Intense luxury flat developments in the mid-levels of Hong Kong Island
Bright Future for Real Estate
Developers
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HEN the "Bank Crisis" broke out
in Hong Kong earlier this year the Colony's general commerce, and the real estate business in particular, suffered a big set back.
The level of real estate develop- ment which reached its highest peak in 1964 descended rapidly. Land prices dropped, there were no sales of dangerous and aged houses as no one was willing to buy these for re- building, and Crown Land auctions ceased. The sale of land generally came to a standstill.
The total cost of a new building is made up of course by the costs of land, labour and building materials, but a drop in the real estate market is not followed by a reduction of labour and materials costs. Land prices may fall by 30 to 40 per cent, but if the price of a new building is reduced by 20 per cent it dips to the level of the actual cost.
Lowest Tide
Consequently under present condi- tions not many new buildings will come up for sale in a year's time.
The real estate business has been at a low tide in 1965 and is now at its lowest. However companies of firm standing have not been badly af- fected and I forecast that soon Hong
By
Gordon
Y. S. Wu Secretary H. K.
Real Estate Developers Association
D
Kong developers will again enter a prosperous era.
There are two reasons for this. First, the Bank Crisis stopped the competition for raising the bank rate. Depositors withdrew their
money from Chinese banks and redeposited it with low rate foreign banks. Ac- cording to statistics the total deposits for the month of September increased by HK$90,000,000.
The rate for these depositors de- creased from 71⁄2 per cent. to 3 per cent. The bankers must find an outlet for utilising this capital. The depositors will not remain satisfied with the new rate and it is likely that soon they will turn again to invest- ments in real estate. I am confident that a considerable sum of money from the banks' savings accounts will
again be put to use in real estate. Secondly, the over-development of the estate business in the past few years created a number of specula- tors and racketeers. Land prices rocketed and rents became exhorbi- tant. Then suddenly the bottom fell out of the market. Completed build- ings were sold off at the best available price and work on new projects was suspended. The speculators went out of business.
Homes Needed
One effect of this is to leave only the sound estate merchant companies, who must be destined for a busy future.
The population problem of Hong Kong can never be solved. The increase in population of 100,000 a year will go on year after year and new homes will always be needed.
Estate merchants have experienced a difficult time, but they have learned the lesson well. They have now formed a Real Estate Developers Association to protect their interests, to produce a better system of hire purchase business and to improve the maintenance service on new buildings. With these steps there will be no for the overnight speculator and estate developers can look for- ward to a bright future.
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Far East Architect & Builder November, 1965
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