Liaison Office's Massive Property Porfolio in HK

The liaison office, through a company, owns over 700 properties in Hong Kong

Through a shell company, Bejiing owns a lot of property in Hong Kong. Even better it didn't have to pay any stamp duties on the staggering 757 residences, offices, car parks and entire buildings as of February last year.

The political party Demosisto, led by Joshua Wong Chi-fung released the findings today, which are staggering to say the least.

Joshua Wong of Demosisto released the findings today

The report says the company, called Newman Investment Company Limited, which was set up in 1972, bought 400 residences before the handover in 1997, about 180 between 1998 and 2014, and then another 130 between 2014 and last year. The total value is estimated at HK$3.4 billion.

Previously local media had estimated the company, whose five directors appear to have the same names as officials in the liaison office, had a portfolio of between 300 to 500 properties. This was obviously grossly underestimated.

Wong says the increased number of flats in the last few years shows Beijing is increasing its reach in Hong Kong.

"Beijing has scaled up its property empire after the 'umbrella movement' in 2014, reaching out its tentacles from Hong Kong Island to other places in the city," Wong said, referring to the large-scale civil disobedience movement that blocked part of the city for 79 days over universal suffrage.

He said Demosisto would submit these findings to the US Department of State, the Congressional-Executive Commission on China, and Britain's All-Party Parliamentary Group Hong Kong.

However, pro-establishment lawmaker Regina Ip Lau Suk-yee, chairwoman of the New People's Party, said she believed most of the residences were for housing liaison office employees.

Regina Ip says the flats are used to house liaison office staff

"When rents are so expensive in Hong Kong, I don't see any problem for the liaison office to purchase flats for its employees to live in," she said. "It might have bought more units in recent years, as it expected to become more and more costly."

We all know housing is expensive in Hong Kong, but they snapped up over 700 properties, not all of them flats. So how many people work in the liaison office, and do they actually live in these flats? What about the offices and entire buildings? What are those used for?

Demosisto estimates at least 722 staff work in the liaison office. What do they all do?

Perhaps even better, this company, because of its links with the liaison office, does not need to pay HK$124 million in stamp duty over the past five years of property purchases.

According to the Stamp Duty Ordinance, the central government, or any "incorporated public officer or any person acting in his capacity has a public officer shall not be liable for the payment of stamp duty".

The company bought 20 flats at Grand Central last year

Seems like this ordinance was specifically written to benefit a particular company...

Last February, a local newspaper reported the liaison office had paid HK$247.5 million, through Newman Investment, for 20 flats at Grand Central complex in Kwun Tong, according to the Land Registry. The office later insisted the properties were used as staff quarters, and denied suggestions it had intended to resell them for a quick profit.

While many of these properties may be "housing", they still are a good investment...

Fact of the Day: Almost US$1 Million Parking Spot

The Center in Hong Kong's Central district has a really expensive parking spot

Hong Kong can proudly say that even though its economy is tanking because of five months of anti-government protests, the city is still having record-breaking property transactions.

The latest is the world's most expensive parking spot in Central for US$969,000, or US$7,205 per square foot for a space that measures 134.5 square feet.

The price of the parking spot is US$7,205 per square foot

Yep a parking spot. It's located in a prime area, an office building called The Center, a building that also has the record of being the most costliest commercial building ever sold at US$15.5 billion last year.

The price of the parking spot, HK$7.6 million, is more than three times Hong Kong's median home price, which itself had topped the global rankings for nine consecutive years, according to CBRE.

Keep in mind that about one in five people in Hong Kong live below the poverty line, and so this property transaction underscores the immense wealth gap in the city.

"Good times or bad times, there are still ultra-rich people paying whatever needed to get what they like," explains James Mak, Midland Commercial's district sales director.

Many live in spaces smaller than a parking spot in Hong Kong

There are only 402 parking spots in The Center for 1.2 million square feet of office space, and the average price for these spots is HK$6 million.

Guess whoever bought that HK$7.6 million parking spot really, really needed it...

Invest in Car Park Spaces

The uber wealthy can afford outrageously expensive prices for real estate

It was just reported today that someone bought two flats on The Peak for HK$1.16 billion (US$149 million). That calculates to HK$131,000 per square foot for Mount Nicholson, a luxury development project.

Prices for private housing rose again in September for the 18th consecutive month, making home ownership even further away for home buyers looking to get into the market.

Which is why some people maybe turning to buying up car park spaces in order to get into the real estate market. The value of these rectangular spaces in the garage are rising faster in value than flats in Hong Kong.

The rest of us might be speculating on car park spaces

A study conducted by brokerage houses in three private housing estates -- Provident Garden in North Point, Mei Foo Sun Chuen in Lai Chi Kok and Island Harbourview in Tak Kok Tsui -- found the parking spots in these places jumped on average of a whopping 167 percent compared to 52 percent for residential units in the last six years.

