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The Kowloon Property thread /HK#2

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Where're the chickens?

 

Not much room for chickens - since they dont pay much in rent.

But that flat represents a real nest egg, i can tell you that.

 

50th floor in the building below. Only two flats are higher up.

 

long-beach-tsui.jpg

== ==

 

Old advert - similar property:

 

The Long Beach - Block 3 - Olympic, Kowloon

 

Price: HK$5.9 M ( HK$7,930/Sq.Ft. )

Lease: HK$18,000 ( HK$24/Sq.Ft. )

Area: 744' Sq.Ft.

For enquires, please quote : Ref no. KL48912

Contact Person: Mr Chan Chi Chung / Contact Tel: 91224755 / Contact Email: ihv2@midland.com.hk

 

E000004317_s.jpg

Overview description

The The Long Beach - Block 3 is located at Olympic, Kowloon. The area of the property is 744' Sq.Ft.. The price is HK$5.9 M and HK$7,930/Sq.Ft. The lease is HK$18K and HK$24/Sq.Ft. Also, the property has Excellent Choice for Investor or End-User, Quiet, Twin Unit, Original Floor Plan, Bright & Open View, Sea View, Panoramic Sea View, Garden View, Grand Finished .

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Hang Lung Group (HK:10) has announced earnings today: HK$4.04 billion- up 66.4%!

(that's before a big revaluation gain)

 

Terry Ng Sze-yuen, Exec. Director, attributed the rise in core earnings to two residential projects:

 

+ HarbourSide in West Kowloon (at ave. $16,300 psf and 60-70% profit margin), and

+ the LongBeach in Tai Kok Tsui (at ave. $7,100 and over 50% profit margin), while

+ HL sold 750 units in HK during the reporting period, generating hk$3.3 bn of profits

 

Both had profit margins of 50 percent to 60 percent. In HK, the firm will release 2,040 units not yet

sold over the next two to three years.

 

Hang Lung Group (HK:10) ... update

bigir2.gif

 

Hang Lung Properties (HK:101) .. update

bigog5.gif

 

Compare: last 12 months : HK:10 vs. HK:101

bignj5.gif

 

Despite the big rises in earnings, Hang Lung Properties dropped 4.85 percent to close at hk$30.40.

While Hang Lung Group dropped 2.55 percent to hk$38.25.

 

- -

 

Note: see HK10 thread :

 

Martin Whitman on Hang Lung Group (HNLGY.PK) / Posted by: gurufocus (IP Logged)

Date: March 18, 2007 11:05PM

 

Hang Lung Group Common was acquired by the Fund at a price that values 100% of the outstanding Hang Lung Group Common at US $4,113,800,000. Around 97% of Hang Lung Group’s net assets are represented by its ownership of 50.6% of the outstanding common stock of Hang Lung Properties Limited. That 50.6% interest in Hang Lung Properties Common had a market value of US $5,733,000,000 at January 31, 2007. Put simply, the Hang Lung Group Common was acquired at a 28% discount from the market price of Hang Lung Properties Common at January 31, without attributing any value to the small amount of other assets, net of all debt, owned by Hang Lung Group. The Hang Lung entities seem to be a very interesting growth play, as the companies over the next five years or so embark on developing 12 major multi-use projects in various secondary cities in the People’s Republic of China.

FLATS FOR SALE.. ..No. : Sold : Cost per sf : Recent prices

The Harbourside..... 767 : 33% : hk$ 3,300. : $17,000-20,000

The Long Beach... 1,224 : 30% : hk$ 3,000. : $ 7,000- 13,000

AquaMarine.......... .. 38. : 97% : hk$3,400. : $ 5,000- 9,000

Carmel-on-the-Hill .. 13. : 92% : hk$3,300. : $ 6,000- 9,000

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Just my HK2 cents worth,

 

I have my doubts about investing in the 'new' areas where there is massive supply (such as Tung Chung, Olympic, etc). These will be hit hardest during the next downturn, in my opinion, as they were during the last (Tung Chung, Tseng Kwan O, etc). The quality of construction at Olympic, for example, is downright shoddy (I viewed a number of 'new' flats there a while back). Moreover, developers are currently marketing 'new' flats at 20-30% premiums (average for HK over the past 2 years) to comparible secondhand prices of similar properties in the vacinity. Shades of UK newbuilds? (oversupply, shoddy construction, bought mainly by mainland Chinese speculators). I would be very wary about 'investing' in such areas ... you don't want to be left holding the bag there when the music stops (very quickly, usually, in Hong Kong's case).

