising anymore. They have risen pretty drastically (~10%) YoY but as of right now and for the past 2 weeks, they're dropping. The agents have been telling me that there have been less and less people looking to rent in the past month so landlords are seeing less action and probably are willing to reduce rent as to not eat another month of mortgage themselves.
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Yeah
Probably that is a seasonal drop-off after the September/early Oct push-up,
and/or competition from "more realistic" landlords in Imperial Cullinan
But thanks for the info
Rents may be up 10% YOY, but as you can see from the chart that I posted, prices seem about the same Per sf - so Yields may be higher.
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Yeah, definitely the dropoff after Sept/Early Oct school season stuff.. From what I understand, it's a huge influx of mainlanders renting places in HK for the HK address so their kids can attend school here..
Keep in mind, the rentals I was talking about were asking prices.. Lots of places in The Long Beach for example, asking for 22-23k.. Most of them ended up settling into the 20-21k range.. With some into the 18k territory.
Not sure about yields, at the end of the day, do you calculate yield based on market value of your good or initial investment?
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"Not sure about yields, at the end of the day, do you calculate yield based on market value of your good or initial investment?"
===
You can do it either way.
But when making a Buy or Sell decision, I think you should look at Current Yields
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I tend to look at both absolute and comparative yields.
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My notion that "New properties will take the brunt of the BSD-related price correction" is beginning to prove evident, I believe:
Yesterday, Cheung Kong announced that "they will slash the prices on two villas at its Uptown project in Yuen Long by 15 percent - the amount of the additional levy"
Originally priced at HK$18.7 million, will now carry a price tag of HK$15.8 million.
Many new properties are overpriced by 20% against the secondary market, and DEVELOPERS HAVE TO SELL, while owner occupiers can stay put ... and wait it out.
Meantime, rents are holding up, even rising, making the sit and wait option very likely, whilst potential buyers tire of "wasting money on rent."
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Ed
12 yrs ago
OTP - many speculators (i.e. non end users) will dump out if they think the market is going to tank... just as would investors in any asset class if they thought prices were going to crash...
Let's say you bought after Lehman... why not dump and take your profit?
Because if you don't this could happen - again : http://media.economist.com/sites/default/files/imagecache/290-width/images/print-edition/20120428_FNC097.png
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The Importance of (Mainland) Children
This is a factoid that Cantonese estate agents are now talking about. (I picked it up from my partner, who was born in HK, and she heard it from an agent whom we have bought two flats from):
The Chinese mainland still has a "one child policy". It doesn't make it impossible to have a second child, but instead makes it MUCH MORE EXPENSIVE to educate the second child. Thus, those mainlanders who are having a second child want to have the child in HK, so that the child will have access to a (cheaper and better?) HK education.
This is one important reason that mainlanders are buying flats in HK. The gain entry into the HK school system, then also have to live here - so they want to buy flats to live in.
This same agent reckons after a brief pause, lasting a few weeks or at most 2-3 months, the mainlanders will be back in the market buying flats, despite the 15% stamp tax for non-residents.
Owning a flat may save them HK$60,000 - $100,000 per annum on mainland school fees.
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BUYERS STAMP DUTY - The impact this far...
gdep,
Your:
"OTP, you seriously believe in these numbers?? especially week to week up and down on particular estate..."
I believe them if I have enough data to look at - and it "makes sense" in relation to my overall understanding of market dynamics.
One week's figure for a particular estate may not have much meaning. But the Olympic area is undervalued IMHO, and the resilience here may be confirming that people are recognizing that.
Even Elsdon MOVED to Long Beach recently. I don't think he did that because he thought prices were overvalued.
And there are enough transactions for Kowloon as a whole to suggest it is holding up better than the rest of the SAR - so far, at least
I don't follow The Belchers, so I cannot say anything intelligent about the 8% price drop there over the last month.
