Complete Property Market Updates of Singapore

Home buyers and developers spar over apartments’ sizes

HONG KONG policy-makers are coming under increasing pressure to draft laws regulating property sales in the city as consumers clash with developers over tactics used to seal a deal.

At the heart of the controversy is a simmering battle between prospective home owners and developers over how apartments are described in terms of size. With no uniform yardstick in the industry, some developers have taken advantage of consumers by selling flats that were woefully overstated in terms of size.

On Tuesday, lawmakers turned on the government after years of debating how to devise a blanket description, and demanded legislation to protect consumers from further exploitation.

‘People are asking for something very simple,’ legislator Kwok Ka-ki said in a Housing Panel meeting of the Legislative Council. ‘They want to know the actual size of a flat. Buying properties and calculating the size of a place are simple concepts but still Hong Kong won’t adopt simple principles.’

The Consumer Council of Hong Kong said it also believes a simple, uniform system is needed. ‘We feel all properties need a clear, uniform definition, so consumers will not be confused and will be able to get to grips with what a ’saleable area’ is,’ said Connie Lau, executive director of the consumer watchdog.

She cited several complaints from consumers. Typically, these involve a flat being grossly overstated in terms of size compared with what buyers actually get.

A 2000 government White Paper on the subject is yet to lead to legislation, fuelling claims that the administration is shielding developers to the detriment of consumers.

Some developers market flats using gross floor area (GFA), while others use saleable area (SA). GFA includes common areas while SA includes features such as bay windows and balconies. Some developers are ambiguous about what they include in GFA and SA.

Both vary depending on the developer and flat for sale, making it difficult for consumers to make meaningful comparisons when shopping for an apartment. The government was yesterday pressed to take action. The real estate industry is currently self-regulated.

‘I would like to ask the government what will the administration do, when will the administration give justice to the public so they can measure for themselves the size of a flat?’ Mr Kwok said. ‘Will you still allow developers to keep exploiting Hong Kong people?’

The topic is gaining momentum as an embarrassing issue for the government as its mass residential sector fails to recover at the same pace as luxury property.

While luxury residential sales in Hong Kong are expected to post double-digit growth this year as limited supply and an influx of capital to the city pushes up prices, the mass residential sector is unlikely to budge by more than a few percentage points.

While analysts are citing a price disconnect between what developers are asking and consumers are willing to pay, a string of bad press over unscrupulous sales tactics has not helped matters.

Other tactics that developers resort to, to make demand for apartments look healthier than it actually is - in order to lock people in - have also come under fire.

Source: The Business Times, 19 July 2007

But overall take-up down 20 per cent year-on-year

GRADE A office rents in Hong Kong’s Central district have hit a record high, averaging HK$92 per square foot (S$17.80 psf), but overall take-up has fallen 20 per cent from a year ago.

Rents in Central have been pushed up by demand from the financial sector with Hong Kong’s most prestigious office address - International Financial Centre - hitting HK$170 psf. Rents at Hong Kong’s other popular address - Pacific Place - average HK$90 psf.

DTZ head of consultancy (North Asia) Alva To noted that other major districts in Hong Kong saw lower take-ups in the first half of 2007 compared with a year ago, partly due to the fact that the financial sector is largely ‘Central-specific’ when choosing office location. He also said that low availability in all districts has resulted in few options that could cater to occupiers’ expansion needs.

DTZ’s analysis of data for H1 2007 also revealed that Grade A office take-up in overall Hong Kong totalled 622,000 sq ft, down 20 per cent from a year ago.

‘Although market activity appears to be tapering off, the figure remains on a considerably high level taking into account the limited availability in the market,’ added Mr To.

On a more encouraging note, the performance of Central/Sheung Wan area was in sharp contrast to the rest of the sub-markets, with half-yearly take-up in these two districts increasing by 16 per cent, from 363,000 sq ft in H1 2006 to 420,000 sq ft in H1 2007, indicating strong underlying demand for prime space in the CBD, added Mr To.

The biggest drop was seen in the Wanchai/Causeway Bay area, where take-up dropped 65 per cent from 136,000 sq ft in H1 2006 to 48,000 sq ft in H1 2007.

Average net effective rents in the Wanchai/Causeway Bay and Tsimshatsui areas are HK$39 psf and HK$31 psf in Q2 2007 respectively.

