CK Lau, the managing director of both Colliers Hong Kong and its Asia Valuation & Advisory Services business, speaks during the Straight Talk show on TVB, Nov 7, 2023. (PROVIDED TO CHINA DAILY)
CK Lau, the managing director of both Colliers Hong Kong and their Asia Valuation & Advisory Services business, is on the show this week.
Lau said that the challenges faced by Hong Kong’s property market are manageable and the government's initiatives to reactivate the local economy have shown positive results. The recent relaxation of stamp duty in the Chief Executive’s Policy Address has led to increased market activity. Optimistic about Hong Kong's property market, he stressed the significance of attracting Chinese mainland talents and enterprises to strengthen the city's international financial center status
Check out the full transcript of TVB’s Straight Talk host Dr Eugene Chan’s interview with CK Lau:
Chan: Good evening! This is Straight Talk with Eugene. Our guest this evening is CK Lau, the managing director of both Colliers Hong Kong and the Asia Valuation and Advisory Services business. With over three decades of expertise in property valuation, real estate consultancy and investment sales, Lau is a prominent figure in the industry. He has written over 200 articles in the Hong Kong economic journal and other publications on land and development in Hong Kong. Tonight, we focus on the dynamic world of real estate development. Is it still the lifeblood of Hong Kong's economy? Welcome, CK!
Lau: Thank you. Thank you, Eugene!
Chan: Alright, CK, as you know, Hong Kong real estate is known to be one of the most expensive in the world. And we had a saying that even one inch of soil is as valuable as gold and our home property is one of the most important investments in many, many people. We have talked about public housing a lot on the show, but tonight we want to focus on private real estate, which has been much of a topic recently after the policy address. So, we can start with a bit of historical perspective, given your past experience on how our property market has evolved. And also, of course, the property prices in the last few decades.
Lau: I think we can look at a few major turning points. First of all, I would perhaps focus upon the Asian financial crisis (AFC) to start with, back in 1997 when the then market was at its peak, but after the Asian financial crisis, the interest rates have gone up very substantially. I mean, foreign agent financial crisis after I mean within that few years, the prime rate was at the range of eight to 10 percent at that period, and overall in that I mean, I will say very difficult time period for Hong Kong from 1997 up to the SARS period 2003, the property prices in general have dropped by two thirds in Hong Kong. And I will say I mean a very difficult time for Hong Kong people at that time. With the high interest rate, the currency of Hong Kong dollars was also very strong. And that is also one of the major factors affecting or pushing the property price down versus our counterparts in other Asian countries. So, this is I will say, I mean a very important era for Hong Kong, investors and owners to remember that. But then we entered into a period of recovery following the 2003 period, because the government had to introduce them in various measures, in particular, inviting more visitors from China to come into Hong Kong and that we have seen them in their property prices have rebounded and then we have a small period of the global financial crisis in 2008. But that period was not that long. And shortly after that, I mean the US government has introduced quantitative easing, and this is where we have seen a long period of public prices, I mean going up.
Chan: Before I'm gonna ask you further questions on how property prices will be affected by different factors. I want to jump to ask a question. You just mentioned Hong Kong went through a very difficult period in the .... after the Asian financial crisis and then down to 2003. When we had SARS, this time we have been through social unrest, riots and three years of COVID. Now we are under a lot of geopolitical factors, the interest rate has gone up, the economy is sluggish, etc, etc. Do you anticipate this difficult period will be more challenging than the last one? Do you think this is okay?
Lau: I think I mean, we have seen that property prices have gone down after the interest rate has been raised. And that I mean over this period I mean, during the social unrest and also the COVID period. We have seen, I mean, losses in population figures in Hong Kong, but I think, right now the economy has shown some signs of recovery, although it is still in a difficult situation. We have seen the government, in particular the Hong Kong government, have introduced different measures to try to reactivate the local economy and that we have seen some population have come back to Hong Kong right now, both, I mean, residents in Hong Kong and more visitors and tourists coming back. So these are, I would say, important factors to support the local economy.
Chan: Right now you mentioned interest rate, population or even the actual economy. So, I assume those are factors that will affect property prices. So, as I asked earlier, is this challenge worse than the last few months we had or you think this is a one that we can handle and we will survive through this?