But the estates that I do follow show more strength in West Kowloon than in Mid-levels since the BSD was announced. I'm not sure why, since you might have thought that WK was driven by mainland buyers. Perhaps it shows the preference of local residents, rather than Expats:
Week : CCLI : CMMI : RobinPl: Tregun : Dynast: Clovell // IslHarb : ParkA : Waterf : Sorrent : TArch : C'ribC : TaikSh.
====
11/25: 115.05 113.11: 16,570 : 19,594 : 23,865 : 22,227 / 10,293 : 11,749 : 13,633 : 17,853 : 22,286 : 6,042 : 11,590
11/18: 116.17 114.32: 16,597 : 19,626 : 23,904 : 22,264 // 9,815 : 11,584 : 13,602 : 17,811 : 22,234 : 6,198 : 11,695
11/11: 116.81 114.20: 16,717 : 19,768 : 25,410 : 22,424 // 9,984 : 11,784 : 14,531 : 16,714 : 22,466 : 6,361 : 11,528
11/04: 116.07 113.81: 16,666 : 19,708 : 23,167 : 22,356 // 9,975 : 11,646 : 12,887 : 16,680 : 22,420 : 6,194 : 10,911
10/28: 114.35 112.33: 16,564 : 19,587 : 23,025 : 22,039 // 9,925 : 10,805 : 12,736 : 15,744 : 22,906 : 6,137 : 11,461
10/21: 112.25 110.37: 16,336 : 19,318 : 22,708 : 21,735 // 9,864 : 10,738 : 12,649 : 15,583 : 23,432 : 6,146 : 11,317
======
Note: 15% BSD on Non-residents was introduced, with effect from 27 Oct. 2012
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Home prices to defy curbs
28/12/2012
Sun Hung Kai Properties (0016) expects home deals to shrink by 5 to 10 percent next year as prices continue to rise despite the latest cooling measures.
Deputy managing director Victor Lui Ting yesterday said the 15 percent stamp duty imposed on non-locals and corporate homebuyers has hampered deals in the past two months.
But Lui said transactions are likely to rebound in the second quarter next year as homebuyers come to terms with the measures.
Lui forecasts a decline in revenue for the developer'revenue from sales in the 2012/2013 financial year, compared with the high HK$38.2 billion turnover for the year ended June. But he still hopes to meet the sales target before the end of this financial year.
This year, SHKP has generated about HK$12 billion from sales, including around HK$7 billion from its Century Gateway project in Tuen Mun. Lui expects prices to climb up to 10 percent next year, given a significant increase in rental levels this year and a relatively low interest rate.
===
+continues: http://finance.thestandard.com.hk/en/business_news_view.asp?aid=129595
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/ Duplicated - For the record here, since it relates to the impact of CYL's policies /
The SCMP article today on Property Launches... er, ah Sucks.
("Flat launches set to give market a boost" / SCMP)
Here's what they should have said:
+ The 15% BSD is hitting New flats more than the secondhand market, because developers have to sell, while owners of secondhand can JUST WAIT, especially owner occupiers, or those with tenants in their investment flats. And new flats in HK have been overpriced for a long time, the premium to secondhand can be 10-20%, and that's too high
+ SHKP recognised this reality, and has priced its flats at Wings-2 accordingly, and a price which is competitive with the secondhand market. In fact, the sales of these new properties may force the secondhand market lower, as fresh supply (at competitive prices) SHOULD do. Take out the car park, and consider the other discounts, then the Wings-2 North facing properties were priced at HKD 8,100-8,900 per sf (Gross), depending on the floor, with the lower price being the 6th floor.
+ One West Kowloon is not selling well because it is not in West Kowloon. It is in Sham Shui Po, next to the "Four Little Dragons." In fact, they should have called the property: "One (Mile from) West Kowloon", or maybe: "Dragon Five", if they were more honest.
+ High Place, the 76 flat development from Henderson in Kowloon City, had its name mistranslated. It was "High Prace", or "High Price", and is clearly oevrpriced in the present market. At HKD 22,000 psf, I cannot see it selling well.