 

My Mid-Levels flat may be 'dreary', but it takes me just 5 minutes to get to work and is 2 minutes walk from Soho/LKF. The construction is also very good, and its in an established residential area located just 8 minutes walk (via the escalator) to Exchange Square. It has also appreciated significantly faster than these 'new' flats over the past few months. Rental demand is very strong, and I get 2-3 unsolicited calls a week from agents asking if I want to sell my place.

 

Some people (mainly Mainland investors) may be swayed by glitzy marketing brochures and persuaded to pay a huge premium for a new flat in an untested area; others stick to tried and trusted areas, where demand may be more predictable and stable. Each to his/her own, I guess ...

 

I looked at Tung Chung, but bought another dreary flat in Mid-Levels. A 20% return in 3 months is anything but dreary.

 

Okay.

But you are out-of-date on other areas:

 

+ TC's "excess supply" is gone. Low prices, and good marketing last year have bought waves and waves of new tenants and new buyers. I would say that the number of empty flats at CC has dropped from 40%+ when we moved in, to under 10% today. And prices are rising fast. Our place (where we live) is up from $3.45mn to maybe $4.9mn today- so that's something like 50% in a year. And the other flats we have here are also moving up by maybe 1% per week, similar to other good areas of HK. The only other potential supply is the "mid-rises" near the Novotel. We have heard that they may be put on the market at something like HK$5,500 psf- which is miles ahead of current prices. If they sell well, then that will tend to drag up secondary market prices with it. So we expect to see our main property go to perhaps $5.8 -6.0mn by year end, if current trends continue.

 

+ Olympic is an interesting case. When LB came on the market, pundits said it looked overpriced, by perhaps the 20% that you mentioned. But that was mainly a comparison with with the next-door tower of Island HarbourView, which is surrounded on three sides by other buildings. Since then, IHV prices have shot up dramatically, and it is now hard to find anything decent below $8,000 psf. By comparison, some of the flats at LB look underpriced. That's because a large number of people bought to flip. And those flippers are now facing a completion deadline of mid-April, so quite a number of flats have recently been put on the market at prices in the region of HK$7,000- 7,500 psf. Once the deadline has passed, and people can start viewing flats in LB, I expect prices to go up. We viewed a number of lats at IHV, and i think the quality of construction at Hang Lung's LB looks better. In the long run, both properties will do rather well IMHO, because they are only one MTR stop away from Kowloon Central. With over 20,000 people slated to be employed at the ICC ontop of KC, i think there will be plenty of demand from professionals working in that location, as well as those who are willing to commute a little further from Central.

 

Photo: That's Island Harbourview to the left, and One SilverSea to the right

lbr3cg7.jpg

+ Prices in One SilverSea are $11,000-12,000 psf

+ A marina for yachts, and sailboats is planned for the water area sometime in the future

+ HK Island is visible in the distance on a clear day

 

There are plenty of agents servicing Olympic and KC also, and no doubt the action will pick up dramatically when people start moving into the lower floors at ICC around mid-year. (It is located right behind OneSilverSea, next to the Sorrento project, which you can see in the photo. ICC may be tall enough to be seen over OSS when the tower is complete in 2010.)

 

BTW, have you see Gordon Tse's article in SCMP about two weeks ago? He is bullish on the mass market, and his picks for top perfiormance include Tsing Yi, and Tung Chung. It amazes me how many people on HK Island have an opinion about TC and havent been here in ages. By comparison, I joined a friend visiting from London as agents took us around to 5 or 6 flats in Mid-levels. We were shown flats costing HK$13- 14mn, with prices in the region of $11,000- 12,000 psf. Most looked dreary or dated, and I think the attractiveness of the Olympic flats will win over buyers and tenants, especially when they are working in ICC, and have a shorter commute. Globakl economic factors may put a cap on housing allowances, so the luxury end may lose its outperformance relative to the mass market.

 

But, hey, in the end: you "pays your money, and you takes your choice", and all of HK is likely to move up sharply in 2008, if the trends in place continue.

 

(also posted on a HPC thread, where PeteHK's comment was posted.)

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Looking beyond West Kowloon, for a change...

 

THE CAPITOL in Tseng Kwan O ..

front01sa0.jpg

 

This new development will launch this week, with prices expected to start near $5,000 psf.

It is phase one of a three phase development by Cheung Kong, and is part of a very large 50 tower

project in this new area.

 

The building will be completed on-to-of/near a new MTR stop on the Tseng Kwan O line.

