Transcription
I welcome everyone to the second session of the Ancient Altar Society. I am here to continue with Ah Sing and Ho Tak, the two good friends who will discuss the property market with you.
Let's first talk about the property market. As you can see, property prices have reached last year's bottom and have risen by about 15%. They remain in a strong state. However, Ah Sing mentioned that property prices are rising too quickly, outpacing economic growth. Why do I say this? Well, recently property prices have indeed risen fast. Although the economy is... If property prices rise by 10% in the first half of the year, the chance is very high. If you expect a large increase, it may not be affordable for buyers. If prices rise too quickly, you will only cause some people to fall out of the ability to purchase. This is not good for the long-term development of the property market, because the property market has been recovering for years. If investment sentiment causes the government to introduce "chili peppers" (cooling measures) like before, it is possible. Of course, the government's "chili peppers" from past experience did not immediately work. But these "chili peppers" will always be... For example, those high housing prices before, for Hong Kong people buying a second home, or for foreign investors, it creates more trouble. It also makes it difficult for people. So, I don't want to see the market being too controlled by the government. So you can...
Yes, but speaking of "chili peppers," is it a true cyclical turning point? Ah Sing, do you think the government will balance the wealth effect brought by the property market with the difficulties faced by young people? Well, the government has many aspects to consider. After the society experienced certain turmoil, I think one of the reasons for young people's difficulties is dissatisfaction with society. So the government has actually considered that young people can get on the property ladder, and it can be very complicated to maintain for too long. That is, the wealth of many ordinary individuals, the banking model, the corporate operating model, are all closely related to rent. It's not something that can be easily separated. It's like a person living on a plain and then moving to a plateau; they might experience altitude sickness. It's a disaster. If property prices suddenly rise too much or fall too much. So I believe the government will watch and act accordingly. For example, if the market recovers, they will sell less. As for housing prices, the government should increase supply in the coming period, so that there is more supply, and prices will not rise so easily. Developers will open for sale, and everyone's prices will have to compete. The strength will not go too high. They will use appropriate methods to adjust prices, rather than immediately implementing "chili peppers" to control the market. I hope the methods the government uses are gentler, making more people able to afford homes, without causing too much damage to the economy or citizens' consumption willingness. Otherwise, it may not be necessary to use "chili peppers."
Well, Ho Tak, have you noticed any sentiment in the market? I think so. Even if you see reports, it's been a long time since Hong Kong has had so many short... There's a good west-style one, right? I've talked about it on the show. Have you bought any? Have you? No, no. Because first, I'm not... It should be that you see it's like, all making money. Because it's the first phase, it should be from May last year. So now you see it rising by 30-40%. That's because in May last year, it was almost at the bottom of Hong Kong's registration. So first, if the overall market rises by more than 10%, it's normal to make money. But because of the current regulations for new property sales in Hong Kong, you cannot sell before delivery. Only second-hand properties can be resold. So you have to wait for new properties. Therefore, recent market transactions should be quite good. I've also looked at it, for example, I've also talked about it personally. I've also seen the west. It should be the new property development. There should be over 400 units in the entire development. But on that day, maybe less than 100 units were sold. So I was like, wow, that's great. However, Group A, I said earlier, Group A... So Group B should be 12.5, Group B one, two, three. I'm B two. So I chose some units to buy. But when I arrived at exactly one o'clock, it was almost sold out. So I think looking at it, people are buying new properties during this period. And I want to make another observation. Actually, many people are not... They are not... They are not... I see, for example, a couple, they are really expecting to have a baby. They are buying together. I guess they are buying for self-use. That is, with the baby, they are buying a house. So I think this period is strong. And earlier, I wanted to recall. That is, Hong Kong people during this period, it is an investment product. Sometimes, separating the issue of investment and social welfare, we should separate them. Ah Sing, have you seen that Hong Kong people occupy... Occupy a certain proportion of the overall housing... For example, people who own property in Hong Kong, about half of the total households. Half more or less. Homebuyers should account for the majority. If you see this number rise, it means society is improving. That is, more and more people have their own property. But if you see this number fall, it means people are starting to... Actually, I looked at the number. I don't know if Ah Sing has seen the median age of first-time homebuyers. It has risen. It says nine years. In the previous generation, it was around 31 years old. Now it's in your forties. It should be seven years. The ratio of property prices to people's income was higher than now. They earn money. Do they use this or the actual income ratio? Actually, you see a lot. I see a lot. Colleagues of frontline Ah Sing say that there are many... Those are hundreds of thousands. What do you call high-quality? High-quality is not cheap. You need at least 2.5 million to be called high-quality. Those people can buy houses in Hong Kong. So their purchase... A million a year is enough to buy a house. Yes. So their purchase also makes the overall purchasing power of Hong Kong users increase. That is, these people themselves have a certain advantage. Those who invest now really have actual needs for property. This is also a characteristic of Hong Kong's demand for the property market. Population is growing, income is growing, so the market... More. Earlier you mentioned a