2012: when car parks became cash shelters
The buyer's stamp duty touched off a mania for parking spaces but now investors might find it hard navigating their way to the speculative exit
Happy Holidays to all.
The new year is traditionally a time to take a look at how things have gone in the past 12 months and vow to start afresh.
I'm not going to give readers any investment tips in this column. But I have talked to a number of senior executives at major developers recently and readers may find hints in their comments on how to plan ahead in 2013.
Since the government introduced the buyer's stamp duty on residential purchases by companies and non-permanent residents at the end of October, investors have been parking their money in non-residential properties, including offices, shops, and even car parks.
In a report recently released by Hong Kong Property Services (Agency), the number of car park sales in the first 20 days of December hit a 16-year high of nearly 3,000 deals.
Stewart Leung Chi-kin, vice-chairman of Wheelock & Co, said developers were happy because they previously had a lot of unsold car parks on hand.
"Some big developers have thousands of car parking spaces. Developers could not find enough buyers, especially for the projects in the New Territories. Now they are happy to see investors showing buying interest," said Leung, who is also chairman of the Real Estate Developers Association.
But Chu Ip-pui, executive director at Kerry Real Estate Agency, warns there is too much liquidity in the market because of the US decision to introduce further monetary easing.
"Some investors bought properties such as car parks without serious consideration. Now the negative impact is starting to be exposed," Chu said.
According to some reports, investors who have bought car parking spaces from developers may now find it difficult to resell the property.
So what do developers advise?
Justin Chiu Kwok-hung, executive director of Cheung Kong (Holdings), said that even if people were advised not to buy, they would not listen because the cost was so low.
"For investors, investment returns are important. Today, return on office properties is pretty low. Once interest rates go up, they will get into trouble," Chiu said.
"The age-old rule is invest within your limits. People like me who are going to retire will pick something with a stable return. I would consider real estate investment trusts."
Chiu is also chairman of four listed reits in Hong Kong and Singapore so any readers concerned about a conflict of interest in his recommendations can take a look at his actions - where he puts his money.
"I have a collection of properties [around the world] but I seldom trade," Chiu said. He has properties in Hong Kong, Dubai, London and Paris.
Last month, Chiu sold a unit in Robinson Place in Mid-Levels West for HK$15.5 million, HK$3.85 million above the price he paid for it four years ago.
"London is good place to buy but sterling now is still high, taking into account the economic environment there. I'm waiting for a decline in the currency," Chiu said.
Mainland China, Australia and Singapore were also some options worth considering, he said. But not the US.
"I don't have property in US because tax is heavy there," he said.
"Try not to allow them to open a tax file on you. Once they do, they'll keep chasing you."