Hong Kong's Bumper Prices Drive Business Away

Eric Ellis, Hong Kong

04/22/1994

IF ANY evidence were needed that Hong Kong has become a market not of this capitalist world, look no further than this car parking space. The space, about the size of the average Australian suburban living room, was recently sold for $HK4 million - almost $800,000.

That works out to be one-fifth of the price of the apartment it is linked to, and four times as much as the Rolls-Royce that will likely soon occupy it And just to confirm that the only communists left in China are the pickled ones in mausoleums, the buyer was a mainland Chinese tycoon doing his bit for motherland prosperity.

Mind-boggling prices like this are driving foreign firms away from Hong Kong to marginally ridiculous Singapore and the relative poorhouse of Sydney to base their Asian operations.

The corporate exodus has reached what some in the Hong Kong Government say are "almost alarming levels", leading to fears that Hong Kong's greedy speculators are pricing themselves out of their prosperity three years shy of the colony's 1997 hand-over to China. The colonial Government has announced an intention to "start a downward trend" in the market, warning prospective buyers to delay plans until the State initiatives are revealed.

The parking spot is on the lower fifth floor of Clovelly Court, a supposedly luxury new apartment block in Hong Kong's well-heeled Mid-Levels that bears a remarkable resemblance to an Australian State housing commission tower.

As for the space itself, The Australian Financial Review yesterday caught up with the local handyman scrubbing up the oil spills and paint splotches lest they detract from the price. He had enclosed the space in designer yellow and touched up its number, 218, which in Cantonese is a homonym for "bountiful prosperity".

But according to Mr C. H. Fan, of Urban Property Management, who helped bank the comrade's cheque for the spot, spotless numerology is the least of the space's attractions.

"There is no space in this area. There is unreasonable demand for car parks in Mid-Levels," he said.

Bemused that someone should think it a high price, Mr Fan offered a deadpan explanation: "There are too many cars in Hong Kong and not enough spaces."

With across-the-board property prices doubling in each of the past two years and banks only willing to lend not much more than half for most tiny flats, Hong Kong's middle-class rump - the "sandwich class" - now finds it impossible to buy a family home, let alone one for a bit of old-fashioned Cantonese speculation.

On Monday, a local radio station ran a talk-back program that specified the average price of a sandwich-class apartment at $HK4 million, almost double the median values of Sydney's toffy Woollahra.

The Government's signal about the overheating market already seems to have had some impact. Agents have reported, if not a softening, then a modest cooling in demand - remarkable for a town in which locals often camp out overnight to secure places on a property ballot, in the same way Australian teenagers queue for concert tickets.

But every cloud has a silver lining, and the property crisis has provided an excuse for Britain and China to discuss Hong Kong affairs.

With an eye on the burst of the Tokyo property bubble of recent times, both have agreed more Crown Land than usual should be released to the market this coming year, an attempt to quell the speculation that has traditionally pushed up the wider market.