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CY Leung vows to tackle housing crisis in address
“The top priority of the current term government is to tackle the housing problem,” the 58-year-old told lawmakers, following a sharp rise in property prices and an outcry over the cramped living conditions of tens of thousands.
“We recognise that problems stemming from property prices and rental, cage homes, cubicle apartments and sub-divided units cannot be solved overnight.
“But we must acknowledge these problems, understand the gravity of the situation, and take the first step forward to resolve them,” he said.
He said the government would aggressively increase land supply to provide around 128,700 new homes “in the short-to medium-term”, with a range of measures including the conversion of 13 green belt zones and further land reclamation.
======
+More:
http://www.scmp.com/news/hong-kong/article/1129374/cy-leung-vows-tackle-housing-crisis
Jaw-Jaw-Jaw
Let's see how soon those 128,700 new homes come forward
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Hong Kong Leader Pledges to Ease Housing Shortage
Leung Chun-ying, who took office last July, pledged to help produce 100,000 new units of housing over the next five years by streamlining approvals, opening up undeveloped lands for housing, and even tapping rock caverns and underground spaces for development.
. . .
In his speech on Wednesday, Mr. Leung tried to change the political narrative by addressing the bread-and-butter concerns of the residents of Hong Kong, where an influx of money, much of it from the Chinese mainland, have led to yawning wealth disparities while driving up housing prices and creating a shortage of affordable homes.
“While Hong Kong is a generally affluent society, there are still many people who live a hand-to-mouth existence.” he said. “Public resources should be devoted to those who cannot provide for themselves.”
. . .
Large-scale developments in Hong Kong take 10 to 20 years to approve and build because they involve considerable public consultation, elaborate engineering to adapt to the challenges of building on steep slopes and sometimes the construction of additional subway stops. Mr. Leung cautioned in his speech that his suggested measures may not bring quick relief from the city’s housing shortage.
Teenagers and people in their 20s have become increasingly active in the past year in street protests that previously had more middle-aged demonstrators, and Mr. Leung tried to seek their support. The city’s youth face higher unemployment than previous generations and more worries about housing affordability. But they have also tended to be sympathetic to environmental concerns about encroachment on the city’s many hillside parks, which real estate developers regard as a source of delay.
“Our young people should recognize that the planning proposals and development options under discussion today are intended to address their future needs,” Mr. Leung said. "It is all too easy for the government to sidestep the problem but it is today’s young people who will have to bear the adverse consequences in future."
===
+more: http://www.nytimes.com/2013/01/17/world/asia/hong-kong-leader-pledges-to-ease-housing-shortage.html?_r=0#h[]
"Tapping rock caverns and underground spaces for development"
???
How does THAT work ?
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Dude. I would totally live in a HK Cave if it had transit and stuff!
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It would come complete with bats and guano and stink!
But seriously, CYL gets A for ideas from me. However, he will be graded still on accomplishment.
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I liked this part:
"57. Some people believe home ownership is not the only way for meeting accommodation needs: it can be met just as well by rented flats. But I believe that home ownership by the middle class is crucial to social stability. The Government is therefore determined to uphold the principle of assisting grassroots families in moving into public housing and the middle-income families in buying their own homes.
. . .
67. We should bear in mind that public demand for land is generated as much from the surging population as from people's aspirations for more space to alleviate their cramped living conditions. Roughly, more than half of the private dwellings have a saleable area smaller than 50 square metres. Do we have the courage to make it our vision to improve the living space for the future generation
. . .
To address the aspirations of property owners and speed up the pace of urban renewal, I will invite the URA to forge ahead with its "demand-led" redevelopment scheme. To that end, the URA also set out to redevelop industrial buildings through a pilot scheme in October 2012, including redevelopment for residential purpose."
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At least the government now knows that the main problem is supply. So they're increasing it as fast as they can. If they're going to succeed, prices will come down.
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Remmy
12 yrs ago
Punter - not necessarily - more people will also flow into HK, so our population will increase. Total vacancy will likely stay the same, and rents will rise as will property in desirable locations, as well as retail and commercial space (so buy REITS, as I have suggested before, especially thr LINK REIT).
