Chartering a course for homes owners
Property guru Nicholas Brooke says HK’s real estate is here to stay despite the ups and downs in the past few years. He tells Sophie He why he thinks so.
Nicholas Brooke, it seems, is neither an optimist nor a pessimist when it comes to Hong Kong’s swinging, sometimes unpredictable, property market.
The sector’s stuttered growth and recent price correction have not moved the head of Professional Property Services — one of Hong Kong’s respected specialist real estate consultancies — an inch.
He’s adamant there won’t be any dramatic tumble in homes prices, let alone a crash. The reason is simple — the huge demand is always there, pillared by limited, restricted supply. But, affordability is the real problem for those constantly battling to find a roof over their heads in this overcrowded city.
As far as Brooke is concerned, he would like to see the market run its natural course, free from any form of intervention by the government.
The British chartered surveyor set foot in Hong Kong 36 years ago. One of his initial stints was with Swire Properties — one of the city’s oldest hongs — playing a role in helping the company develop Taikoo Shing and Pacific Place. Both projects have found their place among Hong Kong’s iconic landmarks — the former as one of the city’s most sought after, middle-class private residential complexes in the 1980s and 1990s, while the latter prides itself on being a swanky, premier lifestyle hub.
Brooke started his own real estate practice and founded Professional Property Services in 1988, then known as Brooke International.
“Very often, people who are not experienced in real estate don’t necessarily understand how they can optimize the value of real estate, what is the highest and best use, how they can develop the property, what would be the best way to develop it, do they need to bring in a partner, how should they fund the development, or what sort of mix should they have in the property? A chartered surveyor can offer suggestions to clients in this area,” Brooke tells China Daily.
Currently, Professional Property Services advises families in Hong Kong and the region on their private portfolios.
“We advise several major corporations, including MTR Corp and CLP. We advise some Chinese mainland companies too, like Fosun.”
Brooke says the major issues facing Hong Kong’s residential market relate to affordability and supply.
The government is struggling to accelerate housing supply but, at the moment, the problem is that the market doesn’t believe the government can increase supply. Everybody wants to buy and people will not wait, so there’s a lot of pressure on prices. And now, indeed, it’s very difficult for the government to come up with more housing units, he says.
“It’s not that we’re short of land in Hong Kong — the problem is that the land is not ready for development. It needs infrastructure, it needs clearance, so the land may not be available for any development for at least five years.
“So, I believe the pressure on homes prices will continue in the foreseeable future. The market may ease a little now, but I don’t think there’ll be any dramatic fall in prices because the demand is huge and people will not wait.”
Brooke stresses he’s not a fan of intervention. The government should let the market find its own level. The Hong Kong government had intervened in the past by introducing a Special Stamp Duty and a Buyer’s Stamp Duty as interim measures to cool the market.
In his view, the government has to do something as no one believes it will actually increase land supply. But, for now, finding the right time to lift those curbs (like SSD and BSD) would be very difficult.
“If it was up to me, I, probably, would have intervened the same way. But, I would have gradually removed those measures, bringing the 15-percent tax down to 12, then down to 10, which would have been my response to the market.”
Looking across the border, Brooke says he’s nervous about soaring housing prices in firsttier cities like Shenzhen, where prices had rocketed close to 80 percent last year, and are still going up and out of control.
Apartment prices in Shanghai were up 50 to 60 percent last year, he says, adding that the mainland authorities need to take more proactive steps to tame the market.
“Although I don’t favor intervention, property prices in those cities aren’t in alignment with the real world, so they probably have to intervene there. In other cities, I think the government should encourage people to buy.”
In top-tier mainland cities, the situation has to be brought under control and pressure be brought on developers to make them less aggressive in their sales policies and pricing. In other cities, the government needs to ease some restrictions and try to allow people to buy two or three homes as investment, so it’s two regimes, Brooke explains.
“The central government has to get tougher. At the moment, it’s leaving the matter to local governments, but I think it probably needs some central intervention.”
Brooke admits that Brexit has had a major impact on market sentiment, and Europe and Britain have been severely affected. In the short to medium term, everyone will be very cautious.
In terms of property investment, he tells his clients to focus on Asia.
Brooke says there are different types of investors — some may want to invest in prime properties in secured markets like Singapore, Hong Kong and Tokyo. Others are more opportunistic, and may look to Indonesia or South Korea as they have a different attitude toward risks and are prepared to take greater risks for bigger rewards.
“We also have investors who like to invest in what we call frontier markets, even less developed, like Myanmar and Mongolia, where people are willing to take high risks for high returns.”
Brooke is confident about the future of Hong Kong’s property market, saying property is a long-term investment and that “you have to learn to ride the cycles”.
“Yes, at the moment, the retail market, as well as the hospitality side in Hong Kong, is soft. But, there are cycles, the market comes down and then goes up. Investment has a lot to do with timing — it’s about when you enter or exit the market. Clearly, right now, it’s not a good time to exit but it could be a very good time to enter the market.”
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