1) New stamp duty bill gives Hongkongers that own two properties room to breathe

News

Hong Kong’s legislature passed a stamp duty amendment bill (the new tax rate has been in effect since November 2016), allowing home owners holding two flats for a total of 12 months, to offload their first property to avoid paying the tax; up from the original six months proposed in the government’s amendment. This allowed the buyer of a second flat to obtain a full rebate if they managed to sell their first flat within 12 months after purchase of the new flat. The Stamp Duty (Amendment) Bill also allows the authorities to impose a flat 15% stamp duty tax, up from the previous range of 1.5% to 8.5%, on non-first-time individuals and corporate buyers of residential properties. (Source: SCMP, 12 January 2018)

Research View 

The 15% ad valorem stamp duty has constrained market activities, especially in the secondary market. 2017 was a robust year for the primary market with 18,645 units transacted, higher than the 10-year annual average of 28.7%. However, only 42,946 units were transacted in the secondary market in 2017, compared to the annual average of 65,460 units over the past decade. The Stamp Duty Amendment Bill will increase the flexibility for owner-occupiers and is likely to stimulate more activities in the secondary market. We expect the 30%/70% spread of transactions between primary units and secondary units to widen in 2018, with the secondary market regaining momentum.


2) Kwu Tung North land premium for HKD1.235 billion

News

Henderson Land has finished land premium payment procedures for an agricultural land in Kwu Tung North, Fanling, totalling HKD1.235 billion (USD158.3 million). The 56,500 sq ft (5,249 sq m) site will provide a total gross floor area (GFA) for residential and commercial use of 282,000 sq ft (26,199 sq m) and 56,000 sq ft (5,203 sq m) respectively. Based on the total GFA of 338,000 sq ft (31,401 sq m), the unit rate of the land premium was HKD3,643 (USD467) per sq ft. The developer plans to build a 30-storey commercial cum residential building, according to sources. (Source: Ming Pao, 15 January 2018)

Research View

According to the Task Force on Land Supply, a Public-Private Partnership (PPP) will be implemented for agricultural land developments. The government will improve infrastructure connectivity to support the development of agricultural land in the New Territories, while private developers will focus on the construction of properties. This will encourage more developers to convert agricultural land for residential developments. However, the development of agricultural land will take a long time, from five to seven years. We expect residential property prices to continue to rise 8-10% in 2018 as there will be no immediate effect on the residential supply.



3) Popularity of the sharing economy opens new business opportunities

News

The Shanghai-based co-working operator naked Hub is widening its reach in Hong Kong. The company has leased the top two floors of Two Harbour Square in Kowloon East, covering a total floor area of 58,000 sq ft (5,388 sq m), which also includes the digital rooftop signage rights for its third centre. The new location leased from Sun Hung Kai Properties, which is set to open in July this year, is the latest move in the escalating battle for co-working market leadership. The expansion is following the move of US co-working giant WeWork, which leased an entire floor covering nearly 36,000 sq ft (3,345 sq m) in the same district late August 2017. Last week, naked Hub’s mainland competitor Ucommune, (formerly UrWork), has entered the Hong Kong market by leasing one floor or 15,000 sq ft (1,394 sq m) at Grand Millennium Plaza in Sheung Wan. (Source: Mingtiandi, 9 and 11 January 2018)

Agency View

The co-working market is heating up as the sharing economy becomes increasingly popular in Hong Kong. Various companies including hotels, serviced apartment providers, developers and investment advisors have begun launching co-living concepts in their properties, which have evolved from the co-working model. Several international co-working operators including naked Hub, WeWork, and Regus are also pursuing to launch their own co-living lines, but are still in the early stages. Based on the increasing number of companies showing interest in integrating the co-living concept into their properties, co-living has the potential to become a new market trend.

Research View

The co-working industry in Hong Kong is maturing as more co-working companies set up spaces across several locations. Amid the rising competition, co-working operators are differentiating themselves by introducing co-living facilities to attract millennials and young professionals seeking community access. Given the deteriorating housing affordability, the co-living concept should become more widely accepted in Hong Kong as flats have become too expensive and small. Campus Hong Kong, a co-working operator, took the lead by opening a co-living facility in Tsuen Wan in 2016. As co-living gains more traction, we expect more co-living properties to be launched across Hong Kong, especially by developers as they have the advantage of build-to-suit arrangements.