Lau: I think we will be able to handle it smoothly. I mean with confidence, with the support from both the central government and also I mean, the initiative to be taken by the Hong Kong Special Administrative Region government. I think we need to add, I mean, decisively to help, to activate the local economy and make Hong Kong attractive to both our residents and also the visitors to come back to Hong Kong.
Chan: Right CK, you know, our property prices, you say, have dropped like two-thirds until 2003. But I think from 2008, until recently, the price has doubled, if not tripled, depending on the price that you have bought the property. So, do you think this time if we can go through this tough time, do you think we can get such a big rebound in the next few decades?
Lau: I think the big rebound may be a bit earlier to start with. But I think we will be looking at for example. I mean, for the last one and half years I mean the proper prices have dropped by around 15 percent whether we'll be able to be covered that I mean in the next few years. We are yet to see.
Chan: So far the prices have dropped 15 percent and the reasons are what you have listed. But if we go to the fundamentals of prices, it's all about demand and supply, how will you comment on the current demand and supply in relation to property prices?
Lau: I think in terms of the amount to start with. For the last few years, we have seen some residents in Hong Kong have left Hong Kong and that have created some units which become vacant or put onto the market for leasing or for sale. So, this is one way I mean the demand has reduced but with the government putting these sort of measures to try to attract talents from mainland and from overseas, this is one way that we will be able to see the demand come back. And I think the population number is very critical because you need to have the people and then you have the demand for the property space. And if we look at the supply side, I mean the government I would say has been acting on this issue for more than 10 years. And that we have some ... we have seen some successes. For example, in the recent policy address, the government has been saying that they have identified a good amount of land which will be sufficient for the next 10 years for building homes. And I think that relieved the concern about the shortage or the acute shortage of Hong Kong in the past but again, we need to understand a lot of the units in Hong Kong, they are quite old. Ah. I mean, not big enough, not good enough right now in the current day standard, and some of them would need to be redeveloped. And that's why the demand is out there, is still there. And I'm confident that I've been willing to back up the economy so that demand would come back.
Chan: And also our chief executive was here last week and we talked about slashing our relaxation of stamp duties in relation to the residential properties so do you anticipate there will be a significant surge of prices because of this new direction of slashing the stamp duties or even increase in the market activity because it seems like the last time we had any relaxation was like over like 12 to 13 years ago.
Lau: I think I mean from what we have so-called discussing or heard before the change in stamp duty. Most of the market company commentators have been thinking that with certain relaxation, there will be an increase in market activities. But whether that would be able to support the prices I mean to be rebounded, I think I mean this is not, as certainly as such, but I think right now with the relaxation, this helps the level of increase of market activities. As can be witnessed by amid some developers have been pushing ahead for themselves firsthand. I mean, the new projects in the market. So, I think this is what I will say quite positively about.
Chan: Right. You know, the real estate market has a far reaching impact on young people, especially when everybody wants to buy a home for themselves, for their family or for themselves to start a career. Often, they will either use their own savings or they borrow from their parents or even a personal loan to make up to 30 percent downpayment that we all did in the last 10 to 15 years. So what is your advice to them? I mean, the price has dropped by 15 percent now, maybe 20, maybe 25? So what will be your advice? I'm sure the viewers are gonna ask me to ask you. What shall I tell my kids? What shall I tell my good friends who have put the hard earned money we saved for all this year and bought something in the last few years because the prices now are back to 2016/15 prices. So, what would you say?
Lau: I will say this is not an easy question, but I would start with something like this. Why? I mean the young couples or the young people who have bought at the outset, they need to question themselves again whether they want a place I mean to live in for a relatively longer term. Otherwise they can lease in the market because of home ownership that comes with different types of benefits. I mean, they can mean to tell people that I own a home. I'm a believer in the Chinese and Hong Kong economy. I have the confidence here. I'm a homeowner. These are the benefits. So, I mean, the market actually goes up and down. With the current reduction in price of course I mean this would cause some sort of discomfort to many young couples who have bought I mean in recent years, but I think they need to revisit again, where they really need to homeownership to start with or whether they can live in a short term, two year or three years tenancy in the market.
