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Property News Weekly Digest
〈China Daily, Nov 27, 2021〉Hong Kong’s lived-in home prices dropped by the most in 14 months in October after peaking in August, with buying sentiment cooling as banks become more cautious in property valuation.

Prices fell 0.85 per cent to 394.8 last month, according to an index published by the Rating and Valuation Department yesterday.

It was the sharpest drop since August 2020 when it retreated by 0.88 per cent, according to property consultancy Knight Frank. It was the second consecutive monthly decline since the index hit an all-time high in August, according to the government’s latest revised data.

"The October data reflects the situation before [the chief executive’s] policy address as buyers adopted a wait-and-see attitude," said Martin Wong, head of research and consultancy in Greater China at Knight Frank.

He said buyers were shifting their focus to new homes as developers continued to offer discounts and flexible financial plans to drum up sales.

The fall in home prices came as Centa Valuation Index (CVI), a weekly gauge which tracks major banks’ valuations for used homes in 133 housing estates compiled by Centaline Property Agency, fell to 29.89 points for the week ended November 21. It was the lowest since the CVI plunged to 18.88 points in March 2020. The CVI slipped below 60 points in the first week of October and has continued to slide since.

〈Asian Post, Nov 26, 2021〉Can developer land banks be unlocked?

Half of Hong Kong lives in public housing. The waiting time for applicants is almost six years. Experts believe there is ample unused land in the New Territories to match the 1,700-hectare Lantau program of 30 years at HK$642 billion. How to unlock that?

The Hong Kong government owns all its 1,111 square kilometers of land. It sells leases set to expire by 2047. More than half of its population of 7.5 million resides in 78 sq km of the New Territories (excluding the New Territories' rural ancestral lands, which accommodate 7 percent of Hong Kong households). The balance resides in 42 sq km from Boundary Street of Kowloon to Hong Kong Island. The population density is higher than that of Tokyo and London.

The half that owns property is especially lucky. Hong Kong is one of the most unequal societies in the world, with the richest 10 percent of households earning 44 times that of the poorest, a fact confirmed by a government report in 2017. Most of the territory is wooded parkland, shrubland and wetlands watched hawkishly by activist citizens, environmentalists, and other non-governmental organizations. Scarcity of land exacerbates the housing shortage and widening income gap.

Property values have soared 262 percent (162 percent after adjusted for inflation) over the last 12 years. The ultraconservative banking regime imposes a term limit on the age of the borrower and a loan threshold on the age of the property. Younger borrowers get longer repayment terms, and new properties get higher loans.

〈Asian Post, Nov 25, 2021〉Joint venture backed by New World and Far East Consortium agrees to buy Kai Tak site as ailing developer tries to stave off default on debt

Kaisa Group Holdings has agreed to sell its stake in a project at the former airport site in Kai Tak at a steep discount and is asking bondholders to exchange US$400 million of notes set to mature next month, as the heavily indebted mainland developer tries to stave off default.

Shares in the Shenzhen-based developer jumped by nearly 14 per cent to close at HK$1.15 yesterday following the announcements, the biggest one-day percentage surge in more than two years.

It was the first time the stock had traded in three weeks after having lost almost 70 per cent, or HK$9 billion, in market value over the past three months as the firm’s cash crunch worsened.

Kaisa, which was downgraded by Fitch Ratings last week to "C" from "CCC-minus", also officially confirmed it had missed about US$88 million in interest payments on its offshore debt due on November 11 and 12. Both junk-rated bonds have a 30-day grace period, after which the company will face a default on the aggregate US$1.5 billion in notes.

〈The Standard, Nov 24, 2021〉Two law firms at the center of a HK$62 million property fraud case have been shut down, says the Law Society.

The society said it has probed Flora Lam & Co, Solicitors in Wan Chai and Li & Associates in Sheung Wan following a police investigation in September.

Police arrested 12 people, including a barrister, two solicitors and a legal executive for conspiracy to defraud on September 1 over the alleged HK$62.7 million scam.

Sources named the barrister as Devin Sio Chan-in and the two solicitors as Wai Pui-shuen and Flora Lam Yan-fong.

The signatures of property vendors and borrowers were allegedly forged as part of the scam, in which a syndicate involving the law firms and financial companies allegedly posed as homeowners of flats whose actual owners had passed away.

"The Council of the Law Society had reason to suspect dishonesty on the part of the sole proprietor of the Lam firm, which allegedly signed off on the conveyancing documents as the witness to the allegedly forged signatures," said society vice president Amirali Nasir.

〈China Daily, Nov 23, 2021〉Debt defaults by mainland developers will not pose a systemic risk to the Hong Kong market, Securities and Futures Commission deputy chief executive Julia Leung Fung-yee said yesterday.

The financial watchdog has kept a close eye on the exposure of Hong Kong's financial institutions to China's property sector and has conducted frequent stress tests to assess the risk, said chairman Tim Lui Tim-leung, adding that the risk was considered manageable after the review.

Meanwhile, SFC chief executive Ashley Alder said market misconduct has been significantly reduced after the SFC strengthens the investigation joint with other law enforcement. He also said that the industry's concerns over the quarantine policy have been passed to the government, however, he understands the intention of the policy is to pave ways to lifting the cross-border restrictions with the mainland.

On the listing of Chinese concept stocks, Alder said he feared Sino-US tensions could prevent a solution.

"Sometimes politics can interrupt technical solutions that are sensible and achievable, and I pick up a degree of political attitude within the US establishment that is not necessarily conducive to a better outcome."