Everything about Landscope Christie's International Real Estate and the Hong Kong luxury property market

Liquid capital

If there is anything which can be read into the recent major transactions in the high-end market, the lack of investment avenues must take top spot. The lacklustre equity and bond markets and the declining commodities market worldwide have affected the real estate market, never mind other factors such as the credit squeeze.

Locally, there is still plenty of investment funds from both corporate and individuals, as Hong Kong investors are traditionally conservative compared to their American and European counterparts especially in non-property markets. Parking money at a bank means zero or negative return as interest rates are not enough to counter inflation. Thus, idle capital has to be invested somewhere. Recent sales of large houses and apartments, including The Opus on Stubbs Road, have pointed to the fact that the money is finding its way into real estate. We have also witnessed a rising number of enquiries about larger properties, notably houses that are usually priced at over $70 million, indicating a potentially huge war chest among investors.

Despite the government’s latest attempts to increase the housing supply – which includes the exemption of premiums on resale of Home Ownership Scheme (HOS) flats – the shortfall in the land bank is clear, prompting speculators to jump on the bandwagon, even though there is no indication that the punitive Special Stamp Duty will be removed any time soon. As a result, the small flats market has experienced a sudden surge in sales and a price hike. More recently, the government announced measures to speed up the conversion of factory buildings into residential units for letting, illustrating the dire lack of developable land territory-wide.

However, nothing will be done in the luxury residential supply; and nothing can be done – at least in the foreseeable future. This explains why, despite a noticeable drop in activity in the high-end sales market in the last 14 months, prices have actually hiked up. Luxury property owners know too well that the more they delay a sale, the more likely the price will go higher – the chronic supply shortage has underpinned this price growth. With other investment avenues drying up, liquid capital has naturally found its way into the property market. What would otherwise adversely impact the property market is now in fact proving to be a benefit and a boon by channelling investment capital its way.

By Koh Keng-shing