Taxes on luxury-home purchases go up, supply of apartments to rise

HONG KONG: Hong Kong will increase taxes on luxury-home purchases for the first time in more than a decade and boost the supply of apartments as a surge in prices last year fuels concerns that the market may be overheating.

Stamp duty on homes selling for more than HK$20 million (S$3.6 million) will rise to 4.25 per cent from 3.75 per cent beginning in April, Financial Secretary John Tsang said in his annual budget speech yesterday.

Buyers of these flats would no longer be allowed to defer payment of stamp duty. The measure could be extended if excessive speculation was detected in the trading of less expensive properties, he said.

The government will also put more residential sites up for auction, he added.

Mr Tsang warned that a recent property frenzy, driven by a huge inflow of more than HK$640 billion since late 2008, could threaten economic stability.

‘If capital flows were to reverse or interest rates rebound, asset prices would become more volatile. This in turn may affect the stability of our financial system and the recovery of the real economy.’

Overall housing prices in Hong Kong rose above 30 per cent last year due to demand from wealthy mainland Chinese, tight land supply and loose monetary policy.

Mr Tsang said the government would strive to increase residential land supply, with plans to auction several urban residential sites in the next two years if market conditions allow.

He also pledged to prevent excessive expansion in mortgage lending.

Prices of some luxury flats returned to the peaks of the 1997 property boom last month, he said.

But some analysts said the moves unveiled by Mr Tsang would have limited effect.

‘It doesn’t help to cool the property prices. It can’t because most of the luxury property buyers come from China. They will not care about a 4.25 per cent or even 5 per cent tax,’ said Mr Castor Pang, head of research at Cinda International.

‘They think property investments in Hong Kong are quite safe,’ he added.

Mr Wong Leung-sing, head of research at Centaline Property Agency, said a bubble would still be created with Hong Kong’s interest rates remaining low due to its currency peg to the US dollar.

He said: ‘The economic boom in China and low interest rates in the United States are two major external factors that together will almost guarantee a property bubble in the next few years.’

Share prices of property firms rose after the budget speech as stock investors were relieved that the measures were much weaker than expected.

Ms Nicole Wong, a Hong Kong-based real estate analyst at CLSA Asia-Pacific Markets, said the stamp-duty increase was ‘lip service’ as the measure will affect only about 2 per cent of the property market.

Stimulus measures by governments around the world have boosted liquidity, which has led to large fund inflows into Asia, driving asset prices higher, Mr Tsang said.

Land sales and stamp duties were the major contributors to the government’s surprise surplus of HK$13.8 billion for the 2009-2010 financial year, he added.

The government is ‘cautiously optimistic’ about Hong Kong’s economy this year and expects it to grow by 4 per cent to 5 per cent.

The city emerged from its latest recession in the second quarter of 2009, when its gross domestic product rose 3.5 per cent on a quarterly basis after four consecutive quarters of contraction.

Source: Straits Times, 25 Feb 2010

Move may drive speculators to target lower end of property market

Hong Kong raised taxes on luxury homes for the first time in more than a decade, a move some analysts said may backfire by fuelling speculation in the cheaper housing market.

Stamp duty on sales of more than HK$20 million (S$3.6 million) will rise to 4.25 per cent from 3.75 per cent from April 1, Financial Secretary John Tsang said yesterday in his Budget speech, citing the increased risk of a property bubble.

For people buying their own homes ‘there might be some impact, but it shouldn’t be that big,’ said Buggle Lau, chief property analyst at realty company Midland Holdings Ltd. ‘For speculators, the cost of speculation increases, so they may shift their target to the lower end of the property market.’

The lowest mortgage rates in at least two decades and an influx of overseas capital equivalent to more than a third of Hong Kong’s annual gross domestic product helped fuel a 29 per cent gain in property prices last year.

The government is concerned at the risk to the economy should interest rates rise and will move to limit speculation if it spreads, Mr Tsang said.

‘If there’s a reappearance of speculation, we will act quickly with measures to cool down the market,’ Mr Tsang told reporters yesterday. While ‘it’s easy for the government to roll out some measures pushing home prices down, it’s difficult to push them back up. We won’t act recklessly.’

The new transaction tax on luxury homes, the first increase since 1999, will only affect about 2 per cent of the property market. Of 110,000 Hong Kong residential sales in 2009, about 2,000 sold for more than HK$20 million, according to Midland.

