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The last chance of saving Honk Kong from bad to worse
2023-10-21
It is widely anticipated that the government will officially announce a new housing policy address next Wednesday. The government’s response to the demand for the withdrawal of spicy measures r elated to the property market will have a significant impact on the local economy. If the government is still hesitant to take action to withdraw spicy measures, Hong Kong property market will pass the pivotal point of no return.
The recent global political and economic situation has been extremely unstable. The latest of Middle East war has a strong negative impact on the already rotten world economy. The Hang Seng Index has dropped repeatedly to new lows recently, which has shown that the market's confidence to local stock market has fallen to an unusually low level. Therefore, the policy address announcement of next Wednesday is the last chance for the government to save the property and stock markets.
In 1997, Hong Kong government announced the plan to provide 85,000 residential units per year, which resulted in a sharp decrease in property prices in subsequent year. Afterwards, Hong Kong government observed that the situation was critical and suddenly announced that the policy had not existed without prior notice. This bold decision saved the property market from bad to worse in the most critical moment.
At present, many Hong Kong listed mainland real estate companies have defaulted on their debts one after another. From an accounting operation standpoint, these companies are close to formal bankruptcy. Due to the extreme shortage of cash flow, these companies have been taking the most aggressive pricing strategy by pushing the newly completed flats in market by half prices.
In the past quarter, Hong Kong's local listed real estate firms experienced a sluggish sale of the first-hand properties. Their cash flow was far less than normal. The debt ratio had been rising to a prominent level. In addition, some companies suffered substantial losses by purchasing multiple development projects at unreasonable prices in the past few years. If these spicy measures are not being scrapped, local listed real estate companies will have a chance to fall into the debt trap as the mainland real estate companies.
The goal of the withdrawal of the spicy measures is directly to save the stock market and property listed companies, and ultimately to benefit the listing owners. The role of removing spicy measures is only to stop losses for the property market. Without the improvement of global politics and economy, the barely absence of spicy measures will not be able to bring property prices to a record high again.
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1. Developers offering new payment methods 2023-10-21 14:46:56 |
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As the market looks to Wednesday's policy address in hope the "spicy measures" to stabilize the property sector may be removed, developers are offering new payment methods to speed up sales of unsold flats at completed projects amid a high-interest-rate environment. Among their efforts is "move in now, pay later" - a plan that allows buyers to take possession of the flats before making the payments in full by up to two years. Instead of applying for a mortgage that comes with an interest rate of up to 4.125 percent right away, purchasers can now "rent" properties from developers after making down payments. All rental payments made during the period go toward offsetting outstanding payments when a transaction closes. |
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2. Unemployment rate remained at 2.8% 2023-10-21 15:31:36 |
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Hong Kong reported a low seasonally adjusted unemployment rate in the third quarter, remaining at 2.8% in the period of July-September 2023, the same inthe June to Zugust period. Data from the Census and Statistics Department also showed that the underemployment rate remained unchanged at 1% at the same period. The department said the changes in the unemployment rate, not seasonally adjusted, and underemployment rate during the June-August and July-September in different industry sectors varied, “but the magnitudes were generally not large.” |
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3. HK salary increases ranged from 3.6% to 4.3% 2023-10-22 10:58:07 |
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Hong Kong’s overall actual salary increases for 80 corporations ranged from 3.6% to 4.3%, which is the highest in the Greater Bay Area, a study from Hong Kong Baptist University showed. According to The Centre for Human Resources Strategy and Development of School of Business of Hong Kong Baptist University (CHRSD) study, this salary hike range was derived after excluding seven companies with salary freezes. It, however, found that the salary adjustment forecast for 2024 ranged from 3.5% to 3.8%. As for Macao, the overall actual salary increases for the remaining 14 organisations without salary freezes ranged from 3.2% to 4%. The salary adjustment forecast for 2024 would range from 2.8% to 3.3%. |
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4. The Land Registry posted 3,893 sale in Sept 2023-10-23 11:04:19 |
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The Land Registry posted 3,893 sale and purchase agreements for all building units received for registration in September. In a statement, this number is lower by 16.5% compared with August and 19.5% lower year-on-year. The total consideration for such deals fell 14.7% from August to $29.8b in September, whilst year-on-year, it fell 14.4%. Of the agreements, 2,862 were for residential units, down 11.9% from August and declined 26.1% from September 2022. |
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5. Developers'new payment methods to speed up sales 2023-10-23 19:52:22 |
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As the market looks to Wednesday's policy address in hope the "spicy measures" to stabilize the property sector may be removed, developers are offering new payment methods to speed up sales of unsold flats at completed projects amid a high-interest-rate environment. Among their efforts is "move in now, pay later" - a plan that allows buyers to take possession of the flats before making the payments in full by up to two years. Instead of applying for a mortgage that comes with an interest rate of up to 4.125 percent right away, purchasers can now "rent" properties from developers after making down payments. All rental payments made during the period go toward offsetting outstanding payments when a transaction closes. |
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6. Hong Kong is far from revival 2023-10-25 10:13:13 |
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Hong Kong has a long way to go before its real estate market experiences a revival. According to Colliers, there’s a mixed sentiment across the city’s core real estate sectors, with retail being the only one to demonstrate resilience. In 3Q23, rents of high street shops by 2.1% QoQ to $223 psf.
“High street rents are forecasted to grow by 8% YOY in 2023, though retailers remain cautious on short-term expansion plans. We foresee a more distinguished market recovery from H2 2024 and beyond, with a focus on retail experiences and a greater diversity of brands,” said Cynthia Ng, head of Retail Services at Colliers in Hong Kong. Office, on the other hand, observed a drop in rents, particularly in the Grade A office market which recorded a 2.3% QoQ decline in 3Q23 amidst a high vacancy of 14.9%. |
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7. Smart investor made fortune by selling asset 2023-10-26 11:39:49 |
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Although the commercial property market remains weak with both the transaction volumes and prices staying low amid a high-interest-rate environment, there are still investors able to make a killing from flipping their assets. One such was Lau Tak-wah, an investor who has wisely chosen to keep a low profile, unlike another of the same name who managed to find fame and fortune in Hong Kong cinema and stage. Lau got himself a 27-percent return from selling a 450-square-foot shop lot in To Kwa Wan that he bought only two months ago. |
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8. Easing of cooling measures will be insignificant 2023-10-27 14:46:53 |
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The impact of the government’s easing of property cooling measures will be “insignificant,” according to several real estate experts. During the latest policy address, the government announced that it will reduce the Buyer’s Stamp Duty (BSD) and the New Residential Stamp Duty (NRSD) from 15% to 7.5%, amongst others. Colliers’ Head of Valuation & Advisory Services, Hannah Jeong said the impact of the reduction will be limited “since there is a gap with market expectation.” |
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