 

+ Located at LOHAS Park, the newest large development atop MTR

+ All major commercial, shopping and entertainment hubs can be easily accessed by MTR within 20 + minutes

+ A 13-hectare greenery and recreational area is reserved, including a 200,000 sq.ft Central Park

+ An exclusive clubhouse, Premier Club

+ Fabulous views: Clear Water Bay Country Park, High Junk Peak and Tathong Channel

+ 2,096 units from 683 to 1,116 sq.ft.

+ Expected completion: second quarter of 2009 (June-July?)

 

Website : http://www.the-capitol.com.hk/home.html

 

= =

 

I attended the VIP showroom viewing in TST yesterday, and liked what I saw.

 

In fact, I made a journey to the TKO tube stop, and saw the almost-completed building standing in the distance.

 

I also visited, Taikoo Shing, and Quarry Bay, near to the project, but within HK Island. There I found very old and dreary flats currently for sale at fancy prices. $5,000 - 6,000 will ftech a 22 year old flat, with old fashioned square wooded floor tiles, and an antique kitchen at Kornhill in TS. While the place I saw in QB was $6,100 psf for a 17 year old dated flat, with tiny windows in the bedroom, and now appliances in a very obsolete kitchen.

 

The agent at The Capitol showroom told us that TS landlords "feared" the new competition from The Capitol. I can see why. Fr an extra 14-15 minutes communiting they can have a very nice modern flat, within an exceptionally attractive setting.

 

I think demand will be strong, and thsoe who buy early on (at lower prices) are likely to make money.

 

... (compare this comment, with what I posted late last week):

 

CAPITOL RESERVATIONS = = = = =

 

Cheung Kong has a new development, the Capitol, in the MTR Corp's new LOHAS Park development area in Tseung Kwan O. The project is being launched this week, at an expected selling price of HK$5,700 to $5,800 psf. The overall project will eventually comprise 50 towers (50 !) of 46 - 59 floors each, offering an eventual 21,500 units with a gross residential floor area of 17.36 million sf. (This must be one of the largest developments in HK ever!)

 

Phase one, the Capitol development from CK consists of five blocks of 2,096 units ranging in size from 683 sf to 1,116 sf, scheduled for completion by June of next year. CK plans to pre-sell the flats starting this week.

 

An article in today's SCMP quotes various Estate Agents, who have reservations about buying in the project:

 

+ Centaline says target prices are 21 percent higher than the average transaction price achieved by units at the nearby Metro Town in TKO, which was completed last year.

 

+ Demand in the primary market is mainly from investors (so you must ask: who will live there, and what sort of rents will they be willing to pay?)

 

+ With such a big project coming, there will be ample supply in the pipeline for the TKO district

 

+ Some dont like the Landfill south of the development. Owners in nearby Ocean Shores and Park Central have protested against the pollution from the landfill- there are odors from the landfill every June to September.

 

However, some think the historical pattern may be repeated: "From past experience, those who buy early should benefit from price appreciation - just like the large projects in Taikoo Shing, Mei Foo Sun Chuen, and Whampoa Garden." (all from many years ago)

 

= =

 

(The smart way to play, might be to buy nearby properties - away from the landfill- in the secondary market. Following is a Q&A also from "Ask the Experts" in today's SCMP):

 

Q:

I bought a flat at Oscar by the Sea in TKO for investment in 2006. It cost me HK$3.8 million. I received an offer for HK$4.12 million for my flat recently. CK plans to launch the Capitol in the area shortly. Transaction in the secondary market may drop significantly after the launch. I'm worried that I might have to wait a long time if I miss this offer. Do you think now is a good time to sell?

 

A:

Transactions in the secondary market will slow down when the new project is launched and it will last from two to three months. But you will benefit and sell your unit at a higher price if the Capitol records strong sales. I believe that you should wait for two months.

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LOHAS PARK = = = = = Fifty residential towers / 21,500 apartments

 

Green, green grass of home

Victor Cheung ... Thursday, November 08, 2007

 

a.jpg.Central-Park-1.jpg.

 

Here's a new town-planning concept for Hong Kong - MTR Corp's (0066) new residential district in Tseung Kwan O doesn't just have homes; it also incorporates a lifestyle.

 

The name of the project - LOHAS Park - makes it clear: LOHAS is an acronym for "lifestyle of health and sustainability."

It is a combination of personal care and concern for the environment.

 

"People living here can lead a green life without compromising on quality of life," Steve Yiu Chin, MTRC chief manager for town planning, told The Standard in an interview.