DTZ also noted that future supply between 2007 and 2009 will exceed 10 million sq ft, mostly in East Kowloon. Mr To said that the ‘glut’ of quality Grade A office supply in Kowloon Bay and Kwun Tong presents expansion options to companies not only in trading, manufacturing and logistics, but also those in the financial sector, ‘which may consider relocating their back office operations to such comparatively low-cost districts that command only a quarter of Central’s rents’.

On how the Hong Kong market compares with the Singapore market, DTZ executive director and regional head (consulting and research) Ong Choon Fah said: ‘There is a lot of similarity in terms of supply factors. There is tight supply in key areas.’

But Mrs Ong does not expect the financial sector in Hong Kong to be too keen to move out of Central. ‘Unlike Singapore, the decoupling (of office functions) is not happening to a large extent there,’ she added.

In Q2 2007, average prime rents in Raffles Place rose 20 per cent quarter-on-quarter to $13.10 psf. Top rents, however, are said to be nearing $16 psf.

Source: The Business Times, 17 July 2007

Imagine prices of homes in Singapore’s Jurong catching up with those in Orchard Road.

Well, it has happened - in Hong Kong, that is, where demand for top-end homes on the outskirts has soared due to limited supply in the city centre. And some of these locations could be an hour’s drive away from downtown.

Prices of homes in the suburbs have seen a surge of as much as 10 per cent in the past year. The upward trend, especially for the high-end sector, is expected to continue through the year, industry players say.

Highlighting this trend, Ms Karen Choi, who heads research at property consultancy Vigers in Hong Kong, said that as of April, sales for homes worth HK$10 million (S$2 million) grew nearly 200 per cent over a 12-month period.

In contrast, the sale for homes in general grew about 40 per cent over the same 12-month period.

More interestingly, Ms Choi told The Straits Times, values of some upcoming top-end homes in countryside areas such as Sai Kung, Tai Po and Sheung Shui - typically bungalows or semi-detached houses with full sea views and designer fittings - are set to surge to as high as HK$20,000 per sq ft.

This was the cost of a new home in Hong Kong’s traditional luxury areas, such as the Peak and Repulse Bay, in 2005 when the city’s property market started recovering from the economically crippling Sars epidemic of 2003.

Homes in these luxury areas have now soared higher to exceed HK$25,000 per sq ft in average value.

‘But given that, going forward, there is limited supply coming into these traditional luxury areas, it is really not surprising that top-end homes in the outskirts have attracted big interest,’ said Ms Choi.

‘The demand for luxury properties is still quite prominent despite soaring capital values.

‘This sector is a lot more resilient than the mass market. For example, while prices of homes on average plunged by 60 per cent after Sars struck, those for top-end properties fell by a much lower 20 per cent.’

A lot of high-end buyers at Tai Po and Sheung Shui, near mainland China, are Hong Kong or mainland industrialists who own factories or investments in neighbouring Shenzhen city across the border, Ms Choi noted.

‘Increasingly, however, I do see more top- level executives who work downtown coming out to either rent or buy in these areas.’

Boosted by a sustained economic recovery and healthy stock market, the luxury property sector has boomed over the past year.

March saw the sale of the most expensive home ever - a house in the Peak district which cost HK$38,500 per sq ft - and the most expensive apartment unit, at HK$32,000 per sq ft.

It is not expected to stop there, with one of Hong Kong’s leading developers, Sun Hung Kai Properties, having forked out last December HK$1.8 billion - a record HK$42,196 per sq ft - for a plot of land at the Peak.

This means that prices of new homes there will have to be set above current records, possibly as high as HK$60,000 per sq ft, analysts say.

Sun Hung Kai is also co-developer of the luxury Orchard Turn condominium in Singapore, which holds the city state’s record home price of S$4,000 per sq ft.

The phenomenon of expensive homes in the suburbs underlines the depth of Hong Kong’s property market, experts noted, compared to places like Singapore.

While the price of the costliest home in Tai Po will still be enough to buy a home in the heart of town, they said, the costliest one in Jurong - at about S$500 to S$600 per sq ft - is no match for even the cheapest Orchard Road flat.

‘Even in top Singapore suburbs like Tanah Merah, the top price ranges at just over S$600 psf,’ Mr Michael Ng, managing director of Savills Singapore, told The Straits Times.

‘This is nothing compared to at least S$1,000 psf for homes in Orchard Road and the prime districts, if these are available now in the resale market.

‘It will still take a while for the Singapore property market to catch up with the Hong Kong one, if at all.’

Source: The Straits Times, 28 May 2007