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Kenneth Ko

POOR market sentiment has scared away investors, with investment property transactions contracting substantially in the past three months.

  With three days to go before the end of September, Michael Chan Sing-fai, Pacific director of Jones Lang Wootton (JLW), estimated that only $7 billion to $8 billion worth of investment property deals were struck in the third quarter.

  This represented a decrease of about 50 per cent in volume, compared with about $16 billion worth of properties traded in the second quarter, he said.

  In the first quarter, when the market was at its peak, the total value of investment property transactions exceeded $40 billion.

  The slowdown in the overall property market has been triggered by a dramatic turnaround in investment sentiment in April following the Government's pledge to cool rising prices.

  Mr Chan, who is also head of JLW's investment department, said investment sentiment was particularly plagued in the third quarter by poor auction results and the Government's implementation of new anti-property measures.

  Falling property prices and banks' tight credit policies put a further dampener on the market, he said.

  'The tight credit is especially discouraging to investors. Banks have virtually refused to provide financing for properties bought for rental purposes,' he said.

  'Developers' moves to offer buyers mortgage lending has made liquidity even tighter. They have tied up a large amount of capital in mortgage commitment.'   Mr Chan said investors preferred to take a wait-and-see attitude in view of the market uncertainties.

  Mainland investors' activity in the territory's investment property market had also reduced considerably since early this year, mainly due to the effect of China's austerity programme which limited their capital flow, he said.

  Over the past two years, mainland companies had been one of the most aggressive investors in the local property sector, and the strong price appreciation had been partly driven by mainland capital.

  'Property prices have fallen at least 15 to 20 per cent from the peak, with declines of up to 30 per cent or so in certain areas,' Mr Chan said.

  But market activity had started to pick up in September and was expected to increase further in the fourth quarter, subject to interest rate movements, he said.

  'More small to medium-sized transactions are likely to emerge, while prices will remain stable,' he said.

  The biggest transaction in the past three months was probably SEA Holdings' disposal of the Wellington Place in Central for $1.02 billion to the Moscan Group.

  Other major deals included San Kei Land Development's acquisition of Ondina Heights in Peak Road for $268 million from Nan Fung Development, and the $430 million purchase of Hong Kong Computer Centre by a China-backed company.

  Two more recent transactions were Hon Kwok Land and Investment's sale of a commercial building in Percival Street for $660 million to mainland-backed firm Periwin Development, and Golden Harvest Group's $450 million purchase of the 28th office floor of Concordia Plaza in Tsim Sha Tsui East. Yukon Holdings also sold a piece of land in Sai Kung for $48.35 million.

  Hugo Poon, director of City Property Consultants, said most investors were still on the sidelines with landlords refusing to cut prices and buyers hesitating to close a deal.

  'The situation is even worse for residential properties, while the office sector looks relatively better,' he said.

  Mr Poon said there was a slight improvement in investment sentiment this month and some optimistic investors were already out in the market looking for opportunities.

  In spite of the negative impact of the austerity drive, he said mainland companies were not completely out of the local property market.



Investment plummets in third quarter