Over the decades, I didn’t panic when my house was worth HK$5 million and I didn’t celebrate at HK$50 million. This concrete box is my home
Hong Kong’s property market is going through one of its periodic shakeouts. Just about every sector is suffering at the moment.
Two new prominent grade A office buildings in Central are reported to be struggling to attract tenants. A four-star hotel up for sale has just had its asking price slashed by 40 per cent – from HK$1 billion to HK$600 million. Empty shops can be seen everywhere.
The most prominent case might be the luxury mall at the 1881 Heritage site in the prime shopping district of Tsim Sha Tsui, reported to have only three tenants now. In nearby Canton Road, a shop previously occupied by a watch brand has been taken over by a bank after the rent was cut by 80 per cent. There are similar stories around Causeway Bay.
Near where I live is a stretch of four street-level shop units that might serve as a microcosm of the current market situation: one is an empty retail store; it is surrounded by three property agent offices.
Despite the clear writing on the wall, some landlords still don’t get the message. Recently, there was a popular tea cafe in Kwun Tong that had to close down because of a proposed major rent increase. The space was subsequently let to a different tenant for the reduced rate that the tea shop had been prepared to pay.
I am aware of office space in Admiralty which was left vacant for a year when the old tenant and landlord were unable to agree. It was later let to a new tenant at a price the outgoing one had offered to pay.
These indicators are important because they confirm that our economy is recovering only slowly from the pandemic years, and tepid growth affects the whole community. But my major concern is with developments in the residential housing market.
Here, the range of living conditions and financial circumstances is so wide as to threaten social stability. At one end of the spectrum we have luxury mansions on The Peak being sold at a “discount” price of several hundred million Hong Kong dollars. At the other, we have more than 200,000 people living in tiny subdivided units.
Somewhere in the middle are the private apartments for sale or rent. Here, the wind seems to be blowing in several different directions at once.
Most eye-catching are the discounts of up to 38.5 per cent being offered by the developer of a major project in Kai Tak. Previously, discounts were 22 per cent. The argument for such deep price cuts is that several more major developments are about to come onto the market, some in Kai Tak but others in areas including Yuen Long, North Point, Wong Chuk Hang and Tai Po.
With such a large market overhang, developers risk being left with substantial unsold inventory. With mortgage rate cuts about to kick in once the US Federal Reserve adjusts interest rates downwards later this month, agents are saying this is a good time to buy.
On the other hand, from the point of view of potential buyers, if a price war is just starting, why not wait a bit longer to see who will cut next and by how much? Furthermore, how do buyers of the units sold earlier at smaller discounts feel?
Meanwhile, the rental market is reported to be going strong, partly because of the influx of tertiary students from outside Hong Kong, and partly from the arrival of new immigrant professionals looking for short-term lets before committing to home purchases. So rents in the private sector are rising.
Given the fluid situation, the banking sector has become relatively conservative in granting mortgage loans. A friend told me recently of her daughter’s case where she and her partner were told to put down a deposit of 40 per cent of the list price of a new apartment before the bank would only lend the 60 per cent balance.
Now I don’t purport to be an expert on the local property market so I am not going to offer any advice to potential buyers. But I can report on my personal experience over the past 38 years. I first stepped onto the property roller coaster here in 1986. By 1997, following some changes in personal circumstances, I ended up with my current apartment for which I had paid about HK$8 million.
Within three years, thanks to the East Asian economic crisis, the value had dropped to a little over HK$5 million. But then the economy boomed and so did property prices: at the top of the market, I was given an indicative price of over HK$50 million by a developer who wanted to buy up the whole block for redevelopment. Given the recent downturn, the current price is probably more like HK$20 million.
I didn’t panic at HK$5 million, I didn’t celebrate at HK$50 million, and I don’t begrudge the “lost profit” in the fall to HK$20 million. This concrete box has become my home. This is where we raised our children – this has been my life.
So my suggestion to families considering a property purchase is simple. Decide what it is you want out of life. If you can find a nice property where you feel comfortable, which could be your home, at a price you can afford, then why not forget about future price fluctuations? You have already won the lottery of life. Enjoy.
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