 

"The place was already designated as an 'environmental protection city' when we began planning in 2002. But after the SARS epidemic in early 2003, we added a slight twist and included an element of 'health' as it is also very important to care for oneself."

 

Formerly Dream City, it will sit atop the MTR Tseung Kwan O South Station, to be operational in 2009, and just north of the Tseung Kwan O Industrial Estate. The district is a large project, Yiu said, and will accommodate 58,000 residents in the 3.55 million- square-feet site area.

 

Fifty residential towers will be erected, offering 21,500 apartments, or 36 percent more than Kingswood Villas in Tin Shui Wai, another large-scale development.

 

The park's key feature will be 1.4 million sq ft of common area with greenery taking up 40 percent area of the whole site, or twice as large as Hong Kong Park in Admiralty. The common area will include a 200,000 sq ft park and a 330-meter promenade overlooking Victoria Harbour.

 

Although as many as 3,000 trees will be planted in the area, Yiu said, the exciting thing is not only the large proportion of green space, but the way these amenities are situated.

 

The planning will separate people and cars - pedestrians can walk to various facilities without having to cross a road since all the places are linked with covered walkways. To encourage walking, distances between different facilities have been carefully calculated, "so that people won't get too tired walking."

 

Bicycles are also encouraged in the district. "Riders can begin at their own flat, enjoy a scenic ride along the promenade, then park their bikes outside the MTR station and take the train."

 

The garden will need no fresh water as the developer installed a 440,000-liter water-recyling system to collect rain and household waste water for the plants.

 

Yiu said the company is studying the feasibility of a kitchen waste processing system in its shopping mall, as an effort to live up to the development's promise of sustainability.

 

Unlike anything in the New Territories, Yiu pointed out, this projects enables residents to enjoy both a rural environment with lots of greenery but still have the convenience of city living as they will be close to the MTR.

 

If you are wondering just how "natural" the air ventilation can be in a densely built condominium project, Yiu said buildings will be left with sufficient space to allow wind to blow through. Although the development is not far away from landfill, appropriate town planning should avoid the problem of smell, Yiu said.

 

LOHAS Park will be divided into nine to 13 phases, which are to be completed between 2009 and 2015.

 

The first phase, Capitol, is situated on the east side of the project and has 1.38 million sq ft of floor area. Market sources said presale may start as soon as this week. Each of the 1,648 apartments will be sold at above HK$6,000 per sq ft.

 

/more: http://www.thestandard.com.hk/news_detail....071108&fc=7

 

/see also: LOHAS park thread : http://www.greenenergyinvestors.com/index.php?showtopic=2497

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all areas rising

 

080116_2.jpg

 

Prices Rally 18.5% in Second Half of 2007

 

Residential prices were steady in the first half of 2007 with an increase of 4.2%. Market sentiment turned bullish in the second half with a series of positive news such as successive interest rate cuts, the auction of the Welfare Road site in Aberdeen fetching a record price and the return of negative interest rates. Prices gathered steam and surged by 18.5% between July and December last year。

 

Hong Kong Island Prices Gain 27.8%

 

Among the 50 major housing estates surveyed, those located on Hong Kong Island outperformed the market with an average price increase of 27.8% (See Graph 2), mainly because of the scarcity in supply of new flats in the districts. Driven by the better-than-expected auction result of the Welfare Road site, the neighbouring South Horizons development rallied with a price increase of 29.2%. Average prices in Kowloon and the New Territories picked up 22.6% and 21.2%, respectively. Their price increases lagged behind Hong Kong Island but still exceeded 20% as a whole. (See Graph 2)

 

 

/see: http://www.midland.com.hk/eng/professional...al/080116.shtml

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HarbourView Place (in The Cullinan project)

============

 

First batch of 70 rooms, released for pre-leasing:

(50th - 70th floor of Cullinan II, next to the ICC):

 

266 premium suites (facing inside of Kowloon Court, not a seaview??)

 

Average asking rent is: hk$60 psf: or hk$29,000 - $92,000 (vs. hk$72-$92 for Four Seasons)

 

Expects to receive interest for overflow of demand at Four Seasons,

which is now fully-occupied with a 3-6 months waiting period.

 

Signature Homes is the luxury residential leasing arm of SHKP.

