November 18 – November 24, 2016

Chinese mainland real estate companies pricing out local developers in Hong Kong.

Happy Thanksgiving everyone and thanks for reading.


Special Reports / Opinion Pieces


  • Esther Fung of the Wall Street Journal highlighted that some property landlords are making deals with Uber and Lyft to allow for or make up for parking shortages.
    • “Ride services such as Uber and Lyft, along with the promise of driverless cars, represent the ‘single biggest game-changer for real estate’ over the next several decades, said Dave Bragg, an analyst at real-estate research firm Green Street Advisors.”
    • “In all, Green Street estimates parking needs will be cut in half over the next 30 years amid an anticipated decline in vehicle ownership, eliminating the need for 75 billion square feet of parking space.”
    • “Green Street expects mass adoption to begin around 2030 and to be completed 15 years later. Uber already has suggested its entire fleet would be driverless by 2030.”
    • Are the Uber drivers savvy to this?


FT – Italian 10-year bonds on course for worst month since 2012 – Mehreen Khan 11/17


NYT – As American as Apple Pie? The Rural Vote’s Disproportionate Slice of Power – Emily Badger 11/20


Visual Capitalist – How Much Government Debt Rests Upon Your Shoulders – Jeff Desjardins 11/23



*Note: bold emphasis is mine, italic sections are from the articles.

Mainland money distorting Hong Kong land prices, tycoon warns. Ben Bland. Financial Times. 24 Nov. 2016.

An interesting thing when local developers are priced out of a market by aggressive and seemingly foolhardy outsiders. What’s noteworthy is who is making the statement and how much development property sites are now going for in Hong Kong – despite its troubles.

“Lui Che-woo this month lost out in an auction for a Hong Kong site that was acquired by a subsidiary of HNA, the acquisitive (Chinese) mainland conglomerate, at double the price paid for a similar site in 2014.” 

Lui Chee-woo is head of Galaxy Entertainment and happens to be worth $11bn according to Forbes. HNA is a Chinese conglomerate with business lines that include aviation (Hainan Airlines), real estate, financial services, etc.  HNA also recently acquired a 25% stake in Hilton Worldwide from Blackstone for about $6.5bn in October.

“The site went for about HK$13,500 (USD $1,740) per square foot – similar to the going rate for completed apartments nearby.” 

That’s per buildable square foot folks…add another $1,000 psf in direct construction costs (probably around that amount to attain a finish level worthy of these price points), plus another $1,000+ psf or so in soft costs (you’ll need brand name architects to be consistent with the message), financing, and profit, and you’re at around $4,000+psf.  Not unheard of in this market, but consider the comps at around 50% of this…

“Mainland developers acquired 44% of the residential land sold by the Hong Kong government last year, up from just 7% in 2012, according to calculations by Spacious, a property listings website. In the year to date, mainland companies have bought 39% of the land auctioned.” 


Bottom line, different folks/companies have different return metrics and objectives…

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NYT – Mortgage Rates’ Rise Catches Home Buyers – and Lenders – Off Guard 11/23

WP – The North Pole is an insane 36 degrees warmer than normal as winter descends 11/17

WSJ – China Cracks Down on Home Buyers With Fake Divorces 11/22

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