China Overseas Land & Investment

Property price spiral 'not fault of mainland buyers'

PUBLISHED : Wednesday, 13 April, 1994, 12:00am
UPDATED : Wednesday, 13 April, 1994, 12:00am

DESPITE increases in mainland investment in Hong Kong property, they are not responsible for the price spiral of recent months, according to an executive at First Pacific Davies.

''It is easy to blame the rapid rise that we have seen in commercial prices on speculative Chinese or local investors. In reality, what has prompted the rapid spiral in prices has been a shortage of land supply,'' Mary Seddon told a seminar organised by Legal Business in Asia.

She acknowledged that while there was some speculation in the commercial sector among mainland investors, most Chinese players were buying properties for long-term investment.

First Pacific estimated that ''at least 70 per cent of purchases have been for a long-term hold'', she said.

In the residential sector, where mainland investors were involved to a lesser extent, the price spiral was due to land shortage and negative real interest rates.

She added that as long as China's economy continued its robust growth, and Hong Kong continued to maintain its existing system, more mainland companies would be attracted to the territory's property market.

She said if Hong Kong was able to maintain currency stability and single-digit inflation, more mainland companies would buy property for long-term investment.

Big players such as CITIC and China Overseas Land are mainly in investments for long-term purposes while privately owned enterprises which have grown as a result of China's open-door policy tend to speculate, Ms Seddon said.

China has been estimated to account for about 23 per cent of investments in the property sector, totalling at least $55 billion.

Alan Dalgleish, First Pacific Davies' general manager for research, said it was difficult to check the mainland's property investments in Hong Kong because there was no effective control mechanism.

Last month, the Hong Kong and Macau Affairs Office, the Chinese body under the State Council responsible for Hong Kong matters, expressed concern that mainland companies were contributing to the territory's property price spiral.