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SCMP Reporter

JANUARY A record $20 billion worth of large-scale property transactions were signed as big-time investors jostled to buy into the booming real estate market.

  The figure dwarfed the previous monthly record of $12 billion, achieved in May 1993.

   The number of ordinary property deals struck during the month fell, but their combined total value jumped, boosted by a string of major transactions.

  Land Registry figures showed 10,749 sale and purchase agreements for the month, down 1.5 per cent from December. Their combined valued came to $40.53 billion, up 26.8 per cent.

   In an attempt to reduce exposure to the red-hot residential property market, Hongkong Bank and Hang Seng Bank announced tough new lending conditions for larger flats.

  They slashed advances on a single property and raised the cost of borrowing. Their new mortgage lending level for properties worth $5 million or more was lowered from 60 per cent to 50 per cent.

     Concern set in after Beijing unveiled its biggest tax reform package since 1949, including property gains tax aimed to curb speculation, known as the Land Appreciation Tax.

  The move was expected to raise combined taxes on property transactions to as high as 80 per cent.

   China also banned the sale of state-owned flats at excessively low prices to halt the drain of state assets.

FEBRUARY Nomura Research Institute, warned that the Hong Kong real estate market could be heading towards a Tokyo-style fall-out following the bull run on prices over the previous quarter.

   'There are real concerns the Hong Kong market will follow the path experienced by Tokyo in the late 1980s,' warned a brokerage report. Nomura thought it probably would not.

   Preliminary Working Committee member Tam Yiu-chung urged China to crack down on illegal funds flooding into Hong Kong's property market, saying they contributed to rocketing real estate prices.

  He accused some major mainland enterprises of hedging foreign exchange earnings through Hong Kong real estate, particularly luxury flats and commercial buildings, rather than repatriate funds and face conversion to yuan.

MARCH A staggering $53.6 billion in property changed hands as home prices peaked.

  The Land Registry recorded 13,241 transactions for the month, compared with an historical average of 5,000 to 7,000 sale-and-purchase agreements a month over the past 14 years.

   Michael Choi Ngai-min, president of the Society of Hong Kong Real Estate Agents, said more than 70 per cent of new flats were being hoarded by speculators.

     The sale by Cheung Kong (Holdings) of 150 flats in Kingswood Villas in Tin Shui Wai, near Yuen Long, was four times oversubscribed - despite the average $2,800 per square foot asking price, which was 33 per cent higher than the cost of similar flats a year earlier.

   Sino Land went on a bull run, paying $4.4 billion for two residential sites at a Crown land auction.

  It set a record for Kowloon by paying $5,600 a square foot on the accommodation value for a 75,982 sq ft site in Farm Road, which came to a total $2.26 billion. Analysts felt the price was too high.

  A third site in Tuen Mun was sold to Hang Lung Development Co for $650 million.

   Cheung Wah Development Co sold a 7,138 sq ft office unit in Bank of America Tower, Central, for $105 million or $14,710 a square foot - 123 per cent more than it paid for the space little more than a year earlier.

     Having seen average home prices rocket close to 200 per cent in three years, Governor Chris Patten announced a special inter-departmental task force to look at ways to slam the brakes.

  He said the Government was keen to drive out excessive speculation and help give genuine home-buyers a chance, and promised decisive measures within two to three months.

  Financial Secretary Sir Hamish Macleod cited rising property and labour costs as the evils behind inflation.

   In his Budget address on March 2, he promised the Government would do everything possible to increase land supply and encourage redevelopment.

  However, estate agents warned that property prices would continue to soar due to continuing speculation.

       Shih Wing-ching, managing director of Centaline Property Agencies, called on the Government to relax plot ratios, particularly in urban areas.

   Home prices ended the first quarter up a further 20 to 40 per cent, depending on who you asked.

   Cheung Kong paid $2.2 billion for a 28,643 sq ft office site in North Point at an auction.

   Chinachem Group chairman Nina Wang said she would build the world's tallest building in Tsuen Wan. The office building, Nina Tower, would be 468 metres high, cost $10 billion, and be ready by 1998.

   In China, under enormous pressure from foreign investors and the provinces, mainland tax authorities reportedly were fine-tuning their highly controversial property gains tax in order to soften its draconian impact on genuine developers.

  Speculators and developers alike reportedly had been leaving the market in droves due both to the controversial Land Appreciation Tax and various economic cooling measures imposed by the authorities in Beijing.

APRIL Property guru Peter Churchouse warned of a possible crash in home prices if the Government mismanaged its handling of the property price bubble.

   He said home prices could tumble 10 to 15 per cent if it got it right, but perhaps as much as 40 per cent over the longer term if it got it wrong.

  Although he erred on the conservative side, saying a full-scale collapse was unlikely, he did not rule one out if there was any fall-out in the economy, political instability in China, dramatic rise in interest rates, or sharp increase in land supply.

     Hongkong Bank executive director Paul Selway-Swift added to voices urging the Government to do nothing which might reduce property prices too quickly.

   Acting Secretary for Planning, Environment and Lands Canice Mak warned potential home buyers to hold back for two or three months to allow government cooling measures to take effect.

