Hong Kong property

Far East Consortium’s David Chiu says Hong Kong is Asia’s ‘best investment destination’

Chairman insists Hong Kong property ‘still reachable’ for middle-income couples, as long as interest rates remain low

PUBLISHED : Tuesday, 27 September, 2016, 5:19pm
UPDATED : Tuesday, 27 September, 2016, 5:19pm

The second son of Hong Kong entertainment tycoon Deacon Chiu Te-ken, David Chiu Tat-cheong took a very different career path to his father, moving to Malaysia in the 1980s and founding Malaysia Land Holdings.

He built the business into one of the country’s largest real estate developers, before returning to Hong Kong in 2000, and now his Far East Consortium International has grown into one of Asia’s largest developers and hotel operators, with operations in Hong Kong, mainland China, Singapore, Malaysia and Australia, and most recently the United Kingdom.

With decades of overseas experience under his belt, Chiu insists Hong Kong is still the best investment destination, with home prices unlikely to drop anytime soon.

How do you view the Hong Kong property market?

It has already recovered, after declined around 10 per cent from late last year until August this year. Unless there is a significant rise in interest rates, home prices in Hong Kong are very unlikely to see any correction.

We have been eager to buy land in Hong Kong and have won some plots. Hong Kong is the best investment destination, with nowhere in Asia like it. It’s safe, has a sound legal system, transparent policies and low taxes.

Definitely we want more – but we don’t chase expensive land blindly. The whole world is printing too much money, pushing up asset prices. We face increasing competition in Hong Kong for land from cash-rich mainland developers.

Is it a good time for home buyers to enter the Hong Kong market?

As long as interest rates don’t go up, it is still sensible for people to buy a flat in Hong Kong. Currently many developers are providing mortgages at very low interest rates, which is good. It makes sense for Hong Kong buyers to borrow from local developers.

The Hong Kong property market’s biggest problem is the cost of construction, which is the highest in the world, even more expensive than in Australia or the UK.

Currently foreign labour is blocked from working in Hong Kong, fearing they will take local jobs. But I think the government should allow more people into Hong Kong, especially to work on infrastructure projects, so more local workers can be available for local developers, and ease construction costs.

Some people say the high home prices are now preventing our talented young people from staying – what’s your opinion?

The most thriving industry in Hong Kong is finance, and the sector’s pay levels are the highest too. But many finance workers have been forced to move to Singapore to find affordable housing. That shows the market is too expensive.

In a low interest rate environment, a unit costing HK$8 million is still reachable for middle-income working couples, if they both have jobs.

But that HK$8 million only buys you a 400-650 square feet flat in Hong Kong, and that size isn’t comfortable, if you need two bedrooms.

The ideal price is HK$10,000 per square feet, so the living space can reach 800 square feet. I know that’s very unlikely to happen, as long as construction costs remain so high.

To be fair, the Hong Kong government has done its best to increase land supply. It has found some very remote land to sell and accelerated approval processes. Although prices in Hong Kong haven’t declined, the growth pace is slow compared with Shenzhen or Shanghai.

Hong Kong is a small place subject to external influences. Interest rates are low and so many wealthy mainlanders come here to buy properties, and Hong Kong doesn’t have a say in this.

But this is Hong Kong’s uniqueness – it’s open and free. If you try and control prices, there won’t be a free Hong Kong. So we have to accept that.

One thing the Hong Kong government can do better is increase the supply of public housing. Singapore has a sound long-term plan for affordable homes.

What’s Far East Consortium International’s strategy?

Four years ago we were focusing on building hotels, but in recent years we have changed our strategy to focus on property development. Our business plan is clear: generate sales from property development, and rentals from car parks and hotels.

We have adopted separate regional strategies for Hong Kong, mainland China, Australia, Malaysia, Singapore, the United Kingdom and New Zealand.

That diversity makes us flexible, without the need to enter any market we consider too expensive.

Hong Kong and the mainland are hot markets, and even Australia is becoming expensive – so we are considering Singapore and the UK now, which we believe are undervalued.

Although our core business is property development, we seek long-term returns, and our team has been searching for car-park investment opportunities around the world. Our goal is to provide shareholders with stable long-term dividends.