‘It will have a 0.01 per cent impact because they raised the stamp duty by half a percent on properties accounting for 2 per cent of the total market,’ said Nicole Wong, a Hong Kong- based real estate analyst at CLSA Asia-Pacific Markets, the regional brokerage unit of Credit Agricole SA. ‘What they announced today is only paying lip service. It will have almost no impact because there is no sign of determination.’

Mr Tsang said the government will also seek to address the supply of land for development by putting more residential sites up for auction.

The change in auction policy could also have an unintended effect as prices ‘in bull markets become signposts’, said Ms Wong. ‘More auctions more frequently could even fuel the property market further.’

In Hong Kong, the primary source of land available to property developers is through government auctions. The operator of the city’s Mass Transit Railway, the MTR Corp, and the Urban Renewal Authority also put sites up for tender.

Under the current system for government auctions, developers must indicate interest in a site on a government list. Once a ‘trigger price’ has been met, the land is auctioned. Mr Tsang said the government would now put sites up for sale at its own discretion.

He said the government will also ensure an increase in the supply of small and medium-sized flats by imposing conditions of future land sales. The government held the first land auction of 2010 on Feb 22.

‘Overall the government wants to increase the land supply,’ said Midland’s Mr Lau, who noted there were only two auctions last year. ‘In the past the land bank replenishment pace has not been very fast.’

Luxury property prices, for which there is no official index, may have risen as much as 40 per cent last year, Ms Wong said. Buyers of luxury homes were undeterred by an October increase in downpayment requirements from 30 per cent to 40 per cent.

Since the fourth quarter of 2008, HK$640 billion of capital had flowed into Hong Kong’s HK$215 billion economy, Mr Tsang said.

Sun Hung Kai Properties Ltd, the world’s biggest developer by market value, reported selling 900 homes in the suburban Yuen Long area for HK$4.2 billion on Feb 20 and 21, or an average of HK$5,400 per square foot. That compared with HK$3,000 in the same area a year ago, Centaline Property Agency Ltd said.

‘The increased risk of a bubble forming in the property market has also aroused public concern about the difficulty in buying homes,’ Mr Tsang said.

Shares of real estate developers gained after the speech, with Sun Hung Kai adding 1.5 per cent to HK$107.20 at the close of trading and Sino Land Co. up 1 per cent at HK$13.92. The Hang Seng Property Index was the only one of the four industry groups on the benchmark gauge to rise.

The stocks gained because ‘there is nothing too radical on property’ in the Budget, said Andrew Sullivan, a sales trader at Mainfirst Securities Hong Kong Ltd.

Source: Business Times, 25 Feb 2010

Stamp duty on luxury property sales raised in Budget; supply of flats to increase

Hong Kong’s government yesterday raised the stamp duty on luxury property sales and warned that more such measures could follow – the clearest sign yet that officials there fear the consequences of a bubble forming, and then bursting, in the territory’s private- home market.

The transaction tax on properties worth more than HK$20 million (S$3.63 million) will be increased to 4.25 per cent on April 1, from 3.75 per cent now, Financial Secretary John Tsang said in his Budget speech yesterday. In addition, buyers will no longer be allowed to defer payment of stamp duty on such transactions.

The government may also raise the transaction tax on properties valued at HK$20 million or less, ‘if there is excessive speculation in the trading of these properties’, Mr Tsang warned.

An inflow of over HK$640 billion of funds into Hong Kong since the fourth quarter of 2008 has increased the risk of creating asset-price bubbles, he said. ‘We are also concerned that if capital flows were to reverse or interest rates rebound, asset prices would become more volatile. This in turn may affect the stability of our financial system and the recovery of the real economy.’

The large inflow of capital has also pushed up the prices of luxury flats, as well as smaller apartments, he said. Overall, property prices are 8 per cent above their peaks before the recent financial crisis; some luxury-flat prices have even returned to their peaks reached during the 1997 property boom, he added.

The rise in property prices has picked up again after slowing slightly in the fourth quarter of last year, and turnover has also increased, Mr Tsang said. He added that he was ‘particularly concerned’ that some people would be unable to meet their mortgage payments if interest rates rise from their current, unusually low, levels.

The government will also work to increase the supply of affordable flats, and will put up several urban residential land sites for sale by auction or tender in the next two years, if the sites have not been triggered by an application by a private developer, Mr Tsang said.

‘The measures are quite similar to those introduced recently by Singapore to rein in excessive exuberance in the residential property market,’ said Leonard Ong, executive director at KPMG Tax Services here. ‘The Hong Kong government is clearly concerned with the risk of a property bubble forming.’

