When property cooling measures are lifted, everyone will rush to sell

Joseph Tsang, the managing director of JLL's Hong Kong office, has worked for the group for 30 years, having started his career in its industrial property department in 1984.

In 2010, Tsang was appointed head of capital markets to oversee sales in Hong Kong, and promoted to managing director of Jones Lang LaSalle Hong Kong a year later. He still heads capital markets, overseeing residential sales, investment sales and marketing, as well as the consultancy business in the city.

Tsang once worked under Chief Executive Leung Chun-ying during Leung's stint in JLL's Hong Kong office, formerly known as Jones Lang Wootton, between 1977 and 1993. But he does not share the view of his former boss on what the right policies are to regulate the city's property market.

How was business for JLL in Hong Kong last year, when the property market was seriously hit by the successive austerity measures?

The housing market has been hit by government measures since 2012, and the tougher measures last year dealt a further blow.

While the residential market was hit seriously with a plunge in sales volume, the profit from our business in Hong Kong reached a record high with an increase of 20 per cent. This was because we have a well-balanced business portfolio.

We have seen a significant increase in other businesses, such as property management and valuation. Sales of overseas properties also increased.

When the Residential Properties (First-hand Sales) Ordinance came into effect on April 29 last year, developers began to ask property consultants to handle their sales brochures. They also seek advice on sales strategies when the market is quiet.

As the market is unlikely to pick up in the near term, what is your strategy to increase the company's revenue?

We are looking at opportunities to generate revenue from the sale of international properties. The local market is quiet and so investors are looking for overseas opportunities. Meanwhile, we are thinking of how to take advantage of our online platform to enhance business. But no details can be unveiled at this stage.

You have witnessed the cycles of ups and downs in Hong Kong's property market. How would you describe this downturn?

Hong Kong has experienced several property cycles, including the market crash during the 1997-98 Asian financial crisis and the market correction when the city was hit by Sars in 2003. It also experienced a downturn during the global financial crisis in 2008-09. They all dealt serious blows to the market. But it recovered quickly in most of these cycles.

However, this time is different because the downturn has been triggered by government policy. The blow is not as hard as that in the previous cycles as we do not see prices plunging in a short period of time. But the impact will be long-lasting. It will gradually affect the economy.

What is the impact of the policies on the market?

The government is playing the land supply card. It keeps putting land sites on the market to increase home supply. The immediate impact is a fall in land prices. This is because when construction costs keep going up, the only way developers see to sustain profits is to cut land prices. We will see land prices dropping at a rapid pace.

The growth in land supply will result in increased production of flats, which will come in the next two to three years at a time when interest rates are on the rise. As a result, home prices will decline sharply. By that time, the government may roll back the measures, but it will probably be too late to stop prices from falling.

With the existing measures, including the heavy stamp duties, sellers cannot easily dispose of their properties. Once the measures are removed, everyone will rush to sell, leading prices to drop rapidly.

It is like we all know the house is going to explode, but all the doors are closed. At the last minute, one door is opened and all rush to leave through that door. In the end, a tragedy occurs.

What is your view of the housing market in Hong Kong?

There is bound to be a downside. I expect home prices to drop 10 to 15 per cent this year and a further 10 to 15 per cent next year if the measures are not removed. If the government is prepared to remove its measures, it should do it right now.

Do you think the government plans to remove the measures?

Those measures are not expected to be taken away in the near future. Hong Kong has been politicised. Measures to cool the property market help boost the government's popularity.

It is not the right time to enter the market, is it?

It is not an advisable time to enter the market at all. Those who enter the market now should be prepared to see the value of their property falling. But some may want to buy now because they need a flat to live in.

How do you assess your own performance?

I am a modest person. I do not want to boast of my own achievements and neglect colleagues' contributions. I would say 'so far so good'.