   Estate agents reported a 60 to 80 per cent drop in inquiries, as potential home buyers took to the sidelines.

  Worried about the sharp slowdown in business, industry leaders warned that if the trend persisted, smaller estate agencies might close and staff lose their jobs.

   Developers urged China to allow the Hong Kong Government to release more land to ease the demand for property.

   Rumours emerged that the Government was considering a capital gains tax on profit made on short-term property transactions as one of its measures to curb speculation.

   The China Business Daily reported that soaring rents had pushed Beijing into the ranks of the world's most expensive real estate markets, with average monthly housing rents for foreigners hitting HK$36.50 a square foot. Tokyo ranked number one with an average $86, while Hong Kong was second at $62.

   Hundreds of angry residents at Danshui in Huiyang county, near Shenzhen, mobbed the local police station to protest against unsatisfactory compensation for property resumptions.

  Residents said police were forced to fire warning shots to disperse the crowd and that sporadic fighting took place.

MAY The first reliable clues to what weapons the Government might use to drive unwanted speculators out of the residential property market were leaked through the Sunday Morning Post.

  In an exclusive report, it said the Government was considering doubling the minimum deposit on pre-sale flats, major changes in stamp duty and restrictions on private sales of flats by property developers.

     Developers ganged up to urge the Government not to take too severe measures to cool the residential property market.

     The Wheelock Group won a tender for San Miguel Brewery's 492,000 sq ft former brewery site in Castle Peak Road, Sham Tseng, with a bid of $3.5 billion. The line-up of losing bidders was believed to have included a rather embarrassed Cheung Kong, which earlier spent $280 million on a strategic 10 per cent stake in San Miguel.

   China set up a land evaluation body to regulate land prices and deals.

JUNE The Government released results of its far-reaching but watered-down review on property price stabilisation, pledging to provide land to cater for an additional 45,000 to 60,000 flats over the next six years.

  It announced a string of anti-speculation measures, springing one surprise - a ban on resale of unfinished pre-sale flats.

  This was seen as the sting in the tail likely to do most to kill property speculation.

  Other measures included a review of the land auction process, and reinstatement of the post of Housing Secretary to provide the Government with a high-ranking official to keep a close eye on emerging housing trends and concerns.

    The Government said it would switch attention to seeing what should be done to combat soaring office prices and rents.

     Property sales plunged to their lowest level in 17 months, with the Land Registry recording 7,120 sale-and-purchase agreements for the month, a 44.6 per cent drop from May.

   Beijing said it would launch a massive project next year to ease severe shortages of affordable housing by building more than 1,600 million sq ft of new living space in the country by 1997.

  In what it called the 'comfort housing project', some two million middle-income families in big cities would be able to buy flats for about 93 yuan (about HK$84.75) per square foot, a quarter of the normal market price.

   A consortium, comprising Cheung Kong, New World and Guangzhou Investment, said it was finalising plans to invest up to $20 billion in a housing scheme in Baiyun, Guangdong province, in what would be one of the largest overseas property investments ever made in China.

   In a double-pronged offensive, the Emperor Group took a death-defying leap into show-business by teaming with a consortium led by kung fu star Jackie Chan to build a 'Superstar Amusement Town' in Shanghai.

  The little town would feature an ice-skating rink, restaurants, cinemas, a Whimsy-style children's amusement centre and, most important of all, karaoke bars.

JULY Office sales slowed sharply and prices eased in the weeks after Secretary for Planning, Environment and Lands, Tony Eason announced the Government's review on residential property price stabilisation would be extended to the commercial sector.

  Estate agents claimed transactions were down 30 to 40 per cent.

   In a bid to lure buyers back into the market, Nan Fung Development offered 90 per cent mortgage financing for several residential developments.

   Two residential development sites in Tai Po came under the hammer, netting $1.25 billion for the public purse. The larger 204,946 sq ft site was bought by a consortium comprising Lai Sun Development, China Travel and Hong Kong Parkview, while the second 150,000 sq ft site was bought by Paliburg Development.

     Shanghai authorities said they would sell 37 old European colonial-style buildings along its famous Bund as part of its efforts to restore the city's status as one of the world's most influential financial centres.

     China published its first urban real estate law in an attempt to curb speculation in its property market and to encourage construction of suitable housing for its 1.2 billion people.

  The Urban Real Estate Law, which will become effective on January 1, 1995, calls for auctions to stop state land being leased at artificially low prices, and clamps down on speculative real estate trading.

  Under the new rules, land for commercial development must be leased through auctions or bidding. Closed-door agreements would be allowed only under special conditions.

  And China's 20,000 real estate firms would have to meet tough new capital and staffing requirements.

   The Broadcasting Authority said it would review its code of practice for foreign property commercials on television, lifting an April 1993 ban on such advertising.

  The Consumer Council warned potential buyers to beware of over-exaggerated claims made in some commercials, after having received an increasing number of complaints.

AUGUST Activity in the residential market began to revive, buoyed by July's positive land auction result, although there was no obvious sign of a rebound in prices.

  Estate agents reported a 20 per cent recovery in inquiries in subsequent weeks.