Tracy Ho, tax partner at Ernst & Young in Hong Kong, said that the moves to cool the property market were not surprising, given the sky-high prices seen in a number of property transactions in recent months. ‘I wouldn’t call it unbelievable, but you wouldn’t think some of this would happen after the financial tsunami.’

The aim of raising the stamp duty ‘is really to increase the transaction costs for speculators, to cut down the speculative atmosphere’, she added.

Last October, the Hong Kong Monetary Authority reduced the loan-to-value limit on housing loans for properties worth HK$20 million or more to 60 per cent, from 70 per cent, and capped the maximum loan amount for cheaper properties at HK$12 million.

In Singapore, the government also introduced various measures late last year to curb speculation in the property market.

Last Friday, it announced a seller’s stamp duty to be levied on those who buy a residential property and sell it within a year, and lowered the loan-to-value limit on housing loans to 80 per cent, from 90 per cent.

Yesterday, Mr Tsang said he expects the Hong Kong economy to expand 4-5 per cent this year, after shrinking 2.7 per cent last year.

He also introduced several proposals to promote a ‘green economy’, including a HK$300 million fund to spur the transport industry to test energy-saving and low-carbon-emission transport technologies; a HK$540 million subsidy scheme to encourage the replacement of older, more polluting diesel commercial vehicles; and tax incentives to promote the use of environment-friendly commercial vehicles.

Source: Business Times, 25 Feb 2010

Sun Hung Kai Properties Ltd, the world’s biggest developer by market value, won Hong Kong’s first land auction of the year with a bid that exceeded most analysts’ estimates after selling 900 homes over the weekend as demand for property in the city surges.

The shares closed 2 per cent higher after the developer paid HK$3.37 billion (S$611 million) for the site in the eastern Tseung Kwan O district. The company raised HK$4.2 billion in a weekend apartment sale that attracted 120,000 prospective buyers in the city of seven million.

The land auction and the weekend sale fanned speculation a bubble is forming in Hong Kong’s housing market, where home prices surged 29 per cent in 2009 as low interest rates and an increase in buying by mainland Chinese stoked demand. Norman Chan, chief executive of the Hong Kong Monetary Authority, told lawmakers on Feb 1 that the city faces a ‘huge’ potential risk of bubbles forming in its asset markets given high liquidity.

‘The outcome is positive for the Hong Kong property market,’ said Eva Lee, a Hong Kong-based property analyst at Macquarie Securities Ltd. ‘People expect 2010 won’t be an easy market given the strong growth last year, but the auction has reinforced their confidence.’

Sun Hung Kai spokeswoman Brenda Wong confirmed the company made the winning bid yesterday. Price estimates for the auction ranged from HK$2.6 billion to HK$3.4 billion, and the median projection of five analysts Bloomberg News surveyed by phone and e-mail was HK$2.9 billion.

Hong Kong is trying to ease a shortage in land supply and new properties that developer Cheung Kong (Holdings) Ltd said last month may help raise home prices by as much as 20 per cent this year.

Sun Hung Kai paid a ‘reasonable’ price for the site, Victor Lui, executive director of Sun Hung Kai’s real estate broker, said by phone yesterday. The price paid was ‘higher than expected but reasonable’, he said, adding he is ‘positive’ about the outlook for the property market.

Sun Hung Kai plans to invest HK$6.5 billion on the plot of land in a medium-sized residential project, which may take between three and four years to complete, Mr Lui said.

The developer at the weekend sold 900 apartments at the Yoho Midtown apartment complex in northwestern Yuen Long district for an average HK$5,400 per square foot, Amy Teo, Sun Hung Kai project director, said. That compares with an average HK$3,000 per square foot for new homes in the area a year ago, according to Wong Leung-sing, an associate director at Centaline Property Agency Ltd.

‘All the ingredients are in place for a property bubble in Hong Kong, including low interest rates and limited supply, but I don’t think we are in one yet,’ said Buggle Lau, chief property analyst at Midland Holdings Ltd. ‘If more speculators enter the market then it could push prices up too high.’

The city had the world’s fastest-growing major housing market last year, according to a survey compiled by real-estate agents Knight Frank LLP.

Some 120,000 prospective buyers have flocked to the show homes since Feb 19, Ms Teo said, speaking at the display properties set up in a shopping centre near the apartment complex in the city’s New Territories. Sun Hung Kai increased the number of apartments on sale to 900 from 700 because of demand, she said. The building complex has a total of 1,890 homes, according to Ms Teo.