Their customers:

+ 80%: are from the US, Britain, and elsewhere in Europe,

+ 20%: are from japan, india, singapore, australia, and the rest of Europe

 

In terms of work:

+ 60%: are in the Financial sector

+ 30%: in manufacturing, and

+ 10%: in consulates

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HIGH SPEED LINK COULD BOOST WEST KOWLOON PROPERTY

 

_wsb_508x295_Airport%20Express2.jpg

 

New Rail line to join HK to nation's high-speed network - from SCMP

Government to build hk$39 billion border link, ease it to MTR

 

"Hong Kong will become the southern gateway to the nation's high speed rail network with the approval yesterday of a hk$39.5 billion plan to build a high speed rail link to the border."

 

Points:

+ Transport Service to begin in 2015, halving the journey time to Guangzhou to 48 minutes.

Time to Shangai will be 8 hours, and Beijing just 10 hours

 

+ New HK terminus in West Kowloon to be linked to the MTR. New station to be in the WK Cutural district,

where theatres, concert halls, museums, and more offices and shopping are planned.

(Note just an Arts hub, but a Rail & shopping hub too. With a link to the HK airport.)

 

hkmetro.jpg

other MTR maps : HK only : Kowloon Southern 2009 : 2006 Yearbook

 

+ Trains will operate at average speed of 200 km/hour

 

+ Work for 15,000 people, and a new 26 km underground line to the border.

 

+ To be built with government money and leased to the MTR.

 

+ Existing fare HK-G is hk$190. New fares will be higher. Govt expects 100k passengers by 2020, 120k- in 2030

 

FUTIAN STATION may become an important hub, with possible links to:

Shenzhen airport, and HK's airport at Chek Lap Kok

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THE GERMANS ARE COMING...

 

Deutsche Bank to take up to 18 floors of ICC

==========

 

ICC: 118 stories/ 490 meters above sea level : 2.5 million sf of Grade-A space

also: HK's tallest building, world's third tallest. Completion: 2010

 

Confirmed Office tenants

-----------------------------

Morgan Stanley ... : 10 floors : 350,000 sf

Credit Suisse ....... : 10 floors : 300,000 sf

 

SNP Vite .............. : 1+ floor :. 50,000 sf

EFG Bank ............. : 1+ floor :. 40,000 sf

Deutsche Bank ..... : 18 floors : 630,000 sf (new, some is under option)

 

HOTEL at Top ....... : 15 floors, toi be managed by Ritz-Carlton

 

DB, Germany's largest lender, announced plans to nearly triple its staff to 4,000 as the firm grows its Asia-Pacific business, and it will take up to 18 floors in the ICC to accomodate them.

 

It currently has 1,500 staff in Central, and plans to move to ICC in 2010. "india and China are the stories of this century," says its regional head, Colin Grasse.

 

For the decision to move to ICC:

"It came down to the quality of the building, the flexibility that it offered us to grow, and the ability to keep the divisions and our back office together in one building."

 

Deutsche bank's 88,000 sf headquarters at Cheung Kong Centre in Central is priced at hk$130 -140 psf.

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The market is stirring, I think there's a good chance it may blast off again.

Centaline's figures show a 1%+ gain in the latest week:

 

Week==== : 35tr : prv : CCLI. : MMLI. : 18wkMA .. before /18

02/17/2008 : 137 : xxx : 73.81 : 71.08 : 63.41 ..

02/24/2008 : 153 : xxx : 73.28 : 70.33 : 64.15

03/02/2008 : 159 : xxx : 73.98 : 71.07 : 64.92

03/09/2008 : 186 : xxx : 73.5E : 70.5E : 65.61

03/16/2008 : 169 : 218 : 73.01 : 69.97 : 66.22

03/23/2008 : 121 : xxx : 72.79 : 69.72 : 66.78

03/30/2008 : 134 : 203 : 72.89 : 70.06 : 67.29

04/06/2008 : 146 : 193 : 73.75 : 70.91 : 67.82

04/13/2008 : 150e: xxx : 71.93 : 69.02 : 68.17 .. 1,227.11

04/20/2008 : 160e: xxx : 72.57 : 69.77 : 68.51 .. 1,233.11

04/27/2008 : 171 : xxx : 71.49 : 68.58 : 68.78 .. 1,238.04

05/04/2008 : 173 : 253 : 71.44 : 68.61 : 69.02 .. 1,242.33 / C.C.

05/11/2008 : 178 : 232 : 71.51 : 68.59 : 69.24 .. 1245.94 / $3,115

05/18/2008 : 150 : xxx : 71.86 : 69.11 : 69.42 .. 1249.20 / $3,085

05/25/2008 : 185 : 209 : 72.67 : 69.87 : xx.xx .. 12xx.xx / $3,115

 

Look at the charts for the West Kowloon projects, and you can see they are

really blasting off again.