  However, Land Registry figures pointed to a further 8.3 per cent month-on-month slowdown in firm transactions, recording 6,355 sale-and-purchase agreements for the month.

  Leading banks lifted mortgage rates by 50 basis points, pushing the standard mortgage rate to 9.5 per cent per annum.

   A plot of industrial land had to be withdrawn from Crown auction for the first time in 10 years after it failed to attract any bids.

   The Government said it would set up a regulatory body, Estate Agents' Authority, to clean up the industry.

   China's central government announced a crackdown on building on arable land in a bid to protect agriculture.

SEPTEMBER The Mass Transit Railway Corp invited tenders for first phase development of two giant sites on the route for the airport railway.

  A number of developers expressed an interest in the proposed multi-billion-dollar developments above stations at Tung Chung and Tai Kok Tsui.

   Just two days after the Government's second land auction embarrassment, Mr Eason announced it would take no further measures to cool home prices.

  He estimated that since June average home prices moderated by 10 per cent to 30 per cent, depending on location, size and age.

   HKR International signed a $4 billion syndicated loan for its planned Tsuen Wan development, the largest loan ever arranged in the territory for a single project.

  The money, raised by arranger Wardley Capital, was to finance HKR's share in a $7 billion joint-venture redevelopment of the China Dyeing Works factory site with New World into 12 high-rise residential towers.

   Jones Lang Wootton reported that only $7 billion to $8 billion worth of property investment deals had been struck in the third quarter, a 50 per cent drop over the second quarter, which itself had been quiet.

  Beijing announced it would set up an institute to oversee a new qualification system to select real estate appraisers as a further important step towards cultivating a regulated real estate market.

   A Richard Ellis World Rental Levels report showed Shanghai and Beijing overtook Paris, New York and Berlin to become the third and fourth most expensive places in the world respectively to rent offices.

   The official China Daily quoted Li Zhendong, Vice-Minister for Construction, as saying China's overheated property market was showing signs of cooling, with the price of urban commercial housing down eight per cent from its high.

OCTOBER The first phase of sales of flats in Cheung Kong's Bayshore Towers development in Ma On Shan was more than 30 times oversubscribed after the developer announced an average asking price of $4,399 per square foot, some 10 per cent lower than prices in neighbouring rival developments.

  The success was closely watched, being the first sale subject to the Government's new blanket ban on resale of pre-sale units, which had scared off many speculators.

   Major developers shunned a Fanling residential site at an auction, as it fell under the hammer after just five bids at well-below market expectations.

  Two lots of Crown land, including the Fanling site and another at Sha Tin, fetched a total of $311 million, more than 30 per cent less than analysts' forecasts.

   Hong Kong Monetary Authority chief Joseph Yam Chi-kwong called for the existing 70 per cent ceiling on mortgage loans to be retained as a long-term measure.

  The move would limit banks' exposure to the property market and enhance economic stability, he said.

   Beijing Municipal People's Congress approved a law to regulate construction standards in a move to increase the quality of residential building.

  The law gave consumers the right and the channels to complain, providing them with a period of guaranteed repair for defects caused by developers.

NOVEMBER The Shanghai office rental market was heading for a crash, and sooner than expected, according to property guru Peter Churchouse.

     The panel reviewing procedures at government land auctions released its final report, recommending large plots of land be divided into smaller lots for auction to allowing smaller developers take part in the auction process and create more competition.

  The panel recommended more Crown land be disposed of by sealed tender.

   Permission was sought to convert the Victoria Hotel in Sheung Wan into more valuable office space.

  Analysts predicted the value of the 700,000 sq ft hotel would soar to about $10 billion if the application was successful.

  However, public uproar broke out over the number of hotels destined for demolition. There were fears of a shortage of hotel rooms for tourists.

   The Government said it would introduce legislation to plug a legal loophole and clarify certainty of title, after a High Court case found thousands of people in the New Territories technically might not own their homes.

   In a bid to attract buyers, Nan Fung Development announced it would offer 100 per cent mortgages on its residential developments, in defiance of government recommendations to banks for a 70 per cent ceiling.

     Estate agents reported a sharp increase in money flowing overseas, especially London and parts of Australia, where home prices seemed to be bottoming out.

   Guangdong authorities started taking back land from investors facing financial difficulties and had failed to carry out development plans.

   Fast food giant McDonald's was issued an eviction order on one of its Beijing stores, despite having what it thought was an adequate agreement from the authorities.

  The group was asked to vacate its 28,000 sq ft site to make way for a commercial and residential complex named Oriental Plaza, planned by Cheung Kong chairman Li Ka-shing.

DECEMBER Sudden closure of local real estate agent CF & Associates renewed public concerns about the risks of buying mainland properties.

  Some 100 affected investors, who had bought unfinished mainland properties through the agent, marched to the Yau Tsim District Police Headquarters in protest against the closure.

   The last government land auction of the year was a flop, with one residential site withdrawn and the other sold to the only bidder.

  It was the first time since 1983 the Government had to remove a residential lot from public auction, and it was seen as a serious blow to slowly recovering confidence in property.



1994 year of the seesaw