Chan: Right let's take a break now and viewers stay tuned with us. We'll be right back.
Straight Talk presenter Eugene Chan (left) interviews CK Lau on TVB, Nov 7, 2023. (PROVIDED TO CHINA DAILY)
Chan: Thank you for staying with us. And we have CK Lau on the show this evening talking to us about the role of real estate development and its impact on the Hong Kong economy. So, CK, on the first half we have touched on the fact that Hong Kong has gone through, in the last few decades, different falls and increase in prices. You talked about the recent drop in prices because of the interest rates or the economy, and many other factors, even geopolitical. And the last are we talked on before the break is a lot of Hong Kong persons have saved hard for their home for them to use, and the prices have dropped from 15-22 percent. If you took on the Hong Kong Mortgage Corporation’s style of mortgages, you are like 90 percent mortgages. So, they are already in negative equity. What would you say to them? Because they are watching us and they are going to say, “Mr Lau, what shall we do?”
Lau: I think we have experience, I mean there was a lot of negative equity situation in the past. In particular, after the Asian financial crisis, many Hong Kong people would just sit there, work hard, and then continue to pay their mortgages, and hold onto their homes. And I think for the young generation, the property price does have this sort of up and down, and that it would depend on their own financial capabilities or their job security, income, etc, to determine what they would do with their mortgage or their home ownership. But one thing in the past that we have seen is that those homeowners, they hold onto their property, continue to make the mortgage payment. Of course, if they are under pressure, they can possibly consider to sell the property. But I think one thing, I mean, this is important is the transaction costs or property transaction is not that small. I would say relatively high these days in Hong Kong still, even with the relaxation of the stamp duty measures. I think this is one of the factor they also need to consider.
Chan: So, in other words, it is, stay there and, I mean no one has crystal ball, will most people be all right if they keep on the payments? Is that what you are going to say?
Lau: I think so, but this is already the historical evidence that we have seen.
Chan: All right, okay.
Lau: Not many people would like to default on their mortgage.
Chan: Right. And also I have checked the statistics of Hong Kong, about 66 percent of the Hong Kong households are actually without mortgages alone. So, is this going to help to add the stability and security to the market?
Lau: I would say so. I mean many people still need to live in their homes, which they own. And then I mean we have a lot of, I would say, older properties in Hong Kong. This is basically the core of the market. And that we have, these days, the new homes put forward into the market, which is, I would say, the more affected area for the young couples. But if they have been chosen, I mean the second hand market, I think their impact would be less.
Chan: Right. I asked also the chief executive last week that by doing all these measures, by slashing the stamp duties, even for the stock market, as well as the property market. I am sure they want to stabilize the price, or even to make sure there is enough activates in the whole economy. What if it doesn’t work? Do you think there should be a plan B? What will you advise the government?
Lau: I think the government has been acting on the stamp duties for part of it only, that means taking away the buyers’ stamp duties and the special stamp duties by half, and that reduce the stamp duties payments, or waive, I mean I should use another world, to ask the newcomers in Hong Kong, under the talent schemes, to pay the stamp duties if they have not been able to achieve the permanent residence status. So, these are, I would say, correct or the right moves for the government. If the activities levels have not returned to a good level yet, or that the prices may continue to decline, then the government should consider to waive the other stamp duty measures.
Chan: Right. Let me just assure you because I asked the same question to the chief executive. He said that before he launches plan, he has already considered plan A, B, C, D, and E, and he believe this is the best plan. So, let's hope our Chief Executive is correct and lead Hong Kong through.
Lau: Yep.
Chan: With all these policies, who do you think will come in and help increase the activity? Have you seen any talents coming to Hong Kong and start actually buying a property because of this delay payments of stamp duty? Should they become a permanent resident?
Lau: Actually I would like to recall a bit. Actually in the last year, when the chief executive announced that they would repay the stamp duty back to those talent after 7 years of residence, some Hong Kong, some of these talents in Hong Kong, they have already been asking whether they would be entitled to buy at such last year. And this year, I think some reports or newspaper report have already reported that some purchases have been made by this group. So, I think for those talents who have been in Hong Kong or going into Hong Kong, they will be interested in this scheme and they may like to make the property purchase at such.