About 40 units were immediately advertised for resale at asking prices of as much as 20 per cent more than the original costs of purchase, the South China Morning Post newspaper reported, citing property agents.

The number of private homes completed in Hong Kong last year fell 18 per cent to 7,200 units, the lowest since 1997, the government said in a report on Jan 22.

The city’s home sales more than doubled in value in January from a year earlier to HK$36.2 billion, according to figures released by the government’s land registry.

Sales gained 4.1 per cent last month from December, the agency added.

The authority, Hong Kong’s de facto central bank, raised deposit levels for luxury apartments in October to try to cool lending. The government also plans to raise stamp duty, or transaction tax, on homes selling for more than HK$20 million to 4.5 per cent from 3.75 per cent in a bid to rein in the property market, the Chinese-language Sing Tao Daily said on Feb 11.

‘Government intervention could lead to higher interest rates, but I can’t see mortgage rates much above 2.5 per cent this year, which is unlikely to deter some buyers,’ said Midland Holdings’ Mr Lau.

Prices may rise as much as 15 per cent in the first quarter, Centaline’s Mr Wong said. Hong Kong’s Chamber of Commerce forecasts the city’s economy may grow between 3 per cent and 4 per cent this year.

‘Given that the US is unlikely to raise interest rates sharply and the yuan is under appreciation pressure, Hong Kong property prices may have substantial growth this year, but there is also a risk of a bubble,’ said Benny Wong, executive director at Hong Kong-based Pan Asian Mortgage Advisory Company Ltd. ‘I expect the Hong Kong government will increase land supply this year in response to the high prices.’

Source: Business Times, 23 Feb 2010

Cheung Kong warns buyers to look out for a bubble amid an ‘unusual rise’

The Hong Kong property market has risen too fast and buyers must look out for a bubble, Cheung Kong (Holdings) Ltd’s executive director Justin Chiu said.

‘The rise is a bit unusual,’ Mr Chiu said in a Bloomberg Television interview yesterday. ‘There should be a correction at some point.’ Low mortgage rates and buying by rich mainland Chinese drove a 29 per cent gain in Hong Kong home prices last year. The city faces a ‘huge’ potential risk of bubbles forming in its asset markets as low interest rates and high liquidity drive up prices, Norman Chan, chief executive of the Hong Kong Monetary Authority, said last week.

Cheung Kong, controlled by billionaire Li Ka-shing, last month forecast luxury-home prices may rise 15 per cent this year, and those for new mass-market residences may climb 15 per cent to 20 per cent.

‘House prices now are still almost 50 per cent below the 1997 high and affordable to households,’ said Buggle Lau, chief analyst for properties at Hong Kong-based Midland Holdings Ltd. ‘It is too early to call it a bubble.’ Hong Kong prices rose about 40 per cent from June to January, and buyers must not expect the same pace of growth in prices in 2010, Mr Chiu said. ‘When people make their buying decisions, they should be cautious,’ he said. ‘Low interest rate environment will not last forever.’

Prices for luxury homes in Hong Kong, defined as those costing at least HK$10 million (S$1.83 million) or bigger than 1,000 square feet (92.9 square metres), may rise 20 per cent this year, real estate broker CB Richard Ellis Group Inc said on Jan 12. Prices for non-luxury homes may rise 15 per cent, it said.

The Hong Kong government has taken ‘appropriate steps’ to warn investors about overheating in the market and will increase land supply this year to curb gains in home prices, Mr Chiu said.

Hong Kong suspended scheduled land sales in November 2002 as real estate prices fell after the 1997-98 Asian financial crisis, the 2000 bursting of the dot-com bubble and the Sept 11, 2001, terrorist attacks. It resumed sales in January 2004, introducing a system of selling land through auctions only after developers promise to pay a minimum amount, part of an undisclosed reserve price.

Cheung Kong rose 0.6 per cent to HK$90.65 at the close of trading in Hong Kong. The shares climbed 37 per cent in 2009, underperforming the 66 per cent advance in the Hang Seng Property Index.

Source: Business Times, 9 Feb 2010

Cheung Kong Holdings also says HK and China’s property markets not in bubble situation

Hong Kong’s luxury home prices may rise as much as 15 per cent this year, and there are no bubbles in the city’s and China’s property markets, said Cheung Kong (Holdings) Ltd, the builder owned by Asia’s second-richest man, Li Ka-shing.

Prices for luxury homes may increase 10-15 per cent this year, and for new mass-market homes 15-20 per cent, said Cheung Kong executive director Justin Chiu in Hong Kong yesterday. Revenue from China home sales may exceed 30 billion yuan (S$6.14 billion) this year, he said. That compares with his September forecast of 1.5 billion yuan for 2009 sales.