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If it becomes easier to convert non-residential lands to residential, the government can easily increase the supply. That's the ultimate solution to the scarcity. However, if all of China moves to HK, then it's a different story.
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(Duplicated for the record here):
http://asiasentinel.com/index.php?option=com_content&task=view&id=5127&Itemid=224
EXCERPTS:
"However, Leung's plans for dealing with the problem mostly address medium to longer term issues. One such is an idea for massive reclamation projects to add up to 3,000 hectares of land primarily for housing. But even if these eventuate - a big if given the time frame and likelihood of strong environmental opposition to some of them - the result would be at least a decade away."
"Leung's failing to address any of the above perhaps reflect the basic dilemma of any chief executive in Hong Kong, not least one who, having been a professional surveyor, understands the situation. That is that though high prices are an important issue for the public, the majority doe not actually want the much lower prices needed to enable those who have yet to get on the ownership ladder to do so.
About 60 percent of the population already live in their own homes and many of the 35 percent who live in public rental housing have no aspirations to own, if only because that seems too far out of reach. Indeed, much of the current clamor is for more public housing rather than cheaper private housing. Those already in the private sector ownership have no desire to see values fall, particularly if they bought recently. Negative equity was a major issue in Hong Kong after the 1998 crash and could be again.
Sky-high recent prices are partly the result of the deliberate squeeze on land supply conducted over the previous 10 years by the government. But even more significant has been abnormally low interest rates resulting from the peg to the US dollar and, to a lesser degree, capital inflow mostly from the mainland either for laundering purposes or speculation on an eventual upward revaluation of the Hong Kong dollar.
The worry must now be that if interest rates begin to rise to what were once normal levels - say 2 percent in inflation-adjusted terms - property prices in Hong Kong would fall back and, as happened in 1999, the government would reverse policy, slowing land sales and public housing projects to limit price declines. "
====
Right - he needs to think about the two shorter term "fixes" that I have suggested before:
+ A tax on vacant flats (and not just "new" vacant flats, like Long Beach, but empty flats held by foreigners. And there may be 200,000 or more of these in HK
+ Opening up industrial properties for residential use - perhaps under a 3-5 year "license" after an inspection. By making the use short term, he can curtail it, if and when prices drop and HK has a surplus supply of residential flats.
I expect at least one of these by mid-year, if prices take another great leap forward after CNY, as they are threatening to do.
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(For the record here):
"Hong Kong Doubles Stamp Duty on All Property on Bubble Risk"
I suppose the good news is that those permanent residents who own only one property will be little effected.
After a price drop (2-3%, maybe slightly more), HK people will work out that they can go on buying multiple properties in their children's names.
There is bound to be a big rise in properties owned individually by those under 25 years old, or whatever.
Like before, the de-rampers will try to talk the market down, but the underlying demand, and ongoing rise in wealth will win out IMHO
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HKLEV
12 yrs ago
Great way to encourage Hong Kongers to have more children to resolve the ageing issue....
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Haha.
Maybe that is the "grand design" behind this.
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Is Mr Leung taking a stand against the property giants? His admin's recent actions do tend to point to it.
Likashing's Apex move may be testing the waters on how to "fight" Mr Leung's admin.
Both are powerful, but Mr Li (and other property tycoons) has longevity (because he's got no term limits).
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It looks like gov't controls are working as prices of some homes have gone down (OWK specificically).
Just as QEs have worked, CYL's actions are starting to work. Of course, one could also argue that some property tycoons have seen the market's peak.
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"OWK specificically"
I might question that. OWK was overpriced for what it is, where it is.
The Four Little Dragons development blocks views to the South and to the East - ie forget about direct sunlight, which many HK people like. And the flats are large, with weird layouts, including a translucent wall (rather than a large window) in the living room.
I think CK hoped that the relative rarity of large flats in the area, would allow them to offload the flats at a price that might have worked in Olympic Station, or even Nam Cheong - but they were not selling well.