 

(Project) & 1 month change

===================

Sorrento (Kowloon Central).... $12,037 psf : + 9.94%

Park Avenue/Central Park (O). $ 7,729 psf : +10.07%

Island Harbourview (Olympic). $ 7,303 psf : + 4.59%

Tierra Verde (Tsing Yi)........... $ 5,237 psf : + 1.58%

Kowloon Index....................... 68.46 vs.'97 + 1.12%

== == == == ==

 

Is this because people are beginning to move in to ICC? Very possibly.

Rents may be set to soar in that area (KC), and near Olympic

 

http://www.centadata.com/cci/cci_e.htm

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Whodathunkit?

 

2349629100101826882vyfezb0.jpg

 

THE MOST EXPENSIVE FLAT in Asia is in Kowloon :

Flat A, on the 80th floor of The Arch: 5,497 sf w/ pool

 

Sun Hung Kai Properties has sold a luxury flat at The Arch in West Kowloon for HK$41,000 psf.

That makes it the most expensive flat in Asia.

 

Previously, in July last year SHKP sold another flat on the 80th floor with similar floor area

for HK$33,500 psf.

 

Before that, in April 2005 the same developer sold Flat A on the 77th fl. of Sky Tower

for hk$31,300 psf. That flat was 5,353 sf

 

Here's Sorrento, which is nearby, without the easy seaview

estateinfoeoz5.png

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ICC Update.

I dropped by the ICC today to have a look, and spoke to reception.

 

Five companies have started moving in,and there are now people working on four floors.

Move-ins will continue right through the year.

 

I think the building will be rolled out in 3 or 4 phases, with the last are opening in 2010

 

== ==

 

How many Expats in Hong Kong?

 

It depends on who you ask, and how you define "expat".

 

Number of People of "white Ethinicity" living in Hong Kong:

 

Year 2001 : 46,584

Year 2006 : 36,384

 

per: HK's Census and Statistics Department

 

(hmm. If 20% of those 22,000 who will be working in ICC are expats,

that's 3,300 and almost 10% of HK's expat commmunity.)

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ICC Update.

I dropped by the ICC today to have a look, and spoke to reception.

 

Five companies have started moving in,and there are now people working on four floors.

Move-ins will continue right through the year.

 

I think the building will be rolled out in 3 or 4 phases, with the last are opening in 2010

 

== ==

 

How many Expats in Hong Kong?

 

It depends on who you ask, and how you define "expat".

 

Number of People of "white Ethinicity" living in Hong Kong:

 

Year 2001 : 46,584

Year 2006 : 36,384

 

per: HK's Census and Statistics Department

 

(hmm. If 20% of those 22,000 who will be working in ICC are expats,

that's 3,300 and almost 10% of HK's expat commmunity.)

 

Uhm, 20% of 22,000 isn't 3,300. Just saying :)

 

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Uhm, 20% of 22,000 isn't 3,300. Just saying :)

 

Quite right: 15%.

Should read: if 15-20% working in ICC are expats (per same definition), then that's about 10%

of the Expats in Hong Kong.

 

If they were all expats, it would be over 50% of HK"s expats

 

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VACANCY RATES - West Kowloon

======

 

Luxury prices up but vacancies still high

Analysts point to developers holding on to completed flats and active investment market

Yvonne Liu

May 21, 2008

The prices of luxury flats in Hong Kong have been driven to post-1997 record levels by limited supply, but vacancy rates in the sector remain stubbornly high.

 

Colliers International data shows that the average price of luxury residential units reached HK$11,846 per square foot in November last year, up 9.4 per cent from August.

 

However, according to the Hong Kong Property Review released last month by the Rating and Valuation Department, vacancy rates of 8.4 per cent at the end of last year were unchanged from 2006 levels.

 

Property analysts said the high level of vacancies was due to developers slowing the release of completed luxury residential units in the hope of higher prices. Another factor was that investors and owner-occupiers were active in the luxury end of the market.

 

Despite new supply of luxury residential flats dropping 49 per cent to 740 units last year as a result, vacancy rates in the sector were unchanged from the end of 2006, according to the review.

 

Vacancy rates of mass residential units with saleable areas of less than 1,076 square feet dropped from 5.7 per cent at the end of 2006 to 4.6 per cent at the end of last year.

 

Eddie Hui Chi-man, a professor at the Polytechnic University's building and real estate department, said that by comparison mass residential units were almost fully occupied with a vacancy rate of just 4 per cent allowing for some frictional vacancies - where developers or buyers hold on to empty properties.