‘I don’t really see a bubble,’ Mr Chiu said. ‘There shouldn’t be too much concern about the governments trying to crush the market.’ Mr Chiu’s comments pit him against investor Jim Rogers, who said on Tuesday that real estate prices in the city and Shanghai are in a bubble and ’should decline’. Property prices in 70 cities across China climbed 7.8 per cent in December, the fastest pace in 18 months. Hong Kong’s real estate prices rallied the most among the world’s major housing markets last year, according to property adviser Knight Frank LLP.

Prices in the last six months of 2009 rose by 30 per cent in Hong Kong and 20 per cent in China, leading Mr Chiu to conclude that speculators may be at work.

‘We think that the substantial increase in such a short time, means that there could be a speculation element,’ he said. ‘That’s why I advise buyers to really see whether they have the means to commit to buying an apartment. They should be careful.’

Record new loans fuelled a 75.5 per cent jump in China’s property sales last year. Home prices in Hong Kong, a trading and financial hub for China, are at their highest in almost 12 years, leading the World Economic Forum and Goldman Sachs Group Inc to caution about the formation of asset bubbles.

Homes sales in China, Hong Kong and Singapore by Cheung Kong, the world’s second-biggest developer by market value, may exceed HK$100 billion (S$18 billion) if the company obtains government consent for all projects, Mr Chiu said.

Cheung Kong’s share price fell 1.9 per cent to HK$98.10 as of 2.40 pm in Hong Kong. The stock’s 37 per cent gain last year made it 2009’s worst performer in the six-member Hang Seng Property Index. It has dropped 1.8 per cent this year, compared with the 4.5 per cent decline in the index.

Fred Hu, Goldman Sachs’s chairman for Greater China, said on Jan 18 that property prices in China require monitoring for signs of bubbles forming.

Prices at some luxury residential projects in Shanghai doubled last year, with Shui On Land Ltd’s Casa Lakeview recording sales of 100,000 yuan per square meter in December, Lee Wee Liat, an analyst at Nomura International Hong Kong Ltd, said last week.

Mark Mobius, who oversees US$34 billion of developing-nation assets at Templeton Asset Management Ltd, disagrees with Mr Rogers, saying on Jan 7 that the bubble in China’s property market isn’t about to burst. Gross domestic product rose 10.5 per cent in the fourth quarter from a year earlier, according to the median of 41 forecasts in a Bloomberg News survey for the release scheduled today.

‘The Chinese will act rationally and they’re not going to kill the market,’ he said.

Mr Rogers, author of A Bull in China, said in on Tuesday that real estate in Shanghai and Hong Kong is ‘very overpriced’. Hong Kong ‘Limited’ Garry Evans, head of global equity strategy at HSBC Holdings Plc, said in a Bloomberg Television interview on Tuesday that ‘China is no way near a bubble’. Hong Kong developers, including Kerry Properties Ltd, Shui On and Hang Lung Properties Ltd, are building homes, offices and shopping malls in China to capture market share in the world’s fastest-growing major economy. The strategy will continue even as China acts to cool the property market, analyst Adrian Ngan said.

‘It’s a long-term strategy, it’s a must, because the growth in Hong Kong is very much limited,’ Mr Ngan, a Hong Kong-based analyst at CCB International Ltd, said before Mr Chiu’s comments.

To cool property speculation, China this month reinstated a sales tax on homes sold within five years of their purchase, and the country’s Cabinet on Jan 10 urged strict applications of a 40 per cent down-payment requirement for second homes.

China accounts for about 10 per cent of Hong Kong-based Cheung Kong’s earnings, Mr Ngan said.

Ronnie Chan, chairman of Hong Kong-based Hang Lung Properties Ltd, said the tightening measures in China will not have an impact on the company’s real estate projects in the country because ‘we have zero debt’. Hang Lung’s strategy of focusing only on developing commercial properties in China helps the developer avoid being affected by volatility in residential prices, the target of tightening efforts, Mr Chan said at a financial forum in Hong Kong yesterday.

Hong Kong home prices, where average values climbed 33 per cent, rose the most among the world’s major housing markets last year, according to property adviser Knight Frank LLP. An index of existing homes is at its highest since March 1998, according to a weekly weighted measure developed by Centaline Property Agency Ltd and the City University of Hong Kong.

