What is new in Hong Kong

James Koo

Since departure of Prof. SS Lau, few, including me, have written much about Hong Kong. Being a dynamic city, HK can turn on a dime. Hong Kong has gong from recession to fast growing, prosperous, dynamic city in a few months.

Instead of deflation, the inflation rate has returned to HK. This is led by rise of property prices. The property price has risen about 50% or so in the past year. Some of the high-end properties have exceeded their 1997 peak prices to the historical high. Recently the “Arch,” a new development in west Kowloon sold the penthouse unit for HK$168 million at HK$31,800 a square foot, a historical new high. Then the developer quickly sold more than 90% of the 1052 units in that large project. However, the HK government has started an investigation regarding this “internal sales” transaction to see if this price is real. An internal sale is a sale to related party of the developer (employees and etc.) The objective is to set a price.

The marketing capability of HK developer is astounding, and beyond one’s imagination (at least beyond mine). It is suspected that they sold that unit along with other unannounced units at a much lower price raise the price of this unit, thus to raise the over all price of the development. Due to recent interest rate increase, the real-estate price shows the sign of cooling down. After the announcement of HK Government investigation, there are many “true owners” advertise in the paper looking for “true buyers” for selling the units in that development at a price much below HK$31,800. Then will HK Government act against the interest of the large developers?

The rents of many commercial units went up 50% or even higher. This caused a wave of shutting down of stores and restaurants. They also have raised my rent. We are already paying about 2X what we would pay in San Francisco—one of the most expensive cities in U.S.

What is good for real estate (tycoons) is good for Hong Kong. Since the rise of real estate prices, the sign of prosperity is everywhere. The rank of negative worth (the price of the house is lower than the mortgage) has decreased dramatically. The HK government reported the economy grew 8.1% in 2004, compared with 2-3% in U.S. And the budget went from deficit to surplus. Helped by ease of restriction of travel by Chinese mainlanders, the hotels and restaurants are full of people. The hotel next door to me charges $250 plus 10% tax compared with $75-80 last year. Unless you make a reservation, you cannot get into many high-end restaurants. In many hotels restaurants, unless you order a table of US$1,000 dinner party, you cannot get a private room.

With the burst of hi-tech bubble, HK is again focusing on tourism. While the tourists from N. America, Europe and Japan have declined, the mainland Chinese has poured in. RMB are accepted in many stores including Watson’s where RMB$1 is accepted as HK$1. “Mandarin are spoken here” are visible everywhere along with “Fine of HK$1,500 for littering and spitting.” The Avenue of Stars is the newest tourist attraction in Tsim Sha Tsui with handprints of the movie stars along the promenade of the shores of Kowloon facing the beautiful Victoria Harbor. Instead of a popular stop for the lovers, now it is crowded like Causeway Bay with hundreds if not thousands people rubbing shoulders with each other. They are mainly tourists from mainland China, and therefore shunned by the self respecting HK locals. And the HK Disney Land is set to open in Sept. that should attract more mainland tourists who otherwise would not have the opportunity meeting a Mickey Mouse. However, if you speak Cantonese with a mainland accent (like me), or if you speak Mandarin, people in HK will happily take your money with a smile from a country hick, to that I can testify with my first hand personal experience. No, that does not bother me. I find it amusing instead.

With the prosperity, there come many other infrastructure changes. If you have not been HK since the last union, the tallest building now is IFC Two with 88 floors right next to the Star Ferry in HK. The architectural award winning 1 Peking Rd. looks like a sailboat at TST. In addition adding a new Ma On line, the KCR train from Lowu to HK reaches TST once again and stops right across street from us at the corner of Chatham Rd and Salisbury Rd. and is “connected” to the MTR via “subways.” Now I can walk from TST MTR station to New World shopping center with about 10 feet of open space. This is very convenient in case of rain. You can also walk underground all the way from MTR to Chatham Rd at the corner of Mody Rd to TST East. However the labyrinth of underground tunnels still confuses me, a long time (5 years) resident of TST right across street from the new HCR train station.

Politically, last Oct. Tung Chee-hwa, the Chief Executive of SAR (Special Administration Region—HK) was resigned. Since then a debate started regarding the back up Chief Executive should serve the remaining term of 2 years or starting a new term of 4 year. Finally this was asked the Standing Committee of NPC to interpret the Basic Law—many HK people view as loss of autonomy. While HK is a city of China, many HK people do not feel they are part of China while they consider themselves Chinese. Shortly after the First Secretary, “Bowtie Tsen” assumed the position as acting head of SAR, he resigned to run for re-election as the Chief Executive. While I wonder if New York or London will report daily what do the mayor candidates do, I just saw on the news channel Bowtie Tseng took trash out from his house. Since I am an out of towner, and often I am, I am not exactly familiar with what is going on or all the subtleties. Other Lighters may correct me as tell all of us what is going on.

If you listened to me at the reunion bought real estate in HK then, you would have see the value of your property went up 50% or more. Now I would suggest you bring more money when you visit HK the next time. Unless you are from Europe, you will find everything is more expensive especially if you come from U.S. with a depreciated dollar.