term. That's right. That is, fear of missing out. Why does this situation occur? That is, when society experiences, or the economy experiences a relatively significant trend, people will worry about not getting on the ladder. They will miss out. It's like not catching the last boat in Suzhou. In the property market, this kind of situation is easy to occur because the property market is relatively cyclical. Once it turns, it's not just a few months, it's three to five years. So if you miss the first train, there are still two more coming. So many people will rush in. But if the market is very volatile, then people may not rush in like this. Now, the trend is obvious, so people are afraid of... Yes. Well, we've talked about how the market is very hot. There are many users and investors. But last time we talked about how everyone is now afraid of inflation. The worry is coming back. That is, the expectation of interest rate hikes by the US this year seems to have risen. Looking back, there was a report from Ruishi before, saying that once the US... Hong Kong's property prices will face the risk of... Do you two worry that the factor of interest rate hikes will affect property prices? I personally believe that hearing about interest rate hikes and saying that the property market will fall is an oversimplification. If other problems are normal, then interest rate hikes increase the burden of... Reduce the attraction. Of course, it's not good for the property market. But if inflation is severe, prices rise, and the purchasing power of currency declines, even if you raise interest rates, you may not be able to stop currency depreciation. That is, if your currency doesn't depreciate, there won't be a currency crisis. Sometimes you can suppress it. Sometimes, when inflation occurs and the purchasing power of currency continues to fall, people will go to buy... Real assets, or assets that are not so affected by other environments, as a form of protection. Sometimes, I have seen situations in Hong Kong where interest rates rise, and property prices also rise. You raise interest rates, and property prices don't rise. But for example, if there are situations like economic recovery, then central banks will raise interest rates. But the economic recovery is so strong that it continues to grow. So even if you raise interest rates, it may not deter people. People may have received income. Maybe the demand for currency has increased. So it's not always the case that after raising interest rates, property prices will fall. For example, this interest rate hike, as mentioned earlier, is it... For those who have lost faith, leading to rising debt. Maybe this kind of speculation will continue. Maybe it's fear of US dollar assets, continuing to rise. So property prices can also rise. Therefore, we need to look at it comprehensively, not just one factor.
Well, Ho Tak, do you think we don't need to worry too much? I think, to supplement Ah Sing, first, most people borrowing in Hong Kong are at a high level, making them very sensitive to interest rate hikes. This doesn't seem to be the case. In the past few years, after the "chili peppers," Hong Kong people were not so crazy about money. The loan-to-value ratio is almost 60%. It's a public loan. So even if interest rates rise, it won't affect them. They have already paid off their loans. So you can raise interest rates as much as you want. So the environment is different. Second, even if interest rates rise, it may be relatively orderly. That is, you won't suddenly raise interest rates. Maybe even if you raise them, at most, in the worst-case scenario, it will be... Then you think, in a normal Hong Kong, if you buy a two-bedroom unit, it's about 400 square feet, costing maybe 7 million. Then you borrow up to 70%. So maybe your monthly payment is around 40,000. So a 1% increase in interest rates would mean an extra expenditure of 2,000 yuan per month. I don't think this is a situation where the actual economic situation is really that high. If you understand it from the numbers, so I think of course, interest rate hikes are better than interest rate cuts. But in this situation, in the current development of the Hong Kong market, I think even if there are interest rate hikes, the transactions will not be as bad as imagined.
Well, Ho Tak, let's look at a recent news item about New World. Recently, there have been reports that New World is considering paying rent in kind, not in cash. It may be in the form of land or other assets. Let me first supplement everyone with information. According to the current agreement and some public reports, New World has to pay a deposit to the government every year, which is equivalent to 30% of the project's annual revenue. This has been paid from 2002 to 2066. Based on New World's debt, this is a last resort, isn't it? New World has already said it's difficult. There are some companies that are struggling. They are trying to hold on. On the one hand, they are holding on to their responsibilities and their reputation. They should have discussed it with the government long ago. Of course, the government has its difficulties. But in reality, if you go to the market, it's really difficult to do business. The air is not even open. Before, New World, of course, when they entered, they misjudged the situation. The government is building such a large shopping mall there. They should also see if there is any way to work together to make it successful. You also have to accept the reality that you can't make it successful. New World also said they can't pay money, give stocks, give land. They are doing business there. They have no money to pay for these parking spaces on the top of the mountain. You drive up and park your car, and it will take a long time to get down. They are asking for some payment. They say they can't pay, they are coming. So you have to accept reality. So now, there is a wound. I think the government initially heard the news and the government officials refused. Originally, you had to pay monthly last month. Now you say you won't pay. Because you have to... I estimate that we have to wait for the right time. It's not something that can be done immediately. Doing it immediately might be very costly. I also help people do shopping mall renovations in mainland China. Sometimes it takes a lot of effort to drag a shopping mall into operation for half a year, and then go from store to store. I also tell my colleagues, you are really not prepared. They hired a group of people who couldn't make it. Then they said, second round of public offering. Then they brought in another group. I think