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Large property rent-collection companies are in dire straits
2024-8-3
In Hong Kong, large property landlords can earn rents and enjoy a steady amount of assets appreciation annually. However, they could avoid taking the risk of the developers to sustain the strong impact of the property market devaluation causing a sharp decrease in property sales income. Three years ago, the stock prices of many listed large rent-collecting companies have been falling from 50% to 70%, and its extent of assets depreciation is much larger than the decline in property prices.
Recently, Wharf Real Estate Investment issued a pre-warning loss of HK$ 900 million in profit and loss statement in the first half of  this year. Compared to the same period of last year, it earned HK$ 1.805 billion.
Hang Lung Properties, which owns a number of high-quality commercial properties and shopping malls in first- and second-tier cities in China, made a net profit HK$ 1.061 billion in the first half of this year. However, it is down 55.7% annually. The latest share price of Wharf Real Estate is Hk$ 19.5 per share, which has been falling 70% from record high, and the current price of Hang Lung is HK$ 8.25 per share, which has also tumbled by 60% from the peak level.
As the major shareholders of these two rental-collection companies, their total net assets have been reduced by 60 to 70 per cent after considering the loss of share price and assets depreciation. The majority of large rent-collection of non-listed companies are less likely to update their assets valuations annually, and its executives are likely to underestimate the risk of excessive borrowing. Until now, a number of insolvency incidents of these companies revealed the above-said problems.
Nowadays, the property market has fallen into the downturn adjustment, the final adjustment may exceed two-thirds from the record high. While the vacancy rate of industrial and commercial properties has been rising, the property valuation and rents have been decreasing at the same time. Therefore, the negative cash flow of these companies will become the new normal. Those large rent-collection companies are now in dire situation and have no clue when it will go through this gloomy recession.
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1. Dock 1A is being transformed into modern all 2024-08-03 13:28:44 |
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Dock 1A, a mall located at 1A Chui Tong Road in Sai Kung district, is being transformed into a modern recreational and lifestyle hub. The property is now available for lease, with the grand opening scheduled for January 2025. The 10-storey shopping mall offers over 56,000 sq ft of leasing space. It will be the first mega shopping mall and parking facility in the Sai Kung district, featuring a wide range of shops, dining, and entertainment options, including coffee shops, a fitness centre, a supermarket, and stores for kids' entertainment and pet supplies. The mall will also have over 380 parking spaces from the fifth floor to the rooftop. |
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2. Office occupiers are downsize office spaces 2024-08-07 11:08:17 |
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Office occupiers are increasingly prioritising cost savings to control overhead costs. 27% of businesses are planning to downsize their office footprint as companies become more cost-conscious, with an appetite for expansion low, according to Colliers. Because of this rental rates across all submarkets fell in Q2, causing overall Grade A office rent to decline 1.% QoQ June 2024. Central/Admiralty also declined 1.2% QoQ whilst Island East experienced the sharpest drop out of all submarkets, 2.4% QoQ. Moreover, vacancy climbed to 16.6% in Q2 2024. |
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3. HK named as a “pivotal global financial hub” 2024-08-08 12:04:10 |
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Hong Kong has been named a “pivotal global financial hub” and international asset management centre, joining Shanghai, Singapore, Sydney and Dubai as one of 5 new wealth hubs, reports Knight Frank. The city stood out for its regulatory frameworks, capital markets, and connectivity to the Chinese mainland, the real estate consultancy firm said in the 2024 edition of its "Rise of the Super Wealth Hub" report series. The report assessed the habitability and attractiveness of wealth hubs insix core areas: urban prosperity, governance & talent, legal framework, enterprise excellence, lifestyle, and opulence. Knight Frank indicated a score between 0 and 1, with 1 being the highest Hong Kong scored over 0.8 in three categories: legal framework (0.91), urban prosperity (0.85), and enterprise excellence (0.8). It also got passing marks for governance and talent (0.66). |
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4. Poor outlook of HK and CHINA 2024-08-09 17:05:36 |
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HK governement still not yet see the bad effects due to the collapsing housing price for HK property. The poor economy performance is mostly due to lack of demands which is coming from the fact that the property price has dropped significantly causing the negative wealth effect. It also caused the banks to shrink its mortgage market, and less cash lending, more conservative approach towards loans approval. Housing price has caused middle class to reduce its budget for the spending. It also impacts the property developers not to bid for the new land, the HK reserve has been dropping more than 50% over the past several years. Sooner or later, HK government has to issue government bonds to use as the income which is very ridiculous. These bonds have to be paid and returned back in case with interest. Definitely, these are not the incomes, the wrong understanding of financial siutation of HK would likely cause the HK rating to drop and finally causing the fear & outflow of cash from foreign |
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