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Property News Weekly Digest
2020/5/23
〈Asian Post, May 23, 2020〉SHKP, Sino Land, CK Asset and New World among bidders for the plot, which could fetch up to HK$1.6 billion, despite virus and security law fears

A residential site in Hong Kong has attracted a stronger response than expected, even as the city faces headwinds from the Covid-19 pandemic and Beijing's plan to pass a controversial national security law.

The Lands Department said yesterday 19 bids had been submitted for the 12,150 sq ft plot in Ap Lei Chau in Island South, the highest number for a site sold by government tender this year.

The bidders include Sun Hung Kai Properties (SHKP), Sino Land, CK Asset Holdings and New World Development.

"It is the strongest response for a site offered for government tender this year," said Thomas Lam, senior executive director at Knight Frank. "It reflects developers' faith in the outlook of the luxury residential market."

The market valuation for the plot, which will yield a gross floor area of 88,280 sq ft, ranged from HK$770 million to HK$1.6 billion, or HK$8,700 to HK$16,000 per square foot.

〈The Standard, May 23, 2020〉The world's biggest real estate investors are sitting on piles of cash, preparing for rare opportunities created by the pandemic. With economies around the world sputtering, commercial property prices are expected to come down.

How much they'll fall is the key question.

Sellers are currently willing to concede discounts of around 5 percent, while bidders are hoping for about 20 percent off pre-pandemic prices, said Charles Hewlett, managing director at Rclco Real Estate Advisors. That estimated gap, which is likely wider in specific cases, has put a freeze on deals.

"The mantra for anything that hasn't gotten started is: delay, defer and, in many cases, renegotiate," Hewlett said. "If I'm going to have vintage May 2020 on my books, I want to be able to demonstrate to my investors that I got an exceptionally good deal."

Private equity firms hold an estimated US$328 billion (HK$2.56 trillion) in dry powder for real estate deployment, according to data firm Preqin.

Prior to the crisis, asset prices had been pushed up as investors chased yield in riskier corners of the property market.

〈Asian Post, May 22, 2020〉Chinese investors buying real estate in America can expect heightened scrutiny amid rising US-China tensions and a new filing fee of up to US$300,000 imposed by an inter-agency review body, analysts said.

A law that extends the scope of the Committee on Foreign Investment in the United States (CFIUS) to review even non- controlling stakes in US property becoming effective was likely to adversely affect Chinese and Asian investors, observers said.

"CFIUS now has jurisdiction over greenfield investments in real estate near specific air or maritime ports, as well as sensitive government and military installations or military training and testing centres," said Mark Uhrynuk, partner at law firm Mayer Brown's corporate and securities practice in Hong Kong. "In light of increasing tensions with China, Asian and Chinese investors can expect heightened scrutiny of many investments into the US for the foreseeable future."

The jurisdiction of CFIUS, which reviews foreign deals for national security implications, now covers virtually all foreign direct investment into the US, including real estate deals by foreign persons that lead to non-controlling investments, after the Foreign Investment Risk Review Modernisation Act came into effect on February 13.

〈China Daily, May 21, 2020〉Rents for luxury homes in Southern district tumbled as the coronavirus pandemic has battered expatriate demand for high-end residential properties.

In Stanley, a 2,790-square-feet home at Regalia Bay was rented for HK$86,000 per month, or HK$30.80 per square foot, after HK$14,000 was cut from the initial asking rent. The current rent is 21 percent lower than its lease agreement for about HK$110,000 per month in 2018.

Ricacorp Properties said the property's rent had not fallen below the HK$100,000 mark since 2004.

With the house being purchased for HK$62 million in 2018, the rental yield is now only 1.6 percent. In comparison, the average rental yield for flats measuring more than 1,722.23 sq ft was 2 percent in March, data from the rating and valuation department showed.

Meanwhile, another 2,781-sq-ft house at the project was leased for HK$98,000 per month to Hoi Mor Energy Metallurgical Group last month, 25 percent lower than the previous tenant's monthly rent.

Between 2014 and 2016, the property was rented to Societe Air France for HK$133,000 per month, or HK$48 per sq ft.

In Repulse Bay, a 2,777-sq-ft home at 3 Headland Road was leased for HK$190,000 per month, or HK$68. per sq ft. The amount is 36 percent lower than its 2014 monthly rent of HK$300,000, according to Centaline Property Agency.

〈China Daily, May 20, 2020〉Amid shortage of homes, compulsory purchase orders set to rise as courts resume their work

Some of Hong Kong's ageing residential buildings are being snapped up for redevelopment through compulsory purchase orders amid a shortage of land in the city.

Billionaire Edwin Leong's Tai Hung Fai Enterprise bought a 61-year-old building in Sai Ying Pun while Hip Shing Hong acquired another old property in Shau Kei Wan yesterday.

Both buildings were worth HK$700 million and were bought under the Land (Compulsory Sale for Redevelopment) Ordinance. The law enables developers to force a compulsory auction to buy the remaining stake of a building if it is over 50 years old and they already own 80 per cent.

The number of such forced sales will increase in the coming months as courts resume operations after closing during the coronavirus pandemic, according to Alnwick Chan, executive director and head of valuation and professional services at Knight Frank, which is helping with applications for three compulsory sales in the next three months.

The auction for On Hing Building in Sai Ying Pun, about 10 minutes' walk from the University of Hong Kong, had a reserve price of HK$700 million. Tai Hung Fai has spent years acquiring 91 per cent ownership of the nine-storey commercial and residential building.