 

Luxury flats on Hong Kong Island recorded the highest vacancy rate of 15.7 per cent, according to the Property Review.

 

However, the areas with the largest number of empty units, according to the report, were Yau Tsim Mong, including the West Kowloon new residential area where 8,825 units were unoccupied - the most in the city.

 

Wong Leung-shing, an associate director for research at Centaline Agency, said the high vacancy levels in West Kowloon were due to developers holding on to completed projects as they waited for property prices to increase.

 

Hang Lung Properties (SEHK: 0101) was one example, agents said.

 

Despite completing the 1,122-unit HarbourSide residential development in 2004, the company still has not yet released for sale 400 garden view units at the Kowloon Station project.

 

Shimao Group launched a luxury project at 23 Severn Road on the Peak in 2004.

 

However, the two houses are still awaiting buyers willing to pay the record asking prices, property agents said.

 

Meanwhile, the three-house Cheuk Nang Lookout Villa nearby developed by Cheuk Nang (Holdings) has seen only one house sold. The remaining two are still available - seven years after the project was completed.

 

"Many wealthy people buy units like they collect cars or paintings," Mr Wong said.

 

This practice was particularly common in the HarbourSide where he said many buyers who bought the first batch of units in 2004 had left them empty.

 

"The buyers are typically rich and usually own a unit or a house on the Peak, for instance, that is bigger than the HarbourSide units. They bought into HarbourSide as a long-term investment and to collect - not as homes," he said.

 

Since they bought when property prices were low, leaving the units empty for a long time was not a financial burden, he added.

 

Centaline Finance director and general manager Hendrick Leung Lee-chung estimated that the holding cost of maintaining a vacant 1,433 sqft unit at the HarbourSide was about HK$68,820 per month.

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TKT LEADING ? Confidence Building from Tai Kok Tsui

 

The West Kowloon area was call "ground zero" of Hong Kong's mini-crash in property last year.

 

While the area seems likely to benefit from Hong Kong's gradual shift towards Kowloon and ICC as a new heart of the city, with many great transport links to be completed there in the next fewyears, there is no doubt that it looked distinctly overbuilt in late 2008.

 

Prices in develops like Sorrento and Island Harbourview "crashed" by 30% or more in a few weeks,and it looked like developers holding completed buildings there would have trouble shifting them. But the thaw is changing that perception.

 

Sorrento ... update

1237969014065442000.png

 

Island Harbourview ... update

1237969055004828100.png

 

HK Property has shown a decent bounceback in 2009. In today's property column in the SCMP, Fulton Mak mentions the Centa-City Leading index, which "dropped about 22 percent in the second half of last year, but gained 4.7 percent in the first two months of this year." Although some doubts remain about whether the rises can be sustained, more aggressive bank lending is helping to "quicken sales."

 

Last weekend Nan Fung launched Florient Rise, a JV project with the Urban Renbewal Authority which is nearly completed and expecting to see buyers move in later this year (September.) During the first two days of the launch 220 units were soldm representing 42 percent of the total 522 units on offer. Prices fetched ranged in most cases between HK$5,200 and $6,393 per square foot. As a high end example, a 1,111 sf unit on the 36th floor sold for hk$9.81 million, or HK$8,837 a square foot, while a 1,300 sf unit fetched hk$11.16 million, or hk$8,585 psf.

 

By comparison, 3 year old Harbour Green, has 1,517 units in total, and is located less than 10 minutes walk from Olympic Station. According to Land registry data in the last three months 23 uints were sold at an average of hk$5,975 psf. There are currently 33 listings at hk$5,153 to hk$9,075 psf. (Note: It amazes me that people will overpay for the lower quality units at Florien Rise. Perhaps they think they are getting a better view, but that's debateable. I suppose it is the magic of marketing new properties.)

 

Encouraged by the good results at Florient Rise, Chinese Estates plans to launch its 182-unit development at TKT this weekend

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TKT LEADING ? Confidence Building from Tai Kok Tsui

 

The West Kowloon area was call "ground zero" of Hong Kong's mini-crash in property last year.

 

While the area seems likely to benefit from Hong Kong's gradual shift towards Kowloon and ICC as a new heart of the city, with many great transport links to be completed there in the next fewyears, there is no doubt that it looked distinctly overbuilt in late 2008.

This photo gives a good idea of the contrasts in TKT

 

IMG_3866.jpg

more: http://www.globalphotos.org/hk-taikoktsui.htm

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Interesting little article in SCMP today comparing HKG property to rest of world - not good.