Chan: So, looks like the government has done the right thing. We don't have enough people, so they have a talent … drawing for talents. Now we are helping them to, assisting them to buy something in Hong Kong, to make them feel more like Hong Kong is their home, and helping our economy. So, looks like the government is doing the right thing.
Lau: Definitely. I think this is the call from the market already.
Chan: All right.
Lau: Because these sort of talents, right now, is attracted to different parts of the world, and definitely Hong Kong needs to maintain or increase its attractiveness, to these sort of talents, in order to fill up the gap that we have seen in Hong Kong, in terms of population figure.
Chan: Right. Since you talked about talents, I am sure those people would have a choice to go to different places, and I know Singapore is a city that we often talk about on Straight Talk, saying that many people have gone to Singapore. But I've read, just because they are doing their preparation to see you today, that actually the rents in Singapore has gone up a lot, and even to buy a property in Singapore, if you are a foreigner, they pay four times more tax in Hong Kong. So, do you think this makes Hong Kong even more competitive now? Back to where people want to come back and work here?
Lau: I think first of all, for talents to go into a certain place for work or for living, they would consider a lot of things, and property ownership is just one of them. And if we look at Singapore, for example, the private market, the private residential market is relatively smaller than that in Hong Kong, with half or more than half of the population in the private market in Hong Kong. And I would be seeing is more important for Hong Kong is to create those accommodation, both for sale and for leasing to attract those talents to come in.
Chan: Right.
Lau: Those units that we have seen in the past years developed in Hong Kong, many of them are very small, just too small.
Chan: Right.
Lau: If you really want to attract those talents who would come in with their families that means with their children, this is not that small units can accommodate them. And that with the good income that they earn, definitely they would like to have good living. That means a suitable apartment or house that can accommodate their property requirements.
Chan: Right. CK, we talked about the perspective from the government, from the young couples. Let’s talk about from the actual developer’s point of view very quickly. I mean they are the ones who are going to provide the private apartments for us to purchase. Do you think they will go into a price fall to try to attract these talents? What do you anticipate?
Straight Talk presenter Eugene Chan (left) interviews CK Lau on TVB, Nov 7, 2023. (PROVIDED TO CHINA DAILY)
Lau: Let's see what you mean by price fall first because the developers would be putting up the units for sale to both the talents and also the Hong Kong people. But I can see that some developers have put up schemes that there may be rebate of certain stamp duties for those people who come into Hong Kong. So, this is one way that they can increase the attractiveness of their units to this targeted group of buyers.
Chan: Right, CK. One last area I am sure the viewers would want me to ask you is that you know Hong Kong's economy is nowadays heavily dependent on the Chinese economy. And we know that the real estate market on the mainland hasn't got very good news in the last year, like the Country Garden payments is having some default issue, the Logan units winding up, Sino-Ocean suspending their payments, and even Evergrande people have been arrested because of property work. So, how do you see all these impacting Hong Kong Colliers Hong Kong?
Lau: In the past, many private enterprises in the mainland, they come to Hong Kong and purchase. But nowadays these kinds of activities reduced a lot, and some of these developers need to sell some of their units or their property holdings in Hong Kong. But at the same time we will be looking at whether there will be other companies, in particular those state-owned enterprises from China, will come into Hong Kong to look at the opportunities here. And from the market we have seen these activities, at least viewing opportunities have already happened. And this, I would say, the interest of mainland talents and also the interests of Chinese enterprises into Hong Kong is very important.
Chan: Right.
Lau: And that would also help to strengthen the international financial center status of Hong Kong, and also help to promote our innovation and technology industries in Hong Kong, which are the two major growth engines for Hong Kong.
Chan: CK, last question, single answer. Are you positive about Hong Kong’s property market?
Lau: Positive, definitely.
Chan: Thank you. So, I am afraid that is all the time we have. Thank you CK for shedding light on this complex and dynamic area. We hope that our viewers have gained a deeper understanding of real estate development in Hong Kong and its role in shaping our city’s economic future. As someone once said, “Don't wait to buy real estate, buy real estate and wait”. Have a good evening and see you next week!
