〈The Straits Times, March 21, 2020〉Cautious investors, lack of funding could threaten firms' balance sheets, say analysts
Real estate developers across Asia are looking at a tough year ahead as the odds of a global recession are rising fast.
Growing uncertainty is snuffing out potential property transactions, investments and purchases.
Governments are taking all possible policy initiatives - fiscal and monetary - to avoid a devastating economic downturn.
But at the same time, they are forced to implement travel bans, enforce lockdowns and enact social distancing measures to contain the spread of the coronavirus, thus depressing economic activity even further.
Despite record-low mortgage rates, the fear of financial distress is likely to keep most home buyers at bay.
China, including Hong Kong, is likely to register a significant decline in transaction volume in the first quarter of this year, according to CBRE's Investor Intentions Survey 2020.
Meanwhile, panic in the financial markets is threatening property firms' ability to raise funds for working capital, debt financing and future investments.
At the same time, credit markets have dried up, and lack of funding may send some companies into default or debt restructuring.
"In this environment, the biggest risk in our view is liquidity risk, and property companies are not immune," wrote OCBC Bank credit research analysts Andrew Wong and Ezien Hoo in an e-mail interview on Tuesday.
〈Asian Post, March 20, 2020〉Victor Li Tzar-kuoi, the elder son of Hong Kong's richest man, said the two companies founded by his father nearly seven decades ago had adequate finances to survive in the city's worst economic slump in decades.
CK Hutchison Holdings, which owns businesses from chemists and supermarkets to ports and mobile phone networks, posted a 2 per cent gain in net profit to HK$39.83 billion for last year.
Underlying profit at CK Assets Holdings, one of the city's largest property developers, rose 19 per cent to HK$28.7 billion, helped by a real estate bull run in the world's costliest city to buy a home.
"Our group was built, and [grew strong] through various storms, and we are used to turbulence," Li said at an online press conference to announce the results for the firms founded by entrepreneur Li Ka-shing.
"We are generally conservative with our finances, which means whenever there are difficult times, we stay well-capitalised."
Among the businesses at CK Hutchison, telecommunications had withstood the slump in consumption, he said, as millions of people globally had been homebound since the outbreak was first reported in Wuhan province.
Sales at its A S Watson chain, which operates chemists and health care stores in 25 markets, rose in Europe, defying the slowdown in industries such as restaurants, retail stores and cinemas.
"No matter what happens, local governments have indicated that their drug stores and pharmacies will always stay open, not like restaurants," said Li, who wore a surgical mask during the online conference.
Hong Kong's economy has landed in its first recession in a decade, weighed down by the US-China trade war, a consumption slump brought on by months of anti-government protests, and now the coronavirus outbreak that has hobbled economic activity. Tourists have stayed away, while businesses are not investing - bringing reduced consumption and empty offices and shops that impact the group's earnings across its range of businesses.
〈The Standard, March19, 2020〉Stewart Leung Chi-kin, the vice chairman of Wheelock and Company (0020), does not expect a steep fall in Hong Kong's home prices, as the government has not yet resolved the land shortage problem.
Leung estimates the unemployment rate in Hong Kong may rise to 5 percent. He said once the coronavirus pandemic is controlled, housing demand will rise and support the local property market and economy.
Meanwhile, Sun Hung Kai Properties (0016) will release the first price list of Wetland Seasons Park Phase 2 in Tin Shui Wai this month. SHKP has obtained presale consent for Phase 2, which provides 699 units, and will release price lists soon. SHKP has collected about HK$4.5 billion after selling around 98 percent of the flats at Wetland Seasons Park Phase 1.
In the secondary market, a 799-sq-ft flat at Grand Yoho in Yuen Long changed hands for HK$11.4 million, or HK$14,268 per sq ft, after HK$5.1 million was cut from the initial asking price. The vendor will incur a loss of HK$1.63 million after paying commission fees and stamp duties.
And tenders for a residential site on Anderson Road in Kwun Tong open today and will close on May 15, The Lands Department said. The lot has a site area of about 21,7075 square feet. Knight Frank valued the site at between HK$6.5 billion and HK$7.6 billion, or between HK$6,000 and HK$7,000 per buildable sq ft.
〈The Standard, March 18, 2020〉The coronavirus outbreak has further dampened demand for car parking spaces, with transactions falling 63.5 percent month on month in February and more loss-making resales recorded.
The number of parking space registrations plunged by 63.5 percent to 226, a five-month low, and total consideration was down by 74.1 percent month on month to a four-year-low of HK$393 million, said Hong Kong Property chief executive Richard Lee Chi-shing.
Some investors are rushing to sell parking spaces amid Covid-19 concerns to save money, as unlike residential properties, they are a luxury rather than a necessity, said Midland IC&I's chief executive Daniel Wong Hon-shing.
This came after months of social unrest punctured the bubble in the lucrative market amid an economic slowdown and a decline in home prices. Louis Chan Wing-kit, Centaline Asia-Pacific residential chief executive, expects property prices to fall 3 to 5 percent this year.
In Tsing Lung Tau, an investor sold a parking space at Hong Kong Garden for HK$580,000, resulting in a 37 percent loss of HK$335,000 after holding onto it for one year.
The average rent of parking spaces at Hong Kong Garden fell by about 18 percent to around HK$1,400, according to Centaline Property Agency.
〈HK Gov.News, March 17, 2020〉Hong Kong was ranked number two in the 2020 Index of Economic Freedom, published by the Heritage Foundation (the Foundation). Hong Kong attained high scores of 90 or above in seven out of 12 components adopted for measuring economic freedom, though Hong Kong's overall score decreased by 1.1 points from the previous year due primarily to a decline in the "Investment Freedom" score, which was mainly due to security issues arising from the social unrest in the latter half of 2019.
A Government spokesperson said today (March 17), "We are naturally disappointed that Hong Kong, which held the world's freest economy title for 25 successive years, has dropped to number two. But we welcome the Foundation's continued recognition of Hong Kong's various strengths and its awareness that the territory remains a dynamic global financial centre with a high degree of competitiveness and openness. It is gratifying to note that Hong Kong attained the highest score among the assessed economies in terms of 'Fiscal Health', 'Business Freedom', 'Trade Freedom' and 'Financial Freedom'.
"Hong Kong faced some unprecedented challenges in 2019. Since June last year, there have been numerous incidents of protests under the pretext of opposing an extradition bill, which had been put on hold since violence erupted and was subsequently withdrawn. The bill, inter alia, sought to enhance the framework for mutual legal assistance in criminal matters between the Hong Kong Special Administrative Region (HKSAR) and other parts of China, and was certainly not politically motivated.