TNAG-1267-FCO40-1616-Economic-situation-in-Hong-Kong-1983 — Page 400

GR 480

CONFIDENTIAL

TOP COPY

CONFIDENTIAL

FM HONG KONG 110709Z MAY 83

TO ROUTINE HONG KONG GOVERNMENT OFFICE LONDON.

TELEGRAM NUMBER 733 OF 11 MAY

ECONOMY

INFO F C O, BRUSSELS, UKMIS GENEVA AND WASHINGTON, CG NEW YORK

(FOR DORWARD)

FOR POSTS AND HONG KONG GOVERNMENT REPRESENTATIVES

REF HKG/GT/19

SUBJECT

THE PROPERTY MARKET

}

MKK09014

0.51

RECEIVED IN REG

- 6 JUN 1983

DESK OFMCS"

INDEX

F.

DEGISTRY

cum Taken

DB

8/6

सवाद

THE PROPERTY MARKET

по

THE PROPERTY MARKET IN HONG KONG HAS BEEN IN A DEPRESSED STATE FOR OVER 12 MONTHS DUE TO SEVERAL FACTORS : THE GENERAL DOWNTURN IN THE WORLD ECONOMY, AN OVER-SUPPLY OF FINISHED PROPERTY (PARTICULARLY RESIDENTIAL AND FACTORY UNITS) AND THE 1997 LEASE QUESTION. IT MUST BE STRESSED, HOWEVER, THAT THE 1997 LEASE QUESTION IS NOT SEEN TO BE THE MAIN REASON FOR THE PRESENT STATE OF THE MARKET BUT IS ONLY ONE OF THE CONTRIBUTORY FACTORS.

2. SALES OF LAND BY GOVERNMENT AUCTION CONTINUE TO ATTRACT BIDS AND SALES OF FINISHED UNITS BY DEVELOPERS CONTINUE TO ATTRACT BUYERS, ALBEIT AT RELATIVELY LOW PRICES. IN FACT, THERE ARE SIGNS THAT PROPERTY DEVELOPERS ARE BUYING LAND AT THE CURRENT PRICES REALISING THAT LAND IN HONG KONG IS NOW COMPARATIVELY CHEAP. THE GREATER INTEREST BEING SHOWN RECENTLY SUGGESTS THAT

THE MARKET HAS BOTTOMED OUT.

3. THE REJECTION BY GOVERNMENT OF A TENDER FOR A SITE AT VICTORIA BARRACKS AND THE REJECTION OF THE OFFER OF ADMIRALTY LOT II BY MTRC IN THE LAST QUARTER OF 1932 ATTRACTED ATTENTION BUT WERE SEEN AS EVIDENCE OF GOVERNMENT'S WILLINGNESS TO STABILISE THE MARKET BY NOT ACCEPTING PRICES WHICH DID NOT REFLECT THE POTENTIAL OF THE SITES. THE CONTINUING PURCHASE OF LAND AT GOVERNMENT AUCTIONS OR TENDERS, INCLUDING THE PURCHASE OF A LOT FOR COMMERCIAL DEVELOPMENT UNDERNEATH KOWLOON PARK FRONTING ONTO NATHAN ROAD AT A PREMIUM OF 213 MILLION DOLLARS HAS LED TO SOME

REASSURANCE OF CONFIDENCE.

4. THE DIFFICULTIES CURRENTLY BEING EXPERIENCED BY HONG KONG

PROPERTY DEVELOPMENT COMPANIES HAVE LED TO CONCERN BEING EXPRESSED OVER THW WIDER IMPLICATIONS OF PROPERTY BASED BORROWING ON THE

FINANCIAL SECTOR. THERE IS NO DOUBT THAT MANY DEVELOPERS HAVE

HEAVY COMMITMENTS TO THE BANKS AND OTHER LENDING INSTITUTIONS. IN VIEW OF THIS, ADDITIONAL FINANCE FOR PROPERTY DEVELOPMENT IS

LIKELY TO BE DIFFICULT TO OBTAIN EVEN WITH A RETURN OF CONFIDENCE.

CONFIDENTIAL

ILINE