Billionaire Mr Li, 81, is dubbed ‘Superman’ by Hong Kong’s media because of his track record for investing. He has a 41.7 per cent stake in Cheung Kong after adding to his holdings 29 times since December, stock exchange filings show.

Mr Li, estimated to be worth US$16.2 billion by Forbes magazine in March, correctly predicted in 2007 that China’s stock market was in a ‘bubble’.

Source: Business Times, 21 Jan 2010

SOUTH-EAST Asia’s largest developer, CapitaLand, is set to stage a giant US$2.2 billion (S$3 billion) acquisition of Hong Kong property investment holding company Orient Overseas Developments Limited (OODL).

CapitaLand China Holdings (CCH) – a wholly owned subsidiary of CapitaLand Limited – announced yesterday that it had signed an agreement to buy OODL from Hong Kong-listed container line Orient Overseas International Limited (OOIL), controlled by the family of former Hong Kong chief executive Tung Chee Hwa.

The deal – set to be completed by the end of the first quarter – will boost CapitaLand’s real estate business with a portfolio of seven sites in Shanghai, Kunshan and Tianjin boasting a total gross floor area of 1.48 million sq m.

Some 87 per cent of that is in Greater Shanghai, while the remaining is in the Tianjin city centre.

Residential area constitutes the largest component – 56 per cent – while offices, serviced apartments and hotels, and retail make up 19 per cent, 17 per cent and 8 per cent respectively, according to CapitaLand.

The purchase will, at a stroke, double the firm’s China property portfolio from 1.4 million sq m to 2.8 million sq m, and increase CapitaLand’s assets in China to approximately 36 per cent.

CapitaLand group chairman Richard Hu said the proposed acquisition was timely and provided an excellent strategic fit.

‘It also fits into our stated goal of growing our asset size in China from the present 28 per cent of total assets to 45 per cent over the next five years, as we remain very confident of the long-term future of the country,’ he said.

The developer will fund the acquisition from internal cash resources, much of which have been generated by the initial public offering of CapitaMalls Asia, which raised $2.8 billion in November. CapitaLand will assume responsibility for a US$1.05 billion shareholder loan owed by OODL to its parent.

CapitaLand president and chief executive Liew Mun Leong said the acquisition, which is still subject to OOIL shareholder approval, represented an ‘opportunistic’ investment.

As most of the sites already have planning and land-use approval, and some have construction permits in place, red tape is reduced and developments can be released quicker to the market.

‘In Shanghai, demand far exceeds supply, and the competition for land at good price levels is tough. With one go, we have solved a few years of land acquisition problems,’ Mr Liew said.

He is bullish about demand, citing Shanghai’s position as a financial centre and its status as a main shipping hub as key engines of growth, while CapitaLand China executive committee deputy chairman Lim Ming Yan said urbanisation would help keep demand high.

DMG & Partners Securities analyst Brandon Lee said the acquisition was likely to be a positive move for CapitaLand in the medium to long term.

‘Some of CapitaLand’s developments have been in lower tier cities so far. This will really allow it to expand its footprint – especially in Shanghai and Tianjin – which are good growing cities in property development,’ he said.

Hong Kong’s OOIL said yesterday it expected to book a profit of US$1.06 billion from its China property sale to Singapore’s CapitaLand.

The transaction represented an opportunity for the group to redirect capital to its core business of container transport and logistics services, it said in a statement released yesterday.

A slump in global trade and excessive capacity in the shipping industry led to a loss of US$231.8 million in the half-year to June 30 – its first in a decade.

Source: Straits Times, 19 Jan 2010

China’s Dec property price surge steepest in 18 months

Real estate prices in China, Singapore and Hong Kong need monitoring for signs of bubbles forming as Asia continues to grow rapidly this year, said Fred Hu, Goldman Sach Group’s chairman of Greater China.

China, Singapore and Hong Kong need to be watched for asset bubbles, especially real estate prices, Mr Hu told a conference in Taipei yesterday. He also warned of inflationary pressures in China and said that China and India would lead the way in economic growth.

Home prices in Hong Kong are at their highest in 12 years, while residential and commercial real-estate prices in 70 cities in China climbed 7.8 per cent in December, the fastest pace in 18 months. In Singapore, a record number of private homes were sold last year.

China’s economy is overheating as asset bubbles and inflation pressures build, posing a ‘major risk’ to global growth, the World Economic Forum said on Jan 14.

Hong Kong residential property prices will rise about 5 per cent this year, Credit Suisse Group AG analysts led by Hong Kong- based Cusson Leung said last week. Prices of existing homes in Hong Kong, which rose 29 per cent last year, advanced further to reach their highest in almost 12 years as at Jan 10, according to Centaline Property Agency Ltd, one of the city’s biggest.

