Why does Hong Kong's property market remain a focus despite concerns about bubble-like condition. Christie's, the auction house, explains the market and its outlook.

London-based auctioneer Christie’s recently announced
a partnership with Hong Kong’s Landscope, a luxury real estate specialist. Here Mitch Lewis, managing director for Asia-Pacific at Christie's, explains why
Hong Kong’s luxury real estate market is a focus despite concerns over a
property bubble.

WBA: Why did you decide to partner with Landscope?

ML: The agreement came about
after 12 months of research, negotiations and due diligence. In operation since 1995, Landscope
is renowned in the region for its high standards of professionalism, integrity
and discretion.
It was vitally important that we
partnered with a firm that fully appreciates the ultimate standards of
professionalism and client care required
in this high-performing region of the globe. Having accomplished the
record-setting sale of a house on The Peak for US$93 million, Landscope is
among the top agents around the globe.

WBA: How does this business
link with your art sales?

ML: Our ultra high net worth
clientele has diverse investment interests, and the synergy between Christie’s
art business and its real estate subsidiary, is a relationship no other network
can offer. With the Landscope partnership this facility will now be available
in Hong Kong as well, where our team looks forward to offering advice on luxury
residential properties as well as art, in Asia and all over the world.

WBA: How do you think Hong
Kong’s property market will be affected by the Eurozone crisis?

ML: With
the Greek debt crisis hovering over the global financial markets and Spain
getting into deeper trouble, confidence in the Euro sunk to its lowest ever.
Yet it is very likely we have not seen the worst. All this has sent shock waves
to other parts of the world and Asia has not been spared. What makes the
picture even gloomier is the slowdown of China’s economy, which has been one of
the major driving forces behind global economic growth in the last decade.

Front-line
property brokers can tell you right away how low sales are these days due to
Euro crisis, stock market fluctuations and the uncertainties associated with
the new government’s impending new policies towards the property market.

WBA: There is talk about a bubble in the Hong Kong property
market amid further cooling measures potentially being introduced soon. What
are your thoughts on this?

ML: Based on his recent comments and assertions, it is
fairly easy to read C.Y. Leung’s mind on Hong Kong’s housing policy. Increasing
the supply is already on the table; the question is, how much? Of all the
developers Landscope Christie’s International Real Estate recently contacted,
none expressed optimism on the future of the market. Some are “cautiously
optimistic” about the high-end market due to limited supply.

There are worries that the impact of a declining mass
market will eventually spill over to the high-end market. From history we know
every downturn in the property market will bring about a series of problems,
including foreclosure, pressurised sales, lack of financing collateral to
support businesses, and rising unemployment. A glut of unsold inventory weakens
investment appetite and so the vicious cycle spirals downward. The result is an
economic setback from which it will take years to recover, if external factors
swing into positive.

The People’s Bank of China recently announced a
quarter of a per cent reduction of the benchmark interest rate, thereby
indirectly confirming the dire economic situation in China. While the move may
help spur investment sentiment, the real impact will take time to manifest.
With regards to Hong Kong’s property market, we are of the view that it will
get worse before it gets better.

WBA: What are you star properties at the moment in
Hong Kong?

ML: At present, we are exclusive agent for a
free-standing house at No. 10, Bowen Road, Hong Kong Island at the price tag of
HK$600 million (US$77.3 million) i.e. HK$120,000 per square foot.  We
believe it is the most expensive property on the market now.