In the same period, second-hand homes rose an average 84 percent across the city, according to data from the Rating and Valuation Department.

"It is even normal to find parking spaces transacted at above HK$2 million, and HK$1 million is becoming the entry point for parking spaces in Hong Kong," said Alun Jin, a property analyst at Mizuho Securities.

Even Sha Tin parking spots are sizzling hot -- one was sold last week at HK$2.5 million, and another at Tseung Kwan O Plaza for HK$2.08 million.

Jin attributes the high prices to real estate developments constructing fewer parking spaces. Between 2006 to 2016, the number of registered private cars rose 48 percent to 189,281. But the number of car park spaces only increased by 9 percent or 54,520 units according to Mizuho Securities.

But is it worth plonking down HK$2 million for a car park space -- up to HK$4 million in Kennedy Town -- and then renting it out only for a few thousand a month? How long would it take to finally make your money back?

However, hold onto it long enough and you could possible double or triple your money back in a shorter time span than if you bought a flat in the same period....

Sounds like another real estate bubble forming already...

The Parking Spot Bubble

Parking spots are a hot commodity in Hong Kong for the uber rich

Hong Kong property analysts are saying people should invest in parking spaces because their value has risen 270 percent in the last 12 years.

A few days ago, a business executive paid a gobsmacking HK$5.18 million on a parking space in a residential development in Sai Ying Pun. It's not even Central.

One parking spot was sold here for HK$5.18 million

In 2005 the average price for a parking spot was HK$396,000, but as of April this year it's HK$1.47 million.

During the same 12-year period, flats rose 256 percent.

The reason for car parking spaces rising higher in value is that three government car parks have closed for redevelopment -- Tsuen Wan Transport Complex Car Park, the Middle Road Multi-storey Car Park in Tsim Sha Tsui, and Murray Road Car Park in Central.

Since 2013, the city has lost 1,888 parking spaces due to changing land use.

For the first five months of this year, prices for parking spaces have gone up 12 percent to an average of HK$1.46 million. During the same period, 3,013 parking spaces changed hands for a total value of HK$4.3 billion.

But if you're looking to break into the property market, owning a parking spot before having a roof over your head is absurd.

Murray Road Car Park (above right) has closed in Central

And how much rent can you charge for a parking spot? Not as much as if you rented the same amount of space to actually live in. It would take you forever to make back the money you paid for the spot. Not really financially viable.

Which makes parking spaces only in the realm of the super rich who need places to park their cars.

Real estate is not a game us ordinary folk will ever win at -- the rules keep changing to make it near impossible for us to have any kind of leg-up on the system.

So maybe speculating on parking spaces is the next big thing. Get ready for a really big bubble.

The Privilege of Parking

Can you imagine paying over HK$5 million to be able to park your car?

A Hong Kong executive has paid a world record HK$5.18 million (US$664,260) for a parking spot in Sai Ying Pun.

Kwan Wai-ming is the executive director of Huarong Investment Stock Corp and needed a third parking spot in The Upton, a new mixed business and residential complex.

The last record price for a parking spot was HK$4.8 million at 55 Conduit Road in Mid-Levels last October.

The price beat the record at 55 Conduit Road at HK$4.8M

In this case, Kwan probably lives at The Upton, having forked over HK$75.6 million in 2014 and 2016 for two units in the building, and then last January he bought two parking spaces at HK$3.78 million and HK$3.98 million.

To put this into perspective for ordinary folk, there's a parking garage across from The Upton where it costs HK$3,000 to rent a parking spot there.

But Kwan is paying for the convenience and security of having his cars in the same building.

The rest of us would use HK$5.18 million to buy a flat to live in -- if given a chance.

Ah, the lifestyles of the rich and obnoxiously loaded...

Number of the Day: US$3 Billion

The Murray Road car park (right) sold today for US$3 billion

Land is getting even more expensive in Hong Kong, with today's sale of the Murray Road car park for a staggering US$3 billion (HK$23.28 billion). That works out to HK$50,064 per square foot.

Whoa.

The government building was sold to Henderson Land

The record up to now was a grade-A office space at 9 Queens Road Central sold in April for HK$145.82 million, or HK$39,800 per square foot.

The buyer of Murray Road, Henderson Land Development, run by Lee Shau-kee and his family, beat out eight rival bids, in particular mainland developers who are now strangled from getting money out of China these days.

Henderson Land plans to develop the multi-storey car park into -- what else -- a commercial building the company describes as "a landmark building" that will be completed in 2022.

Analysts are already speculating multinational and mainland firms will occupy that office space.

There's a convenient walkway from Central to Admiralty

So while car owners already have one less place to park their cars in Central (it closed a few weeks ago), pedestrians will lose a convenient thoroughfare, as it provided an easy short cut to Admiralty and the edge of Central.

By the way -- now that the government will have another US$3 billion in its coffers, how about using those proceeds towards building social housing? Seems like the most decent thing the authorities could do...