now, for example, this place might need to rest. Let's cool down first. Let's cool down the electricity. But I think, speaking of what was said, this is not something that only New World has to face. In fact, the project was signed in 2018, which was before the epidemic and social movements. The changes in the past few years, everyone has seen. In fact, I think no one could have predicted it would be so bad. So you have to accept reality, which is reasonable. And this single project accounts for too high a proportion of New World's. So you can't deal with it. You will have more trouble later. Of course, now people are thinking, some people have said, will New World... Will it be passed down to them? However, those New World developments are doing... It's not that the economy is too much. The economy in mainland China has always been under downward pressure. Now we hear that it should be okay. If the economy recovers and grows at a high speed, and per capita income increases, then people who come down will naturally consume more. At that time, wow, there were many people from the mainland who came down to shop. And people from the mainland shopping is even more... They don't want them to come. So they want to find a place to settle down. It's very close to the market. At that time, many people wanted to build a large shopping mall by the lake. At that time, it was felt that the demand was very high and the trend would continue. But in reality, it changed later. So, if this situation changes, I think it's not suitable to rush now. Let's wait until the conditions are better. One way is to accept that some commercial spaces are burdened. Let them shed this burden. Another way is to let the market cycle. Now, many places in Hong Kong, those... Those rents are half of the revenue. It's too bad. They want to keep their customers. They open for business. So, but now New World's market, we are also their customers. So they want us to hold on first. So you... Live on first. Usually, it means paying a lower rent, half a year's rent, maybe a year's rent. So now you are not paying rent. Now, let's wait until the market is better. So there is no need to force New World to do badly, nor to force the government to do badly. Everyone is now thinking about what can be done to make this place come back to life. I see some netizens discussing, why not open a casino? I also mentioned it at the time. Because at that time, the environment in Hong Kong was indeed very bad. It's not a bad idea to have another place. But now, there's no need to think about it. Now, the stock market in Hong Kong has a daily turnover of over 200 billion. How long will it take to open a casino to have a turnover of over 200 billion? Of course, casinos eat a lot. I personally think that most of the market... Most people buy... It's like buying big or small. It doesn't make much difference. So, if a financial market has such activity, it's already losing money. So there's no need to use methods like Macau's. Those are... Those are more fun, more diversified, and require more knowledge. If you can make it successful, people will praise you. Wow, you are... The mainland also wants to develop the financial market. So now there's no need to rely on it. That era, the economy was declining. Now I believe the government is very unlikely to approve it. The most difficult part of turning into a casino is that the eyes have been opened. You have spent tens of billions. You have already spent it. You need to change the purpose. It's actually very difficult. If it's purely for special purposes, then you can think of special purposes more easily. For example, think about education. Instead of building it in Hong Kong, use it for education. But it's built. Those office buildings, empty. So it's really, unless there are some... Unless there are some really skilled people, you still have to rely on... Gradually focus on positioning to achieve it. This is clearly a very long-term process. That's why New World has to face reality. This is not a situation that can be reversed with a short-term move. So it's not easy. This is the reality. We also talked about it earlier. This project is a big burden for New World. If this rent is really implemented, how much help can it bring to New World's finances? They themselves have been working hard to reduce it in recent years. Because in the past, the loan-to-value ratio was over 70%, which is relatively high compared to general large developers. But as I said, it's not just about money. For example, the airport also has problems. But the airport has hundreds of billions invested in it. So it also has to face this situation. This kind of binding, this kind of trouble, will also cause a big problem in the company's entire corporate operations. Of course, how they are negotiating with the government now, I don't know. I agree, I agree that it's better to... The rent is too high. In commercial society, it's often like this. Because we all have common interests. The government is responsible for the airport. They are not responsible for collecting rent. So if there is a chance to change the lease, maybe it can be reasonably shared. If the government is also... The public will also see, wow, is it New World? Then modify the lease and then... If the neighboring market wants to do this, and if you can use this clause to take it over, then it's beneficial to both parties. We also talked about it earlier. If in the current situation, they are forced to pay such expensive rent, people will calculate that their monthly income is not enough to pay for... To pay for... So people will have doubts about this company, lose faith in them. In the stock market, the atmosphere is not good. So I think the government may also have to consider the overall situation, reduce some of their burdens, so that they can quickly balance. I believe that not only the government needs to provide some preferential terms, but also banks. Some banks, I see some investors around me who have had problems, and banks will also be understanding. That is, okay, you find a way to buy it and pay it off. I won't pursue you for late payment. Why not pursue it? You can't collect it anyway. It's better to give them a chance to preserve their own capital. Even if they are criticized. So I believe that when these situations occur, it is necessary for all parties to sit down and discuss. Well, the program time has come to an end today. Thank you to both of you. I don't know what your opinions are on New World's approach. It's good. Welcome to leave comments and tell us. We'll see you next week. Goodbye, goodbye, goodbye.