So­phie He

China Daily (USA) - - HONG KONG - Con­tact the writer at so­phiehe@chi­nadai­lyhk.com

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

“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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