Compares ' how much house' you can buy with the money over time. As an example in 1997 at the peak

you could buy 3 times the space in NY for the same price you paid in HKG.

Now you can only buy about the same - SO NY has grown in value by 3 times and HKG not at all.

 

Makes me wonder what the future holds... it basically looks to me like HKG property is constantly getting cheaper

compared to everywhere else - though that might look a bit different soon if everywhere else keeps going down and

HKG stabilises.

 

Looks like a sort of property globalisation - eventually everything will cost the same (in equivalent areas) everywhere.

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Looks like a sort of property globalisation - eventually everything will cost the same (in equivalent areas) everywhere.

 

How is that possible when each area has its own drivers, are dynamic in different ways and have different underlying factors causing the market to strengthen or weaken?

 

I didn't read the article so perhaps you can enlighten us about this?

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The comment about globalisation is purely my own opinion. I think over time as global trade increases the average income in the average ( first world ) country will be similar - therefore average prices paid for food and Ipods and cars and eventually houses will become similar. Obviously this is a generalisation - there are things like taxes and interest and labour costs rates that play a role.

 

HKG will sooner or later merge into the greater Shenzen/MAcao/ Guangzou area and crossborder areas will develop into nicer places to live - and over time the 'exclusiveness' of HKG property will reduce - this will bring costs down.

 

So over time HKG will become cheaper relative to other places. This the article clearly shows - price in most of the world have doubled or even tripled in the past 20 years - HKG is not much more expensive than in 1990.

 

Obviously Central will always demand a premium - just like central Tokyo/NY or London always will. Once again I I am talking averages here.

 

So for the long term investor - HKG might not show as much growth as up and coming areas. Prob the opposite as prices here fall to meet rising prices in the region and average out over time.

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The comment about globalisation is purely my own opinion. I think over time as global trade increases the average income in the average ( first world ) country will be similar - therefore average prices paid for food and Ipods and cars and eventually houses will become similar. Obviously this is a generalisation - there are things like taxes and interest and labour costs rates that play a role.

 

HKG will sooner or later merge into the greater Shenzen/MAcao/ Guangzou area and crossborder areas will develop into nicer places to live - and over time the 'exclusiveness' of HKG property will reduce - this will bring costs down.

 

So over time HKG will become cheaper relative to other places. This the article clearly shows - price in most of the world have doubled or even tripled in the past 20 years - HKG is not much more expensive than in 1990.

 

You idea makes sense except for:

 

+ Tax rates, which are far lower in HK than China, so people will go on having far more money to spend on property

+ Time and location: HK people work very long hours, especially those with top jobs.

 

If HK people have only 4 hours (for example) to themselves each day, and especially those in top paying banking, finance, and legal jobs. And they make, say, HK$2 Million per annum, and 25% of that is available for their free time, then you could say that each minute of that free time is worth HK$2,083.

 

Therefore, it is not surprising that, the further one gets from Central, the lower the prices.

 

Thus, we have:

+ Kowloon Central prices at HK$10,000 psf / 5 minute by MTR from Central

+ Olympic....................... at HK$7,000 psf / 10 minutes

+ Tsing Yi........................ at HK$5,000 psf / 20 minutes

+ Tung Chung, ............... at HK$3,000 psf / 30 miuntes

 

People pay alot to live closer to Central and those high-paying jobs.

 

It's not surprising when you see how little free time they have

 

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THIS could help West Kowloon residential property prices...

 

A large site above the West Kowloon terminus of the Guangzhou-Shenzhen-Hong Kong Express Rail Link next to the Kowloon MTR station has been zoned for commercial use, boosting the bid by city planners and developers to establish a new core business district in the area.

 

/see: http://www.tradingmarkets.com/.site/news/S...20News/2357271/

 

I think I read in yesterday's SCMP, that this would bring over 3 million sf in new office space,

50% more than the 2 million sf at ICC

 

(here it is):

 

Kowloon station site to bolster district's hub ambitions

08:40 | 03.06.09

A large site above the West Kowloon terminus of the Guangzhou-Shenzhen-Hong Kong Express Rail Link next to the Kowloon MTR station has been zoned for commercial use, boosting the bid by city planners and developers to establish a new core business district in the area.

 

The 633,321 square foot site could support a gross floor area of 3.17m square feet, 14% more than the total gross floor area of 2.78m sq ft provided by One and Two IFC in Central and 26% more than the 2.5m sq ft office space provided by neighbouring International Commerce Centre.

 

South China Morning Post

 

 

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