Economic
News relating to
Property and Construction Market -
New faces are showing up on the HK property development scene -
It may be a good time to enter the HK property development market now
if abundant financial resource is available
A WSJ article today titled "Hong Kong Developer Cartel Being Challenged: Barclays"
reports
that
it is surprising to see new players coming into the HK property market
recently. There are many factors behind the recent "perceived"
changes in the Hong Kong property development market with showing up of
new players and re-emergence of old faces. The fact is that HK is such
lucrative market for property developers that no one will let go of it,
only more would like to get in. There are many factors behind what is
perceived as change. Apart from what Barclays noted, the
perceived change in HK property development market can also be
interpreted in the following way.
Limited small
plot supply
There
had not been abundant supply of smaller development sites suitable for
“small & mid sized" developers in the recent past in HK. Activities
of “small & mid sized" developers were not as obvious as the large
developers, thus giving the impression that they were shut off from the
market. It is predicted that there will be more smaller sites released.
Probably it has started happening.
Limited scope
for further sharp property price rise
HK, being a totally free market, ie. no control
on money going in & out, has experienced sharp fluctuation (or,
rise and sharp rise only in recent years) of property prices due to
large influx of hot money from QE I, QE II in US and huge financial
stimulus package in China (originally meant for tackling GFC). It is
expected that the government will implement policies to "control" the
"uncontrolled" property price rise. It has been started with more land
release in recent months. The only direction for the HK property market
is either "flat" or "down". Large developers have scaled back their
bidding price for development sites, giving more chances for "smaller
& mid-sized" developers.
PSPS housing
scheme
HK has not reacted to the effect of hot money flowing into the property
market quick enough by starting PSPS (Private Sector Participation
Scheme) or other similar housing schemes which cater for the
lower/middle income class. The property prices in the heated
market has galloped off to much higher levels, making it out of reach
of many middle class. These types of PSPS housing development
projects are more suitable for the participation of "smaller &
mid-sized" developers. The new HK chief executive has promised to re-start
PSPS asap....that means more opportunities for "small & medium
sized" developers.
Political factor
The
sharp rise in HK property prices in recent years has created a huge gap
in housing affordability, especially for young people and families. If
so called "high-income professionals" with college degrees cannot
afford a decent shelter, the tough living condition of the
non-professionals can be imagined. The noise from the society shouting,
allegating and accusing of "官商勾结” (collusion between government &
businesses) and "地产霸权" (monopolizing power of property developers), and
echoing of this noise by middle class, sends a signal of risk of social
unrest, if the situation is not managed properly. Changing the
perception by having new & infrequent faces on the market will be
logical and welcomed.
Chinese developers "going abroad"
The appearance of more main land based Chinese developers in the HK
property market is expected, due to active push & "encouragement"
by China for private enterprises to "go-abroad". Chinese private
enterprises can now lever investment finance in foreign currency with
their main land assets and personal guarantees. China is releasing the
power of their huge foreign reserve for foreign investment. HK,
being an on-shore "off-shore" location with the same language, will be
the favourite first stop for many Chinese private enterprises,
including property developers, to exercise their newly found government
facilitated financial muscle.
HK is a lucrative market for property developers. No one wants to
let go, only more wants to go in. If you have the financial
resources, perhaps now is a good time to enter the HK property
development market.
AAPAC Group can help
If you need assistance in terms of entering the HK property development
market, our
company can
help, particularly in the area of property development, project
finance, JV arrangement, project
management, planning, architecture, design, engineering, construction,
building material & system.
Fabian Chan
Source: WSJ -
20.7.2012
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