測量師時代 SURVEYORS TIMES

Issue: 2011.09

Property Investment - Road to Prosperity?

In recent years, the real estate market has been booming to such a high point that results in to a very favorable return from property investment. This leads to a general belief in the public that real estate business is the most profitable industry and that the property developers are the ones that benefit most from it. But is it true that investing in real esate is the easiest route to prosperity?

Due to rapid population growth, high inflation and other economic and social factors, it is without doubt that Hong Kong property prices have risen considerably over the past three decades. My personal opinion is that investment in real estate does not necessarily guarantee profit-making, the result could vary considerably due to the choice of different timing and type of property.

From analyzing the data from the Rating and Valuation Department, it is noted that the highest price increment over the past three decades is not residential property, but is the core Grade A office space. Whilst the property price particularly the large scale private housing estate that has been increased by about nine times, price of core Grade A office space has been appreciated stunningly beyond eleven times.

Successful Investment counts on choice of purchases with the right timing

As for investments on ground floor shops, choices such as the Canton Road at Tsim Sha Tsui or Russell Street may top your investment to ten or hundred times! However, for industrial premises, data shows that the gain is only about five times in the last three decades, which may be even less than investing on a blue chip stock. Moreover, the return could even be down to merely three times if not for the government “revitalising industrial buildings policy". Thus return on different choices of types of property can differ drastically.

Substantial increase in property prices can be very rewarding. Yet the market fluctuates dramatically over the past 30 years and investment in real estate is not always a "sure win"! Compare to the peak in 1997, property prices in 2003 have been down more than 60%, a huge loss of asset values to developer, investors and property owners, so if acquiring a property in 1997 and sold it during the year 2003, you could not even regain your original capital! There have seen cases like even investors as solid as banks did not survive the financial turmoil. Like all other real estate developing companies are also subjected to financial risks and market frustration. Since the right choices of property type and timing crucial, how should one master the right timing and choice to invest? The key I believe lies in government policies.

Government Policies – The Key to Good Results

As Hong Kong's largest landowner and property suppliers, the government also is the authority to determine land and housing policies. Thus her every move would have impacts on will be influential to the real estate market. In the 80's, the “fifty hectares” limited the land supply. In the early 90's, the policies to combat property speculation, such as the increase of stamp duty, restriction on the sales of uncompleted properties and the famous "85,000 housing flats" policy in 1997, all these contributed to a direct impact on the rise and fall of property prices. Since 2003, the government has changed land sale policy by introducing the “Land Sale Application List” system, which effectively allows the developers to determine the amount of new land supply. The reduction of new supply together with the cessation of HOS, result in drastic increase of property price in recent years.

To conclude, no matter it is the private individuals or property developers, a thorough understanding of government policies is the key to success in real estate investment. Developers definitely have better resources in hiring experts to analyze and recommend strategies, so their investment odds are naturally higher than the general public.




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