The doubling of the tax provided a face-saving reason for big price cuts. And I think they are now priced at a reasonable level - especially considering that CK will "absorb" the basic Stamp Duty amount.
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The fact remains that people bought at the "higher" prices. Now new buyers have bought in lower prices. Prices have gone down.
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Yes they have - at OWK.
But that does not necessarily mean prices are falling, or will fall, across HK.
A few people may buy an overpriced development. But if it is truly overpriced, then sales may stall out well before the project is sold out, which is what happened at OWK.
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I personally think that prices will fall at around 10% (the big players are again trying to dictate/influence where prices should settle). It's no rocket science as the number of buyers have been lessened by recent gov't actions. Law of supply and demand - more items to buy (more newer developments being offered) plus less buyers (affected by addt'l stamp duties and other controls, e.g. reserved for perm residents) will ultimately bring down prices. It may take some time though. However, having no sales in major residential devs recently shows buyers are now more than willing to wait. So sellers who "have" to sell have no choice but to lower prices. On the other hand, buyers who "have" to buy has paid premiums too (higher prices, record prices) but the number of transactions points to a lower number of buyers biting high prices.
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Hi, Punter.
It is not that I disagree, but I wonder WHAT PRICES do you think will fall by 10%?
I think that New Property prices could fall that much, or more in HK. And secondhand prices are likely to fall by less than new prices fall.
I began to formulate this thinking when I heard an official spokesperson for one of the big estate agents say in his presentation that he thought secondhand prices would come down, and not new prices. I asked a question challenging this assumption, and he answered it very poorly.
It occurred to me that he was "talking his book." His firm makes a bigger commission when they sell new properties at new projects, and he has not control over the price levels. He needs to take whatever price the developers give him. And he does not make a worse commission when the buyers subsequenlt lose money. So his best-paid job, is pushing new properties, and it may be "bad for business", if he says those prices must come down. I am constrained by no such considerations, and can just "speak my truth".
I think New property prices might come down by 10-20%, while seconhand prices come down by as much as 5-10%.
It still amazes me that people will pay a premium for something that they are buying offplan, and they can not see in complete condition, and know what view they are buying. Instead of a 10% premium to equivalent secondhand, would it not make sense for off-the plan sales to come at a 10% discount, given the bigger risks? That swing alone, would take 20% off new property prices. And secondhand prices need not fall at all.
Moreover, I think that most HK developers have enough "fat" in their profit margins to cut some big amounts off prices. CK's big cuts at OWK may be a confirmation of this fact.
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New vs Secondhand Gap narrowing
And article in today's SCMP mentions this:
"Since the government announced the introduction of a 15 per cent Buyer's Stamp Duty to non-permanent residents and corporate buyers in October, the pricing gap between primary and secondhand narrowed..."
Mind the Gap
======
Q4-2012 : 13.3 %
Q3-2012 : 24.2 %
late2008 : 08.3 %
From: Developers face tough battle in New Territories
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(For the record here):
R:
"The HK property market is performing exactly as I predicted at the beginning of this year. What essentially is happening is that the "haves" are increasingly being protected as landlords, and the "have not's" are increasingly being isolated as renters. Going forward, this will make it easier for landlords to exploit renters, as the rent/own arbitrage costs makes it increasingly prohibitive for renters to become owners."
Maybe this is one of those markets where transactions are so few, you can see what you want to see. I see something different.
+ Transactions in the secondary market have fallen to almost nothing, except in the below $5 million bracket, where prices are still rising
+ Developers are cutting prices on new properties, so they are more competitive with prices in the illiquid 2nd hand market.
This is what I predicted: the developers would take the brunt of price cuts. And why not? The premium to secondhand had reached ridiculous levels, and developers can still do very well after the modest 5-10% price cuts that we have seen.
After a while, I think we may see buyers creeping back into the secondary market, as they see low-priced properties continue to rise, and they see that sellers (except a few panicky ones) are not going to give in, and cut pices in response to the pressures of the "cooling" measures.