Record-low mortgage costs, near-zero interest rates on savings deposits and buying from rich mainland Chinese stoked demand even as Hong Kong Chief Executive Donald Tsang said on Jan 14 there is no ‘obvious bubble’ in the city’s property market.

In November, Mr Tsang had warned that asset prices in cities including Hong Kong and Singapore were ‘going up to levels that are incompatible or inconsistent with the economic fundamentals.’

To help ease a shortage of homes, Hong Kong will hold its third land auction in the current financial year next month, it said last Friday.

In China, property prices rose at the fastest pace in 18 months in December, with residential and commercial real-estate values in 70 cities climbing 7.8 per cent from a year earlier, the National Development and Reform Commission said last week.

To cool speculation, the government this month reimposed a sales tax on homes sold within five years of their purchase, after cutting the taxable period to two years in January 2009 to bolster a market that was then flagging.

The central bank also raised lenders’ reserve requirements from yesterday, seeking to rein in liquidity from record lending without stalling a recovery.

A total 14,991 units were sold in 2009 in Singapore, according to Bloomberg calculations, beating the historical high of about 14,800 units set in 2007.

Source: Business Times, 19 Jan 2010

Sino Land, K Wah paid HK$10.4b for 20,925 sqm plots

Sino Land Co and K Wah International Holdings Ltd together paid HK$10.4 billion (S$1.9 billion) for two waterfront sites in Hong Kong’s New Territories, falling short of estimates for the land auction.

Shares of Hong Kong property companies, the best-performing group this year on the Hang Seng Index, fell. Three analysts polled by Bloomberg News gave estimates that ranged between HK$11.4 billion and HK$13 billion for the 20,925 sqm (225,000 sq ft) plots in the Tai Po district, the largest properties offered since September 2007, according to Lands Department records.

‘Apart from Sino Land, which owns sites nearby and would benefit from paying a higher premium, other developers weren’t keen on pushing up the price,’ said Conita Hung, head of equity markets at Delta Asia Securities Ltd in Hong Kong.

Shortage of land and buying by overseas speculators has fuelled gains in home prices of as much as 30 per cent this year, sparking a public outcry over housing costs and prompting the central bank to warn of ’sharp corrections’ in asset prices should fund flows reverse.

‘This shows the developers are being more cautious,’ said Kevin Lai, an economist with Daiwa Institute of Research in Hong Kong. ‘A lot of this year’s economic recovery comes from short-term capital inflows and the money isn’t likely to be swimming around in the next 3-5 years.’

The Hang Seng Property Index fell after the close of the auction. The gauge, which had gained as much as 1.3 per cent before the sale began at 2.30pm, retreated as much 0.5 per cent. It has advanced 60 per cent this year, outpacing the 50 per cent added by the benchmark Hang Seng Index.

Sino Land, controlled by the family of chairman Robert Ng, added 0.5 per cent. It had gained as much as 2.2 per cent before the auction commenced. K Wah fell 1.7 per cent.

The auction result ’suggests that developers are not pushing too aggressively because of concerns that interest rates will begin to rise’, said Kenny Tang, an analyst at Redford Securities Co in Hong Kong.

Morgan Stanley forecasts yields on US 10-year treasuries will climb about 40 per cent next year, pushing interest rates on 30-year mortgages almost to their highest in a decade. Because Hong Kong’s dollar is pegged to the US currency, official interest rates track those in America.

The peg to the dollar has also meant that speculative money has flown into Hong Kong as a decline in the greenback has made asset prices relatively cheap. More than HK$640 billion flowed into Hong Kong since October last year, Hong Kong Monetary Authority chief executive Norman Chan said this month. Asset bubbles are the ‘No 1 threat’ to financial stability in Asia, he said.

Mr Chan’s comments followed those from Donald Tsang, the city’s chief executive, who said on Nov 13 that he was ’scared’ that money flowing into Asia because of low interest rates in the US could lead to another financial crisis in the region. Hong Kong’s economy has contracted for four straight quarters, year-on-year, even as property prices surged.

In October, the city raised down-payment requirements on mortgages for homes valued at more than HK$20 million to 40 per cent from 30 per cent of the purchase price to curtail speculation.

Developers say the government, one of the largest suppliers of building sites, should offer more land to help hold down prices.

