Spare No Expense

Ignoring the Hong Kong government’s attempt to rein in home prices, Sun Hung Kai Properties (SHKP) is offering a super-deluxe house on The Peak for HK$175,735 per square foot.

That is not far short of the HK$880 million billionaire Cecil Chao Sze-tung was asking for his headquarters office building, the 32-storey Cheuk Nang Plaza at 250 Hennessy Road in Wan Chai, when he put it up for sale earlier this week.

The house has a saleable area of 4,661 sq ft, a 4,478 sq ft garden, a private pool, a 273 sq ft terrace, a 813 sq ft rooftop and 917 sq ft of car parking space. It also comes with a 220 sq ft air-conditioning plant room.

The sale of the houses is open to the public. Last week, SHKP cancelled the sale by tender of houses No 11 and No 12 at Twelve Peaks when the bids fell short of its asking prices.

According to the price list, the 3,759 sq ft house No 11 is now selling for HK$404.2 million, or HK$107,529 per sq ft, while the 3,771 sq ft house No 12 is being offered for HK$425.4 million, or HK$112,808 per sq ft.

Buyers will get a 3 per cent discount if the transaction is completed within 150 days. They will also be given either a 11.75 per cent rebate to offset the impact from the 15 per cent buyer’s stamp duty or an 8.5 per cent discount to compensate for the double stamp duty.

Factoring in the 3 per cent discount, house No 1 will cost HK$794.43 million, or HK$170,562 per sq ft. Although the discount plus stamp duty rebate could amount to up to 14.75 per cent, a buyer under a corporate name would still need to pay a levy of HK$93.36 million.

SHKP bought the site at 12 Mount Kellett Road in 2006 for a record HK$1.8 billion, or HK$42,196 per square foot.

The most expensive home in the city is House 10 at Skyhigh on Pollock’s Path, which measures 5,989 sq ft and fetched HK$800 million, or HK$133,578 per saleable square foot, in June 2011.

The second-priciest home is a 5,145 sq ft house at 3 Gough Hill Road, which was sold in February this year for HK$650 million, or HK$126,336 per sq ft.

Sock it Away and Then Pay Cash

New Game in Real Estate
by Victor M Adamus

Well it had to happen sooner or later that I would run into the “new math” game sweeping the nation of owners of property going the “short sale”route. But some of these folks are smart money people who figured out how to top end the foreclosure game.

I had heard about people not getting foreclosed on for more than two years.  The couple I worked with went out 33 months before they agreed to sign the deed over with the lenders permission to sell the property for less than what was owed.

When they found out that the first property was worth $98,000 less than what they bought it for in 2005, they stopped making payments to the lender and instead, put the monthly mortgage in a savings account.  They made the same payment to their savings that would have gone to pay down the mortgage. Both have good jobs, both make a high incomes, and they could have continued to pay the mortgage but could not compromise living in a large house when their upcoming needs in retirement would mean less house to care for. 

They put it up for sale at the market rate of 35% less than what they paid for it and it sold on terms the bank approved, giving them no money at settlement but a “paid as agreed” legal instrument with the bank agreeing not to send them a 1099c form as income for what was not recovered.

They bought my listing in a gated community with half the square footage that the first house had.  They paid cash from holding back the money owed the lender of the first property. So with no mortgage on the second purchase they only owe a small homeowners association fee for pool maintenance and grounds keeping.  The community also has jogging trails, a picnic area, two pools, and is located a few minutes from major shopping and 15 minutes to two different hospitals. So in six years when they retire, they will already be where they want to be.

With no mortgage to pay and only an association fee of $225 a month, which includes water and sewer, the only other cost is electricity. Six years of banking more money will put them ahead again and quite possibly their short sale investment will be worth more than what they paid. It had sold in the boom days for $155,000.

It wasn’t my place to ask them if they had a retirement plan, 401k or other company benefit, because too many people have lost most of their contributions when the stock market crashed. But even so, if they both take Social Security and use the savings over the six years they will invest, they should have a nice chunk of money to draw down from in an emergency. I mean who wouldn’t want to live in a nice place for $225 a month?

It’s called the “new math” in Real Estate and it had to happen sooner or later.  People beating Wall Street at their own game.

IS NOW A GOOD TIME TO BUY PROPERTY?

by Victor M Adamus

Yes. It’s a good time to buy property because there is more inventory in the marketplace, the interest rates are low, around 4% for buyers with good credit and many sellers are willing to deal or help with closing costs or defray a few months of monthly condo maintenance fees.


It’s a good time to buy because text book wisdom says “markets are cyclical” and they are. This means if you buy now, you will be buying close to the end of the down cycle before the market picks up again.

That, in my opinion, is the best time to buy residential property. Sellers pricing of properties couldn’t be better. Some closing agents are reporting closing prices 10 to 25% less than appraised value. And buyers who zero in on the foreclosure markets are getting good deals too, but the waiting time to close the transaction could go out three months. That's a long time to wait especially with Sellers who are out there competing with Short Sale prices.  Buying from an owner may even be a much better deal since they are caring for the property.


Having said that, why is the buyer pool always less than the amount of inventory offered in the marketplace when prices for properties are so good? Or when the market is near bottom?

Well, that is what we call the psychology of market conditions. People, for some reason, have a fear of buying when the prices are falling and panic when interest rates rise. They can’t accept the opportunity at hand, and will wait in the hopes it even gets better, but unfortunately, many a buyer waits too long until the increase in interest rates force them out of the marketplace for what we call “their house of choice”.


This reluctance to buy, many experts agree, is impacted by “market shifts”. Changes in the real estate market that can throw buyers off balance. The perfect house is at the price they can afford but then they waited too long to buy it. Customers have told me “I could have bought that house a year ago when it was so much less” . . . or “I didn’t buy because nobody else was buying”.


I have also found that in a slow market buyers who read the market for what it is and are house hunting for a long term investment know instinctively when it’s the right time to buy because of the selection available “for sale”. People, who are ready to put their roots down, find a home priced below the market, one they can afford, jump on the opportunity to get the low price, even if they have to make a few trips to Home Depot.


Maybe they picked a house where they can make improvements to it over time and hopefully turn a profit when it’s their turn to sell three to five years down the road. These are “smart money” buyers. Buyers who buy in a down cycle always maximize their investment. They buy low so when it’s their turn to sell, they sell high.


But for the bubble burst nationwide, homes doubled in value every 3 to 5 years! Back then it was a situation where an owner could take on more debt, like a second mortgage, pay off his credit cards, cars, and any other loans because when he sold the property he/s could always count on the equity to draw down on during retirement.  It’s a whole new ballgame for those folks now but for buyers looking to buy, yes, it’s the best time to get a piece of the rock.