I don't think renters are under any special pressures. They happily take advantage of the cuts in the primary market, if they like particular properties than come on the market in that sector.
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Sea change in home price outlook
http://www.thestandard.com.hk/news_detail.asp?pp_cat=30&art_id=132463&sid=39339054&con_type=3
A significant shift is taking place in public expectations over home prices following a spate of government cooling measures, a survey has found.
=== ===
Sentiment is changing.
"26.7 percent expect prices to fall in the coming year while only 20 percent said prices will surge"
This sounds Bearish:
"Some homesellers have cut asking prices by about 10 percent, said Louis Chan Wing-kit, residential chief executive at Centaline Property Agency.
He expects prices to drop by 10-15 percent by the end of the second quarter. Hong Kong Property estimates flat prices to fall by 10 percent amid the "price-cutting" trend."
But the reality is that New Properties are taking the brunt of the price correction - as they should - they were overvalued by 10-15%.
The Press does not want to tell you that, because they get too many advertisements for new property.
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OTP. What correction? The correction that everyone wants to happen. I agree with you on primary though.
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The correction we are seeing is in the prices of New Properties.
And CK has been the most aggressive in cutting its prices.
EXCERPT - from the article, above:
"Developers, meanwhile, are offering a wide range of discounts to clear stock amid the lackluster sentiment.
Cheung Kong Holdings (0001) slashed prices for the six remaining houses at its Uptown project in Yuen Long by up to 11.8 percent from HK$16 million each - the second time it has offered a price cut. One 1,666-square- foot home sold for HK$14.78 million, or HK$8,873 per sellable sq ft, right after the price cut.
Kerry Properties (0683) offered second home loans of up to 25 percent for all flats at Lions Rise in Wong Tai Sin. Homebuyers do not need to start repaying their mortgage in the first two years.
Lai Sun Development (0488) cut prices by HK$388,000 at Ocean One in Yau Tong while Sino Land (0083) knocked up to 2.5 percent off at The Avery in Kowloon City."
Secondary market prices seem to be moving sideways-to-up... so far.
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UNINTENDED CONSEQUENCES : Halted Redevelopment
"...halted any new acquisition programs as soon as the duty was imposed"
BSD Hits Business for Old Flats Hard
The 15 percent Buyer's Stamp Duty may have succeeded in curbing the red-hot residential property market, but it also dealt a heavy blow to the redevelopment business. Last year, the lands tribunal received a record 57 applications for compulsory auction for redevelopment - including 25 cases in the first quarter alone.
. . .
Richfield Group (0183), which specializes in assembling old building units, then selling the complete - or almost complete - titles to developers, took the largest direct hit when the old structure acquisition activities were brought to a virtual halt.
"Buying old homes for redevelopment is a very slow process. Often it takes five to seven years to gather 100 percent titles for a project, plus six years of construction, including the demolition of the old buildings," said Stewart Leung Chi-kin, chairman of REDA's executive committee.
"Out of every 100 old home acquisition initiatives, only 30 would succeed in becoming a redevelopment project. Who would still want to do it when they are saddled with such additional financial burdens as the BSD?"
===
http://www.thestandard.com.hk/news_detail.asp?we_cat=16&art_id=133330&sid=39598714&con_type=3&d_str=20130502&fc=7
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And that shows in Richfield's share price - down about 35% from its peak:
http://www.aastocks.com/EN/stock/BasicChart.aspx?&symbol=00183
Stock code is 183 (not 184 as reported in the Standard).
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This is the one good thing about CY's BSD.
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Redevelopment of older buildings is a good thing - it reduces the amount of land that has to be allocated for redevelopment. I would like to see the HKSAR goverment try to find a way to allow redevelopment of older buildings to resume - possibly exempting buildings older than (say) 40 years from the BSD etc?
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... Or from half of the tax - then something could still happen
... Or at least giving them 8 - 10 years to get a deal done.