Raymond Kwok, vice chairman of Hong Kong’s biggest developer Sun Hung Kai Properties Ltd, said Dec 3 that property prices in Hong Kong are still ‘reasonable’.

Hang Lung Properties Ltd chairman Ronnie Chan said Dec 4 that Hong Kong’s home market is a ‘good bet’, joining billionaire Lee Shau-kee in forecasting rising prices. Mr Lee is the chairman of Henderson Land Development Co.

Low mortgage costs, near-zero interest rates on savings deposits and buying by mainland Chinese pushed up existing home prices 28 per cent this year as of Dec 20, according to the Centa-City Leading Index, a weekly measure developed by Centaline Property Agency Ltd and the City University of Hong Kong.

Hong Kong home transactions almost tripled in November from a year earlier, figures from the Land Registry show, marking the eighth straight monthly gain.

Transactions of luxury homes, or those costing at least HK$10 million, jumped to 595 in November from 99 in the same month last year, according to the Land Registry.

Henderson Land said in October that it set a global record by selling an apartment for HK$88,000 per sq ft on a net area basis.

The first Tai Po site sold yesterday at HK$7,145 psf, according to Ricacorp Properties Ltd.

‘We’re satisfied with the result,’ said Chris Mills, assistant director of lands for the Hong Kong government. ‘The media has been talking up the value of the sites over the past few weeks to some quite major extent.’

Source: Business Times, 29 Dec 2009

The New Territories waterfront land will be auctioned on Monday

Cheung Kong (Holdings) Ltd, Sino Land Co and other Hong Kong builders seeking to replenish land reserves may pay up to HK$13 billion (S$2.4 billion) in next week’s government auction of two waterfront properties in the New Territories, analysts said.

Two residential parcels of the same size in the Tai Po district will be auctioned on Monday. Each covers 2.0925 hectares, the largest properties to be offered since September 2007, according to Lands Department records.

Hong Kong is trying to ease a shortage in land supply and homes that fuelled price increases of up to 30 per cent this year, sparking a public outcry over housing costs and prompting the central bank to warn the city may face ’sharp corrections’ in asset prices should fund flows reverse. Developers said the government, one of the largest suppliers of building sites, should offer more land.

‘If you are running very low on inventories and aren’t sure when the next site will be drawn, you’d want to seize on this auction and lock in the project,’ said Paul Louie, a Hong Kong-based analyst at Nomura Holdings Inc.

The two sites could fetch up to HK$6.5 billion each, said Alnwick Chan, executive director at Knight Frank LLP in Hong Kong. Two other analysts surveyed by Bloomberg estimated the combined price at HK$11.4 billion.

Sino Land Co, controlled by chairman Robert Ng’s family, is the front-runner to win Monday’s auctions since the developer already owns three sites nearby, Mr Louie said.

Joyce Yu, a spokeswoman at Sino Land, wasn’t immediately available for comment.

Henderson Land Development Co, controlled by Hong Kong’s third-richest man, Lee Shau-kee, is interested in bidding, company spokeswoman Bonnie Ngan said. New World Development Co and K Wah International Holdings Ltd also said they may participate in the auction, which was announced on Nov 18.

Developers trigger government auctions from a list of available sites by promising to pay a minimum amount. One bidder will likely buy both parcels to build luxury homes, said Alvin Lam, executive director of Midland Surveyors Ltd.

‘These are choice waterfront sites, and given the low-density requirements, it should draw many builders to auction for it,’ Mr Lam said. The sites each have a gross floor area of 720,757 square feet. Mr Lam forecasts both sites to be auctioned at HK$11 billion, or HK$7,631 a square foot. Mr Louie and James Cheung, director of Centaline Surveyors Ltd, estimated the land could fetch HK$11.4 billion.

Low mortgage costs, near-zero interest rates on savings deposits, and buying by mainland Chinese pushed up existing home prices by 28 per cent this year as of Dec 13, according to the Centa-City Leading Index, a weekly measure developed by Centaline Property Agency Ltd and the City University of Hong Kong.

Hong Kong developers have 50,000 units on hand to sell, based on estimates of their land bank, sites under construction and homes that were built, compared with 73,000 units in September 2007, Mr Louie said. The government sold a 22,126-square-metre site in Tai Po that month, according to Lands Department records.

Hong Kong home transactions almost tripled in November from a year earlier, figures from the Land Registry show, marking the eighth straight monthly gain.

The Hang Seng Property Index, which tracks the city’s six biggest developers, has risen 61 per cent this year, making it the best-performing component in the benchmark.

Source: Business Times, 24 Dec 2009