It was the best of times, it was the worst of times…Charles Dickens’ famous opening line in A Tale of Two Cities has be appropriated to describe all manner of ups, downs and duality of a given situation — sometimes brilliantly, sometimes not. Either way, we all recognise that the two go together, and that applies to Hong Kong’s property market too. So how far did that pendulum swing?
Best: Doubling Down
The Hong Kong government maintained its controls on the property market and upheld cooling measures, among those February’s implementation of the Double Stamp Duty. “The implementation of Double Stamp Duty in February 2013 has effectively suppressed demand by increasing transaction costs and these DSD measures have also discouraged speculation,” says Manager of Research and Advisory at Colliers International, Joanne Lee. “In the residential market, developers started to offer discounts to their new projects and the levies include the double stamp duty and the 15 percent buyer’s stamp duty. This has attracted strong market attention and sales are well responded.”
Worst: Double for Nothing
Or maybe not. If any one move stood out for the negative for some it was the same DSD. Local and global analysts point to the DSD as a market killer in the commercial sector. “In our opinion, extending control measures to the non-residential property markets is not only unnecessary but also damaging to Hong Kong’s standing as a liquid, free market economy and as a real estate investment destination within the region,” states Joseph Tsang, managing director and head of capital markets at Jones Lang LaSalle. Noting that in advanced economies like Hong Kong commercial investors have sufficient capital reserves and are risk-knowledgeable, limiting investment activity is both unnecessary and unfairly targets foreign firms, as evidenced by Manulife Financial’s additional $200 million duty on a recent purchase. On top of that, “Higher stamp duty rates can also have an impact on market transparency… While Hong Kong has traditionally ranked in the highest echelons of transparency in [JLL’s transparency] survey, the potential to circumvent the DSD by trading real estate via a holding company rather than through a direct asset transaction could reduce market transparency and ultimately lead to a structural decrease in investment volumes over the longer-term,” warns Tsang.
Best: Inside and Out
In September the Hong Kong Green Building Council and BEAM Society finally got around to looking inside and set out guidelines for green assessment standards for interiors. With architects and interior designer frequently lamenting the fact that they’re ahead of the government on green initiatives — and too often can’t use them for lack of current official guidelines — BEAM Plus Interiors is the kind of step that may encourage actual change, as one of the criteria for assessment is innovation.
Worst: Ways to Go
BEAM is all well and good but as Dr Merrin Pearse, sustainability consultant at Coordinate 4 U, points out, the government failed to implement the World Health Organization’s Air Quality guidelines in full in 2013, and come 2014 (allegedly) will only implement part of them. According to WHO, two million premature deaths each year can be attributed to poor air quality — indoors and out — and with the government here making all sorts of noise about improving the environment and going sustainable, brushing off basic internationally recognised standards (WHO’s guidelines have been around since 1987) sends the wrong message.
Best: No More Mystery
April’s Residential Properties First-hand Sales Ordinance may have been a bit confusing at the outset but overall, the Ordinance was a good move for consumers. True, the Ordinance led to a momentary blip on the sales transaction radar and yes, it is being blamed (along with various duties and cooling measures) for a market slowdown, but the idea behind the law was to weed out the misinformation or misdirection from swarming sales agents. Buyer should always beware but it’s nice to see the sleight of hand removed from the most basic elements of a property transaction.
Worst: Status Quo
Though she has no quarrel with the effect of the DSD on the residential market, Colliers’ Lee notes, “Sales activity stayed low amid restrictive measures still in place. Investors have remained cautious about entering Hong Kong’s property market.” Some major market movers from Mainland China as well as local investors have started looking to overseas alternatives to avoid the heaps of taxes in the SAR. “Most prospective buyers have adopted a wait-and-see approach, while some vendors hold onto their properties as interest rates remain low. As a consequence, the overall sales volume across the four property sectors experienced a substantial slowdown. Only end-user demand is left in the marketplace.” Worst of all? The measures have done little to control prices.
Best: Park Protection
With chatter about developing country parkland once again making headlines, the WWF’s statement about the incorporation of Tai Long Sai Wan, Kam Shan and Yuen Tun into the park system was welcome. The hue and cry in 2010 over unauthorised excavation of one hectare of TLSW land led to a government assurance to revisit the loopholes that allowed it to happen. “This incident and the destruction of other enclaves reflects that government has to take more stringent protection measures to ensure the conservation, landscape, educational and recreational values of Country Parks are safeguarded for all Hong Kong people,” said Dr Michael Lau, senior head of the local biodiversity and regional wetlands programme at WWF-Hong Kong in a statement. LegCo made good on its promise: the proposal was tabled for negative vetting in December and passed. Yes, we need houses, but not at the cost of our home.