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Property News Weekly Digest
2018/7/7
〈China Daily, July 7, 2018〉Will the subprime mortgage crisis that brought US banks to their knees and triggered the recession in the United States in late 2007 stage a replay in Hong Kong?

It’s not empty talk or something that can be totally ruled out, given the exponential growth in the shadow banking business in Hong Kong mortgage market over the years.

There’s also the popular perception that a bubble burst in the world’s most expensive property market is unlikely, as the interest rate for bank loans for first-time homes buyers — currently at 2 to 3 percent — has been very low and going up by a further one or two percent is no big deal, plus a slew of harsh measures by local regulators to check speculation, which have all appeared to have assured many that the chances of massive defaults are unlikely.

But, what has unnerved some experts is that the first defaults might spring from the lowest rung of the most problematic mortgage market — ineligible borrowers who have turned to developers, as well as “shadow banking” finance houses, offering lendings of up to 90 percent of a property’s value.

Shadow banking services — typically credit facilities offered by non-banking institutions that operate outside the norms of traditional commercial lending — have grown by leaps and bounds in the past few years, spawning fears that a carbon copy of the US subprime crisis that occurred between 2007 and 2010 may come to haunt the city.

Walking into the office of Axht Company — a local money lender located in Harbour Crystal Centre, Tsim Sha Tsui — customers are confronted by a seemingly ominous sign in big font on the wall that reads: “This room is under video surveillance.”

It’s in this room that clients, many of whom are homes buyers who fail to meet the normal criteria for securing bank credit, could obtain loans of up to several million Hong Kong dollars as

〈Asian Post,July 7,2018〉Mainland investment in Hong Kong's commercial property sector jumped to a new high in the first half of this year, propelled by several high-profile purchases of office towers.

A total of 15 sales of commercial properties worth a cumulative HK$31 billion were completed by mainland investors in the first six months of the year.

These transactions made up 35 per cent of the total commercial property sales worth HK$89 billion in that period, according to figures from international property consultant CBRE.

Last year, mainland investors accounted for 20 per cent of commercial property transactions. "Mainland investors have a strong interest in Hong Kong's office towers. They love those with ocean views," said Tony Ng, the senior director for capital markets at CBRE in Hong Kong. "Office towers in major cities like Beijing and Guangzhou do not enjoy that."

Ng expected the demand from the north to continue to rise. "We will see more mainland Chinese landlords as their interest has now also extended to shops, retail podiums and industrial buildings," he said.

Of the 15 deals in the first half, nine were for office buildings, which saw their values increase because of low vacancy rates and high rents.

Among the transactions, Henglilong Investments in June paid a total of HK$15 billion for the 21-storey Cityplaza Three and the 24-storey Cityplaza Four to Swire Properties.

Both towers are located in the Taikoo Shing residential and commercial development in Quarry Bay, in the east of Hong Kong Island.

〈The Standard, July 6, 2018〉Hong Kong developers are rushing to unload their unsold stock of property as fears grow of tougher market conditions after the government announced new measures to ease the city's long-running housing problems.

The city's chief executive, Carrie Lam Cheng Yuet-ngor, last week announced a vacancy tax on newly built flats that remain unsold for six months, and that the price of subsidised homes under the Housing Ownership Scheme would be cut to 52 per cent of market rates from 70 per cent.

"The prices of flats under the Home Ownership Scheme will look more appealing than before and will probably attract more households to apply for them," said Raymond Cheng, the head of Hong Kong and China research and property at CGS-CIMB Securities, in a research note.

He said the vacancy tax, equivalent to two years of rental income as calculated by government specialists and based on market rates, could force developers to sell faster and to set more conservative selling prices.

"Based on current rental yields of 2.5 per cent, the vacancy tax will account for 5 per cent of the property value. We believe a vacancy tax rate of 5 to 6 per cent is high enough," Cheng said.

In the wake of the announcement, Sun Hung Kai Properties, the largest developer in Hong Kong by market value, unveiled prices for the first batch of 128 flats at its incomplete St Martin development in Tai Po yesterday. The flats, phase two of the total 640-unit development, will be offered for sale next week.

〈The Standard, July 5, 2018〉The chances of seeing many big-ticket deals in the local property market are less likely for the second half of 2018 compared with previous quarters, mainly because of limited stock in the market, but leasing and investment sentiment will remain strong, said Marcos Chan, head of research, CBRE Hong Kong, Southern China and Taiwan.

The new expansion demand from mainland financial firms and co-working operators will keep the office market robust, said Alan Lok, executive director of advisory and office transaction services, CBRE Hong Kong.

The footprint of co-working centers was 1.1 million square feet in 2017 and is estimated to surge to 1.6 million sq ft by the end of the year.

In the industrial and logistics sector, the leasing activities in the second half of 2018 will continue to be driven by relocations from building redevelopment as well as technology-related companies seeking alternative industrial facilities, said Samuel Lai, senior director of advisory and industrial transaction services, CBRE Hong Kong.

The launch of the Hong Kong-Zhuhai-Macau Bridge and Express Rail Link later this year will drive the demand for the flow of logistics and people, he added. Subsequently, the demand for related facilities and services is set to bring new excitement to the industrial and logistics sector.

〈The Standard, July 5, 2018〉Sun Hung Kai Properties (0016) yesterday said that it will launch the pre-sale and price list next week of more apartments in certain new residential projects that will provide small-sized flats.

Deputy managing director Victor Lui Ting said more apartments will be offered for sale at the group's Victoria Harbour project in North Point and its St. Martin project in Pak Shek Kok in Tai Po.

Meanwhile, Moody's Investors Service said the Hong Kong government's newly introduced tax on new vacant private apartments will have a moderate and manageable impact on Moody's-rated local developers.

"Most Hong Kong developers that we rate either show sufficient liquidity to absorb the proposed tax, or have enough profit cushion to absorb discounts needed to clear inventory," said Stephanie Lau, vice president and senior analyst at Moody's.

Among Moody's-rated Hong Kong developers, Sun Hung Kai Properties, CK Asset Holdings (1113) and Nan Fung International have relatively greater exposure to Hong Kong's residential property market compared to their peers.

"These three developers will be compelled to accelerate their residential sales pipelines that are potentially subject to the new levy. However, the timing of property sales related to the higher-end market will be more unpredictable," Lau said.