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2011-12-18

35% New flats bought by Mainland purchasers. Distorted supply of flats.

$18b for 5 newly developed estates  35% flats bought by Mainland purchasers
Implement restrictions for non-locals  Ensure flats for locals
Estate Agents: road shows in Mainland to attract buyers
Distorted supply of flats
Oppose supply increase by reclamation

It seems that land in Hong Kong is scarce, and we have insufficient land for housing. Some people say that we need reclamation and cavern development. Unfortunately, a large number of our scarce flat units are bought by purchasers from the Mainland, just like how our hospital services are demanded by them. Developers keep constructing large flats and developing luxurious projects. Purchasers from the Mainland keep buying large luxurious flats. As a result, there is no hope in lowering the price of flats. There is no hope to have a home in Hong Kong for locals. Donald Tsang, Henry Tang and CY Leung, how do you respond to this “deep rooted problem”?

There were various estimations about the ratio of flat-purchasers from the Mainland without empirical studies. In order to give a clearer picture for the public, we, Green Sense, has conducted a research in mass scale (the study). We have investigated 5 major development projects, which have been put on sale this year. There are 4116 units in total. They are Festival City (Cheung Kong (Holdings) Limited)、Inland Crest (Kerry Properties Limited)、Imperial Cullinan (Sun Hung Kai Properties Limited)、The Hermitage (Sino Group) and Uptown (Cheung Kong (Holdings) Limited). We have identified the categories of purchasers and calculated the relevant ratio and contracted price. We concluded that purchasers from the Mainland have already crept deeply and firmly into the first hand private housing market of Hong Kong.

According to the study, 20% to 30% of the concluded sale involves purchasers from the Mainland (sole purchaser or joint purchaser with Hongkongers) (Table 1). The majority of purchasers are Hongkongers, and there is a certain percentage of company purchasers. The nationality of some purchasers cannot be identified. Excluding the categories of company purchasers, foreign purchasers and joint purchasers, the percentage between purchasers from the Mainland and local purchasers is 37.5% and 62.5% respectively (Table 2).

The ratio between purchasers from the Mainland and local purchasers calculated above is adopted in analysing the relative ratio of the company purchasers. Since the majority of sale under the name of a company is in fact concluded by individuals, the ratio above would indicate the amount of purchasers from the Mainland under the name of a company (Table 3). Lastly, the money invested by purchasers from the Mainland is ranged from 21.6% to 51.1% for the 5 new major development projects (Table 4). The difference among the 5 projects may be a result of different marketing strategies.

We have also investigated the money invested by purchasers from the Mainland in the 5 projects. An impressively 18 billion was invested by them. It shows that huge amount of hot money from the Mainland has been flown into Hong Kong and has gradually conquered local residential housing market (Table 4). Comparing the purchasing power of purchasers from the Mainland and local purchasers, it is evidenced that the purchasing power of Mainlanders is higher than the locals in all 5 projects (Table 5).

In addition, we have arranged “undercover” as potential buyers to the newly open Festival City Phase III and recorded conversation with several estate agents. It is proved that developers now adopted the marketing strategies targeting Mainlanders instead of the locals. Strategies include road shows in China and arranging shuttle bus travelling between the Mainland and show flats in Hong Kong. The following is part of the conversation:

“…which means Hongkongers 60%, Mainlanders 40%…”
“Yesterday, there were so many potential buyers from the Mainland. They have two-way exit permits in order to come here and queue for Hong Kong flats.”
“Many purchasers from the Mainland purchase flats here. Not necessary for home. Maybe for rental. Only one or two for personal residence.”
“There are many Mainlanders near East Rail Line. It takes only half an hour to travel to Shenzhen or Lok Ma Chau.”

According to statements from the estate agents, Mainlanders are clear marketing targets of developers. It may be because the purchasing power of Mainlanders is stronger than that of the locals. Green Sense has long criticized that, many residential buildings are now designed to luxurious 3-room large units, in order to cater the taste of Mainlanders. Many of the locals are prevented from a purchase because of the high price. Moreover, the names of the projects are deliberately designed to give an impression of superiority and magnificence, even though they are regarded as garish, hardly comfortably accepted by many Hongkongers.

Roy Tam, President of Green Sense, said, “How can Hong Kong possibly satisfy all the hot money from the Mainland, as Hong Kong having so little land? Locals are now hard to purchase a flat at a reasonable price in first hand housing market. And it is the reason why there are so many complaints from the public.” In Singapore, there is additional 10% stamp duty for non-locals flat purchasers, and as a result restricting the flow of hot money from coming. The Hong Kong government should take action now to tackle the problem of our residential housing market being conquered by purchasers from the Mainland.

