MAGAZINE 53 MARKET WATCH

 

 

Are you in search of a cut-price property with plenty of potential? Jane Drew heads to Sai Ying Pun on the advice of Kenneth Cheung, senior consultant at Iglu Property Consultants

Many downtown areas have been up-and-coming for so long that one begins to wonder if they are ever going to quite make it; but not so Sai Ying Pun that skinny strip of land immediately to the west of SoHo. Buy here, the experts say, and you’ll be sitting pretty in a year or so, and laughing all the way to the bank in five.

For the moment, however, Sai Ying Pun is the ugly ducking to SoHo’s swan – or to put it another way, it’s everything SoHo was, about 15 years ago. It’s a bustling, predominantly Chinese residential area, with a couple of local stores and eateries thrown in. The majority of buildings are old (30-40 years) with city views, though it’s already possible to spot a few newer 10-12 storey developments which take in the harbour.

The immediate attraction of Sai Ying Pun is that it offers up a real taste of “old” Hong Kong; you’ll be picking up your morning coffee at a cha chan teng rather than a Starbucks, and you’re more likely to be woken by the sounds emanating from a metalworker’s shop than from a nightclub. Added to which, of course, you’ve got the best of both worlds, since SoHo (and Central) are on your doorstep.

Anyone looking for a bargain in Sai Ying Pun should concentrate on the older buildings, and units that have not been previously renovated. “At Hang Sing Man on High Street, for instance, you’ll be looking at paying around HK$4,000 per square foot for a 500-square-foot apartment. This is a good buy at HK$2.5 million when you consider that the same type of unit in SoHo can go for more than HK$5,500 per square foot,” says Kenneth Cheung, senior consultant at Iglu Property Consultants.

At one of the newer buildings in Sai Ying Pun, like Elite Court on Center Street, a 600-square-foot to 800-square-foot unit sells for around HK$5,500 square foot: still a steal when you consider that in SoHo, a flat in a modern block could set you back HK$12,000 per square foot.

“Investor activity is so high in the area at the moment that there’s every chance the bank will match the asking price on an older unit, but valuations tend to be better for new buildings.  Again Elite Court is a good bet as the asking price went up to HK$5,000+ per square foot this year and the bank will consider previous transactions in making their evaluation,” says Cheung.

Investors should note that the asking price for units throughout Sai Ying Pun has been rising steadily for the past three years; up by about 15 percent since January.

If you are looking at a short-term investment, it should be easy to sell on a Sai Ying Pun property, given the current market, assuming your asking price is close to the bank valuation. “If you renovate well, you can expect to sell a unit bought for HK$2.5 million for around HK$3.2 million,” believes Cheung.

When renovating, be sure not to price yourself out of the market, but set aside between HK$100,000 and HK$200,000. In addition to upgrading the appliances and materials, you’ll probably need to fix the pipes and knock out a few walls. An open-plan layout immediately ups the bar but it’s worth noting that one-bedroom units are currently selling better than studios.

The price point in Sai Ying Pun is such that even starter investors are now looking into buying and renovating entire blocks.  Buildings in which all units and communal areas have been upgraded are commanding impressive prices. At Kush 111 on High Street, for instance, 700-square-foot serviced apartments are now renting for around HK$38,000 per month.

“If you are looking to buy-to-rent, you would do well to stick to the older blocks since the efficiency ratio is high at 80 percent (compared to 60 percent for newer builds). Post-renovation, the monthly rental should easily cover your mortgage,” explains Cheung.

“Rentals aren’t quite hitting the SoHo scale as yet but you can expect to tenant out an old (renovated) 500-square-foot apartment at the end of Hollywood Road for HK$18,000 per month; HK$21,000 for a newer 575-square-foot flat on Bridges Street,” he concludes.

But it’s the long-term potential of Sai Ying Pun property that is really hitting the headlines. The first stage of the Sai Ying Pun Escalator along Centre Street will be completed next year, linking up Mid-Levels West with the future MTR and facilitating urban renewal in the area. Sai Ying Pun Station is expected to be up and running by 2013; part of the underground extension of the existing Island Line from Sheung Wan to Kennedy Town.

With the MTR in place, property prices in Sai Ying Pun are expected to increase 40 percent across the board. It already has geographical proximity to Central, and once residents can get downtown in 15 or so minutes (even during rush hour) there will be nothing to stop this area’s gentrification.

Clearly the time to buy is now, as prices are already on the up. Potential buyers should also note that local developers may soon be looking to position themselves in Sai Ying Pun, before the government imposes height restrictions in the area, thus driving up prices.