Buy now with rates low, Li urges
Cheung Kong (Holdings) chairman Li Ka-shing reiterated yesterday that prospective homeowners should buy now, especially with inflation rising and interest rates low.
'For personal use, with adequate funds for a 30 per cent to 40 per cent down payment, buying property should not be a wrong move,' Li said after the annual general meeting of his flagships Cheung Kong and Hutchison Whampoa.
Li's comments came a day after Chief Executive Donald Tsang Yam-keun said the rises in new home prices had alarmed the government. Speaking to the Legislative Council on Thursday, Tsang said the government would do all it could to curb property prices.
But Li's call to buy is supported by low interest rates, rising inflation and surging construction costs.
'It is unlikely that interest rates will rise this year,' he said. 'Even if the rate does increase, the maximum increase is 50 basis points.'
Deputy chairman Victor Li Tzar-kuoi said the positive market was supported by strong demand.
According to Centaline Property Agency, housing prices in Hong Kong are at 97.44 per cent of 1997's peak level. This is 10 per cent higher than last November, when the government announced anti-speculation measures to cool home prices.
Chairman Li said the practical way to stabilise the market was to expand supply. 'Apart from residential sites, [supplies of] commercial sites also need to increase,' he said.
But he also warned of the risk of oversupply and increases to a level that hurt the property market.
Hong Kong had enjoyed a low-tax environment for years because the property sector contributed a major part of the government's revenues, he added. If the property market collapsed, the government wouldn't have the revenue. Then other taxes would increase, chairman Li said.
Li also said the company had no immediate plan to spin off the group's other businesses. Even if it did, retail operations would not be considered in such a move, Li said.
Cheung Kong (Holdings) last month spun off Hui Xian Real Estate Investment - which owns Beijing Oriental Plaza in Hong Kong - as the first yuan-denominated share offering outside the mainland.
But it had a less-than-stellar debut, with shares dropping 9.35 per cent on their first day of trading.