We have the following suggestions:

1. As a major shareholder of MTR, the government should direct the supply of the properties above railways. Many of the property supply of the coming few years locate along the railway. It is appropriate for the government to have granted a land lot in Tsuen Wan West with flats with limited floor areas (i.e. the minimum number of flats as well as the smallest and largest floor areas of flats being specified in the conditions of sale). Such policy should be further implemented in the land lot in Tai Wai Station and the remaining phases of LOHAS Park. The said two developments can in total provide 20,000 flats with limited floor areas. These flats can better cater the needs of locals who seek to buy a home in Hong Kong.
2. Increase the proportion of the provision of flats with limited floor areas in the 2012 List of Sites for Sale by Application.
3. Available flats should first be ensured for locals. Non-local buyers should pay extra 10% stamp duty.
4. Since it is more difficult to know the identity of buyer under a company name and it is possible for non-locals to avoid the extra stamp duty as a result, company buyers should also pay extra 10% stamp duty.

We, Green Sense, sincerely hope Donald Tsang, CY Leung and Henry Tang to seriously address this “deep-rooted problem” of Hong Kong, and grant Hongkongers an opportunity of buying and having a comfortable home.

 

Research Data

 

Table 1  Categories of purchasers of new & major development

	Mainlander	Joint purchaser ?Mainlander &Hongkonger	Hongkonger	Company	Other nationality	No name / unidentifiable	No. of  researched flats	Percentage of Mainlander & joint purchasers
Uptown	136	10	460	18	15	54	693	19.60%
Inland Crest	146	1	180	100	47	3	477	30.80%
The Hermitage	274	18	395	189	40	46	962	30.40%
Imperial Cullinan	167	0	136	284	11	34	632	26.40%
Festival City	238	32	760	226	23	72	1352	20.00%
Average	24.50%	1.20%	44.60%	21.00%	3.90%	4.80%	1.20%	25.70%

 

Table 2 The ratio of Mainland purchasers and Hong Kong purchasers

	Mainlander	Hongkonger	Ratio
Uptown	136	460	22.8%：77.2%
Inland Crest	146	180	44.8%：55.2%
The Hermitage	274	395	41.0%：59.0%
Imperial Cullinan	167	136	55.1%：44.9%
Festival City	238	760	23.8%：76.2%
		Average	37.5%：62.5%

 

Table 3 Percentage of Mainland purchasers
(The calculated ratio above will be used to estimate the number of mainland purchasers in the form of company buyers)

	Mainlander	Joint Purchasers – Mainlander &Hongkoner	Estimated number of Mainland purchasers in company form	Aggregated Amount of Mainland purchasers	No. of researched flats	Percentage of Mainland purchasers
Uptown	136	10	18 x 22.8% = 4	150	693	21.60%
Inland Crest	146	1	100 x 44.8% = 45	192	477	40.30%
The Hermitage	274	18	189 x 41.0% = 77	369	962	38.40%
Imperial Cullinan	167	0	284 x 55.1% = 156	323	632	51.10%
Festival City	238	32	226 x 23.8% = 54	324	1352	24.00%
					Average	35.10%

Note: There may be other circumstances which cannot be reflected upon the above calculation, for example, company dormitory and foreigners.

 

Table 4 Money invested

	Monetary value of flats sold  (Million)	Percentage of Mainlander purchasers	Money invested by Mainland purchasers (Million)	Money invested by Mainland purchasers (Billion)
Uptown	3461.706	21.60%	747.728	0.747
Inland Crest	6114.894	40.30%	2464.302	2.464
The Hermitage	12990.56	38.40%	4988.374	4.988
Imperial Cullinan	13526.62	51.10%	6912.102	6.912
Festival City	11732.61	24.00%	2815.827	2.815
			Total: 17928.333(Million)	Total：17.93 Billion

 

Table 5 Purchasing power of Hongkonger vs Purchase power of Mainlander

	No. of flats purchased by Mainlanders (According to Table 2)	Average price per flat (Million)	No. of flats purchased by Hongkongers (According to Table 2)	Average price per flat (Million)
Uptown	136	5.28	460	4.83
Inland Crest	146	12.98	180	11.01
The Hermitage	274	15.04	395	11.72
Imperial Cullinan	167	21.87	136	18.44
Festival City	238	8.96	760	8.5

Note: These are not company purchasers.

 

We, Green Sense, have endeavored to ensure accuracy. However, we do not guarantee there are no mistakes in the above data. The risk of mistakes should be one of your considerations before citing the above research.

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