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(For the record here - from the main thread):
In another article in pg.1 of the BUSINESS section, Walter Kwok is quoted as saying: "I have been in touch with CY," he said. "He gives me the impression that he does NOT want to see a big correction in home prices. He expects to see a stable property market, and that is good for Hong Kong's future."
I still think we will see some reduction in the BSD if prices fall 10-20% from the highs (for HK as a whole, not just for overbuilt and far away TKO.)
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A HINT is not (yet) a Trend.
From today's SCMP, "luxury site" article:
"Chinachem suspended sales of its remaining five five flats at Hong Kong Gardens and would lease them out instead."
Prediction: RENTS will drop for Luxury flats
=======
There are a HUGE number of vacant new luxury flats held by developers, and they are beginning to realise they will not be sold at target prices. If these flats flood into the rental market, rents will fall for larger and more expensive flats.
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Now the price are HIGH! How much do these developers want to sell their flats for? Or they expect inflation to raise the prices further?
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The problem is THE GAP between the (Higher) price the developers want for their properties, and the (Lower) price at which they can actually offload the larger and more expensive properties.
The Buyers have pulled back (on properties above $8-10 Million, or whatever) because of the Double Stamp Tax. And it is especially tough for non-HK-Residents who have to pay the BSD of 15%. When you add up all these taxes, they can come to 20% or more for certain buyers. And some may be willing to pay all the taxes, so as the Developers cut their prices by that much.
The Developers may prefer to hold the properties and rent them out, because they can earn more from that, than by investing their cash - or they can borrow at less than the Rental Yield.
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20% Price Fall ?
That's what Stanley Wong Yuen-fai, and "Advisor" to the Long Term Housing Steering Committee* is targetting.
"20% is not significant. Flat prices have risen 23 per cent since last year. So we are talking about whether the prices can return to last year's level.
Also: "The government should consider banning mortgages for second properties", if prices do not fall in a "reasonable adjustment."
Centaline said: They hope that Wong's comments do not represent the HK Government's views.
Centaline's Data shows (for the CCLI Index):
2012 Low- : $94.16 (01/08/12) : LOW
2013 High : 123.66 (03/17/13) : +31.3%
2012 Low- : 115.16 (01/06/13) : +22.3% / - 6.87% off High
Recent ---- : 120.14 (06/02/13) : + 27.6% / - 2.85% off High
===
*Wong is also Chairman of the Housing Authority's subsidised housing commmittee,
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Punter's comment / from the Main Property thread:
"Another idea was to excempt those are trading up. If you're selling a 2 bedroom flat and buying a 3 bedroom flat and only have one property that you use as residence, it makes sense that you could be excempted from paying the extra taxes. Admin is going to be difficult but doable, in my opinion"
Not a bad idea - yet there's another way to do it :
+ Charge the extra tax, but
+ Refund it, if the Buyer sell his original "sole flat" within 12 months.
This would allow the market to "unfreeze" to some degree, since some like to buy, and have a flat to move into, before they buy.
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Yes, that's a great idea. I might also buy a bigger flat, but I don't want to first sell mine. Then what if I have to rent for a year? 1/4 million bucks down the drain, and 1/4 million bucks less that I can pay for down payment.
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http://www.ird.gov.hk/eng/faq/avd.htm
See Q24 on the FAQ. People trading up get a refund if they sell their old place within 6 months. I think this is too short and 12 months as per OffThePeak's suggestion is more realistic.
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It would have to be 36 months for me to take the plunge.
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With a 6 months window, you can probably only buy a secondhand vacant flat.
Else you will have to move into "temporary" accommodation until your "newly bought" property is available - What a hassle ! Don't HK lawmakers think about these practical issues ?
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So, will the measures be approved in Legco or not? CYL's admin will lose face bigtime...
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Today's news hints that the admin is not really working towards lowering prices...That's too much to ask, I guess. So sorry for locals that have been priced out of the market.
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CYL's measures are not working for the average family - could he launch more (ugh!)
Today's SCMP has an article, with headline:
"LIFE QUALITY DIPS, as Home Prices Soar, study shows.
