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Random Reflections on the Hong Kong Property Market. Nicholas Brooke Chairman 22 nd March 2005 Professional Property Services Limited. Menu. Outlook for the property market Chasing the tourism dollar Funding of cultural and heritage initiatives Health warnings.

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random reflections on the hong kong property market

Random Reflections on the Hong Kong Property Market

Nicholas Brooke

Chairman

22nd March 2005

Professional Property ServicesLimited

slide2
Menu
  • Outlook for the property market
  • Chasing the tourism dollar
  • Funding of cultural and heritage initiatives
  • Health warnings
a more predictable property market
A More Predictable Property Market?
  • Shift from trading to investment mentality
  • More comprehensive long term approach to planning and land use
  • Land supply driven policy
  • Influence of Government
  • Re-think of housing policy
  • Market largely driven by fundamentals
  • But – Beware of euphoric forecasts
influence of government
Influence of Government
  • Leasehold land tenure system
  • Principal generator of land supply
    • Disposals – application list system
    • Lease modifications
    • Agencies – URA / MTRC / KCRC
  • Dependence on land revenues
  • Major owner and until recently provider of social housing
market overview residential
Market Overview –Residential
  • Ultimate barometer of Hong Kong’s well being
  • In recovery mode but is it sustainable?
  • Three markets within a market
  • Potential issues relating to supply in 2006-2007
  • Vulnerability to increases in interest rates
  • Speculation at top end
slide6

Total Stock of Private Residential Units by Class in Hong Kong

Class D (53,646 units)

Class E (24,112 units)

Class C (110,624 units)

Class A (361,243)units)

Class B (501,137 units)

Classification of Residential Units by Class :

Class A - saleable area less than 40m²

Class B - saleable area of 40m² to 69.9m²

Class C - saleable area of 70m² to 99.9m²

Class D - saleable area of 100m² to 159.9m²

Class E - saleable area of 160m² and above

Sources: Rating and Valuation Department

slide7

Hong Kong Residential Market (Overall) Supply,

Take-up & Vacancy

Sources: Rating and Valuation Department, HKSAR & PPS

slide8

Hong Kong Residential Market

Annual Price Indices (1999 = 100)

Sources: Rating and Valuation Department, HKSAR & PPS

slide9

Hong Kong Residential Market

Annual Rental Indices (1999 = 100)

Sources: Rating and Valuation Department, HKSAR & PPS

the state of the commercial markets
The State of the Commercial Markets
  • Strengthening occupational market
  • Disconnect between occupational demand and investment appetite
  • Inflexibility of existing supply
  • Future of CBD?
  • “City” approach to the attraction of major space users
slide13

Supply, Demand & Vacancy in Prime Areas

New Supply & Take-up (net sq ft)

Vacancy Rate (%)

* As of September 04

Source : CB Richard Ellis Limited

key ingredients of a world class city
Key Ingredients of a World Class City
  • Diversity
  • Education
  • Employment
  • Quality of life
chasing the tourism dollar
Chasing the Tourism Dollar
  • National/city approach to creating world class tourist destinations
  • Development of family tourism – Disneyland and Ocean Park
  • Legalisation and growth of gaming
  • Emergence of Macau as the Las Vegas of Asia
lack of overall conservation policy
Lack of Overall Conservation Policy
  • Both built and natural heritage require protection
  • Often piecemeal approach with no overall responsibility or policy
  • Lack of “not-for-profit” culture or “lifestyle capital” mentality
  • Need for more sustainable model if we are to retain what is left of our heritage assets
muddled approach to cultural activities
Muddled Approach to Cultural Activities
  • Absence of holistic approach
  • Entrustment but to whom?
  • Why just a single cluster?
  • Lack of community involvement in conceptual thinking
  • Assumption that if you build, they will come
premium return driven approach
Premium/Return Driven Approach
  • Presumption that property developers are only solution to conservation and cultural initiatives
  • Results in less than optimum solutions as developer is bottom line driven
  • Present assessment criteria means strong financial bid will always win
  • New mind-set required – sites should not be “sold” – they are public assets
slide23

Former Marine Police Headquarters

  • a heritage hotel with food and beverages outlets and retail facilities for completion in 2007

Source : Flying Snow Limited

health warnings i
Health Warnings (I)
  • Continued Government involvement
  • Lack of meaningful institutional investor pool
  • Trading mentality still prevails
  • Lack of sophisticated asset management expertise
  • Failure to resolve long term policy/strategy issues
    • Heritage
    • Sustainability
    • Urban Renewal
health warnings ii
Health Warnings (II)
  • Absence of successful public and private partnership model
  • Potential volatility of supply
  • Lack of joined up thinking
  • Need for strategic planning
  • No account yet taken of intangible returns