Bloomberg
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June 18, 2010
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1:53
Hong Kong Authorities Probe
Henderson's Failed Sales
June 18 (Bloomberg) -- Bloomberg's Phillip Yin reports on the
investigation into canceled apartment sales at Henderson Land
Development Co.'s 39 Conduit Road project in Hong Kong. Henderson,
controlled by billionaire Lee Shau-kee, will provide "all necessary
information" to Hong Kong authorities, spokeswoman Bonnie Ngan said by
telephone today. The sales were canceled due to "the economic
environment" and lending policies that were tightened by the Hong Kong
Monetary Authority, Ngan said. 39 Conduit Road Sale Site
In Hong Kong, a $56.6 Million Apartment
By KEITH BRADSHER, The New York Times
Published: October 14, 2009
HONG KONG — One of Hong Kong’s largest developers announced
Wednesday that it had sold an apartment for 439 million Hong Kong
dollars, setting a record, just hours after the city’s chief executive
warned that the city might be facing a real estate bubble.
Enlarge This Image
Bobby Yip/Reuters
The developer of the "Conduit Road 39" building in Hong Kong announced
that a 6,158-square-foot duplex apartment in the building has sold for
$56.5 million.
The deal, valued at the equivalent of $56.6 million, set a record
price per square foot for Hong Kong, and the developer, Henderson Land,
said it was not aware of a higher figure’s having been paid anywhere
else. Henderson Land declined to disclose the buyer’s name
but said it was a company registered in Hong Kong. The buyer’s
representative spoke the local dialect with a strong mainland Chinese
accent and appeared to be spending money earned on the mainland, a
Henderson representative said. As China’s economic recovery
has gathered force this autumn, wealthy Chinese are pouring fortunes
into Hong Kong real estate, producing a powerful surge in prices for
luxury real estate. Hong Kong pegs its currency to the U.S. dollar and
links its interest rates to American rates; with a flood of money
pouring into local banks, adjustable-rate mortgages are available in
Hong Kong for an initial rate as low as 2.05 percent, fueling real
estate speculation. Donald Tsang, the city’s chief executive, cautioned in his annual policy address Wednesday that the boom might not last.
“The relatively small number of residential units completed and the
record prices attained in certain transactions this year have caused
concern about the supply of flats, difficulty in purchasing a home and
the possibility of a property bubble,” Mr. Tsang said.
International comparisons of apartment prices per square foot are
difficult because different locales have different conventions on how to
count terraces, common areas and other features. Hong Kong in
particular has had many controversies over whether developers have
overstated the square footage of apartments and the value per square
foot of often-complicated transactions. Henderson Land said
that the apartment on Hong Kong Island, near the top of a skyscraper
overlooking Victoria Harbor, was a two-story unit with five bedroom
suites. It measures 572 square meters, or 6,157 square feet, and has a
garden of 340 square feet, for a price per square foot of 71,289 Hong
Kong dollars, including the garden. That measurement includes common
areas like elevator lobbies that are partially allocated to individual
units. Most real estate markets use a narrower definition of
square footage, excluding such common areas. Henderson Land said the
price per square foot of usable area, a more common international
measure, was about 88,000 Hong Kong dollars, or $11,350. The
apartment building has its own ballroom, outdoor swimming pool, fitness
center and outdoor yoga area. Another unit on the same floor just sold
for 397 million Hong Kong dollars. Last month, a local
businessman bought a one-bedroom apartment of 816 square feet at a
luxury development across the harbor in Kowloon for 24.5 million
dollars. Hong Kong’s real estate market is unusual because
the local government owns virtually all of the land and leases it to
developers for periods of as long as 99 years. Each lease contains
strict zoning rules governing the square footage of the building that
may be erected, how the building may be used and other uses; changes to
the lease typically require lengthy negotiations with the government, as
well as very large payments. Hong Kong has more than 1,000
old industrial buildings left from its days as a manufacturing hub
before almost all of the factories moved across the border to mainland
China in the 1980s and 1990s to take advantage of low-cost labor.
Because of a strict requirement that they be used by manufacturing
companies, many of the buildings are vacant or serve as warehouses for
manufacturers across the border even though the buildings occupy prime
locations. Mr. Tsang said Wednesday that his government
planned to start allowing the conversion or redevelopment of these
buildings, which have a combined floor area of 87 Empire State
Buildings, or 17 million square meters, into commercial real estate.
Property values are a subject of almost daily speculation in Hong Kong,
where half of residents own their homes and most of the rest live in
subsidized or government-owned housing. Mr. Tsang pointedly avoided any
suggestion that the buildings would be turned into residential real
estate. His predecessor, Tung Chee-hwa, tried to address
Hong Kong’s chronic housing shortage and high prices by increasing
leases to developers so as to increase the supply of apartments. The
effort got under way just as the Asian financial crisis hit in 1997 and
1998 and contributed to a 68 percent plunge in residential real estate
prices from 1997 until a trough in the early summer of 2003, near the
end of an outbreak of severe acute respiratory syndrome, or SARS.
Lau Siu Kai, the head of the central policy unit of the Hong Kong
government, said at a news conference with foreign correspondents
Wednesday that the government particularly wanted to use the nearly
vacant industrial buildings to house companies from six industries that
Hong Kong was trying to develop: education services, medical services,
testing and certification, environmental industries, innovation and
technology, and cultural and creative industries. Some
economists warn that if U.S. interest rates start to rise, real estate
buyers in Hong Kong could be severely squeezed. Virtually all mortgages
in Hong Kong are issued at floating rates pegged to banks’ prime rates,
with no lock on the interest rate even in the first weeks of the
mortgage. Still, the record price set Wednesday is not likely to
last long. The latest deal was for an apartment on the second-highest
floor at 39 Conduit Road; the penthouse has yet to go on sale, with
Henderson Land expecting to price it at 100,000 Hong Kong dollars per
square foot, or $12,900.
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