"Hong Kong homes are the least affordable they have been in the last 10 years," accord to figures in a Chinese University study.
Housing Affordability Index:
2012 : 12.76
2002 :: 4.70
"A four-member family now has to spend 13 times their annual income to buy a 400 sf flat in an urban area."
They use the following example, of a "Typical family"
Size : 400 sf
Cost $3 Million
Mtg.: $21,000 - over 13 years, to buy the flat
=========
CYL"s measures have slowed the Centaline index - and kept the prices of Large Flats, costing over $10 - 15 million, "going sideways" at best.
But cheaper flats, such as those costing $3 Million, have continued to escalate in price.
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7% of HK's land is utilized for housing, plenty more to develop on. Only a government could be so moronic as to screw up something so simple as four walls and a roof.
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Lucane01 - I agree with you. I can only conclude that the BSD/SSD measures are just temporary and buying the govt a bit of time to increase the new housing stock at the lower price levels below HKD 3 Million. There must be loads of opportunities up in the far north of NT. My sense is that the price level differentiation per sq foot between the higher end areas and lower end areas is not as wide as it should be. Would be interesting to see a like for like comparison with other major financial centres like NY, London.
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NYC housing can be surprisingly cheap. Couple years ago you could buy a 4-story Brooklyn brownstone that is only ~3 subway stops away from Wall Street for about $170 USD psqft (1.4k HKD). Today that same brownstone will be up a bit to about 2k HKD per sqft, but its still far cheaper than any Hong Kong price anywhere in this city AND it is definitively better quality housing (beautiful 4 story mansion close to Wall Street or 300sqft prison cage in Mong Kok... take your pick).
Even though America is a complete trainwreck they did at least get land right - freehold property with minimal regulations (although they can be extreme in some places like CA or NY).
HK is great but its land policy is downright moronic and anyone who thinks there is a land shortage is a certified fool. It takes 5 seconds to crank open Google Satellite Maps to see how wide open this city is - and yes I fully know that much of it is mountainous but look at Mid-Levels, the Peak, Tsing Yi or any number of other places where they've developed housing for hundreds of thousands on steep slopes.
Having to spend literally decades of your life in order to afford a tiny 500sqft four walls + ceiling is insanity. Good thing the long term debt cycle is about to implode and prices will accordingly come crashing down with it.
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FORMULA FOR A CRASH
"New Flats Target is too low: Lawmakers" - SCMP
"Critics say govt plans to build 470,000 units in 10 years does not take into account increasing population and smaller households."
+ Why has the target not risen with increases in Population "lawmakers" asked
+ Young people are not be given an opportunity to form families
TARGET: 470,000 units
Puplic-- : 282,000 units-
60% would be public rental and subsidised flats
Waiting List: 234,300 applicants
are waiting for a Public Flat.
== ==
Well, that's one sort of opinion.
But how many flats were completed last year? Maybe 12,000 units or so?
4X that figure is bound to cause a crash, don't you think?
Maybe that is what they want
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(Disregard the TVB brouhaha, it's another story.) LCY's doggedness in standing by the property measures is finally getting results. Prices have gone down in the form of discounts. Under pressure will be the second hand property units.
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"Prices have gone down in the form of discounts. Under pressure will be the second hand property units."
Not until the developers find that their intial discounts are getting demand. So far, they start off with big discounts on the first batch, and then raise prices. At The Long Beach, I have shown: they are now selling "new" flats at a premium to the secondary market, thanks to two neat Developer Tricks.
That is not going to put downwards pressure on the secondary market.
However, in some less desirable locations, you may find that there is so much new supply coming, it does put downwards pressure on the secondary market.
The Visionary in Tung Chung may be one to watch.
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Have they sold out the remaining units in TLB?
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CY Leung's admin reads the ax forum, he's now proposing what has been suggested here: (1) More flats, (2) bigger flats.
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Bigger flats means more expensive flats.
The Stamp Duties are huge on those. So the disincentives his govt provides are all against it.
Where did you read that?
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