1. Random Reflections on the Hong Kong Property Market Nicholas Brooke Chairman 22 nd March 2005 Professional Property Services Limited

2. PPSPPS Menu Outlook for the property market Chasing the tourism dollar Funding of cultural and heritage initiatives Health warnings

3. PPSPPS A More Predictable Property Market? Shift from trading to investment mentality More comprehensive long term approach to planning and land use Land supply driven policy Influence of Government Re-think of housing policy Market largely driven by fundamentals But – Beware of euphoric forecasts

4. PPSPPS Influence of Government Leasehold land tenure system Principal generator of land supply –Disposals – application list system –Lease modifications –Agencies – URA / MTRC / KCRC Dependence on land revenues Major owner and until recently provider of social housing

5. PPSPPS Market Overview – Residential Ultimate barometer of Hong Kong’s well being In recovery mode but is it sustainable? Three markets within a market Potential issues relating to supply in 2006- 2007 Vulnerability to increases in interest rates Speculation at top end

6. Total Stock of Private Residential Units by Class in Hong Kong Classification of Residential Units by Class : Class A - saleable area less than 40m² Class B - saleable area of 40m² to 69.9m² Class C - saleable area of 70m² to 99.9m² Class D - saleable area of 100m² to 159.9m² Class E - saleable area of 160m² and above Class B (501,137 units) Class A (361,243)units) Class D (53,646 units) Class C (110,624 units) Class E (24,112 units) Sources: Rating and Valuation Department

7. Hong Kong Residential Market (Overall) Supply, Take-up & Vacancy Hong Kong Residential Market (Overall) Supply, Take-up & Vacancy Sources: Rating and Valuation Department, HKSAR & PPS

8. Hong Kong Residential Market Annual Price Indices (1999 = 100) Hong Kong Residential Market Annual Price Indices (1999 = 100) Sources: Rating and Valuation Department, HKSAR & PPS

9. Hong Kong Residential Market Annual Rental Indices (1999 = 100) Hong Kong Residential Market Annual Rental Indices (1999 = 100) Sources: Rating and Valuation Department, HKSAR & PPS

10. The Leighton Hill, Happy Valley

11. Tin Shui Wai, Yuen Long

12. PPSPPS The State of the Commercial Markets Strengthening occupational market Disconnect between occupational demand and investment appetite Inflexibility of existing supply Future of CBD? “City” approach to the attraction of major space users

13. PPSPPS Supply, Demand & Vacancy in Prime Areas New Supply & Take-up (net sq ft)Vacancy Rate (%) * As of September 04 Source : CB Richard Ellis Limited

14. PPSPPS Key Ingredients of a World Class City DiversityEducationEmployment Quality of life

15. PPSPPS Chasing the Tourism Dollar National/city approach to creating world class tourist destinations Development of family tourism – Disneyland and Ocean Park Legalisation and growth of gaming Emergence of Macau as the Las Vegas of Asia

16. Disneyland

17. Ocean Park

18. PPSPPS Lack of Overall Conservation Policy Both built and natural heritage require protection Often piecemeal approach with no overall responsibility or policy Lack of “not-for-profit” culture or “lifestyle capital” mentality Need for more sustainable model if we are to retain what is left of our heritage assets

19. PPSPPS Muddled Approach to Cultural Activities Absence of holistic approach Entrustment but to whom? Why just a single cluster? Lack of community involvement in conceptual thinking Assumption that if you build, they will come

20. PPSPPS Premium/Return Driven Approach Presumption that property developers are only solution to conservation and cultural initiatives Results in less than optimum solutions as developer is bottom line driven Present assessment criteria means strong financial bid will always win New mind-set required – sites should not be “sold” – they are public assets

21. West Kowloon – Aerial View

22. West Kowloon – Conceptual Proposal

23. Former Marine Police Headquarters  a heritage hotel with food and beverages outlets and retail facilities for completion in 2007 Source : Flying Snow Limited

24. The Magistracy

25. CPS Barrack Block

26. PPSPPS Health Warnings (I) Continued Government involvement Lack of meaningful institutional investor pool Trading mentality still prevails Lack of sophisticated asset management expertise Failure to resolve long term policy/strategy issues –Heritage –Sustainability –Urban Renewal

27. PPSPPS Health Warnings (II) Absence of successful public and private partnership model Potential volatility of supply Lack of joined up thinking Need for strategic planning No account yet taken of intangible returns

28. Thank You!

29. Professional Property Services Limited