Dr. L. H. Li Associate Professor Dept. of Real Estate &Construction,HKU Land and Construction Management Web site : Tel : (Dept. of Real Estate & Construction)

To save a few trees for the monkeys, students are required to download supplementary (to required readings) lectures notes (from http ://hkusury2.hku.hk/li, click on various notes under “Year One” to download. If you have problems in doing so, please let me know.

Real Estate Market Structure Market Structures in Real Estate and Construction Perfect competition or monopoly ? Characteristics of perfect competition Large numbers of players ? Homogenous products ? Free entry and exit ? Perfect information ? Number of Customers Identical factor prices ?

Land and Real Estate Market Structure in Hong Kong - Data and Information Construction stage : Construction floor plans of various degree need to be submitted and approved by the Buildings Department. Consent to Commence Work as indication of new supply Occupation stage : The Rating and Valuation Department (R&V) is responsible for the assessment of a kind of property tax – Rates The R&V Department publishes annual report on such data as property price indices for all sectors and size classes It also produces database on information such as vacancy rates, take-up ratio as well as market yields Try the R&V Dept web site :

Land and Real Estate Market Structure in Hong Kong - Data and Information Private sector : Surveyors have been dominating the provision of property-related services in the HKSAR. In the recently years large securities house such as Nomura and Morgan Stanley also participate in the analysis of the real estate market.

Real Estate Cycles in Hong Kong Long upward trend since 1984 with only minor adjustments in 1989 and in 1992, until Since 1992, relative cyclical movements were becoming more obvious, but new peaks normally climbed to higher levels as compared to the last peak. This pattern continued until after the Asian financial crisis in 1997 when prices bottomed down to the 1992 level

Real Estate Cycles in Hong Kong Interest rate in Hong Kong has been set to follow the tend of the US pattern, leading to the role of interest rate in the monetary policy in Hong Kong being relatively inactive. The HK interest rate, on which the mortgage rate bases, cannot always reflect the actual macro economic situation. As a good inflation-hedge tool, demand for real estate will soar under an artificially-low interest rate period leading to rising prices

Can the Gov’t dictate supply ? The new “socialist” style of land management system in Hong Kong after 1997 with production indication might not be effectiveness as the government cannot control all supply channels of housing

Table 5 : Contribution of Housing Supply Via Government Land Auction Channel YearAnnual new completion of housing floor space (1,000 sq.m.) Floor area available for housing development via government land auctions (1,000 sq.m.) % of supply from auctioned land on total supply % % % % % % Average :26.68% Source : L.H. Li, (1996), Development Appraisal of Land in Hong Kong, Hong Kong : Chinese University Press

Real Estate Cycles in Hong Kong This market expectation, when faced with a market failure, started to search for explanations in the government policies for the burst of the bubble. One of these being the over-production of government-subsidized housing, or the HOS, for sale in the market. Is it true ?

Real Estate Cycles in Hong Kong The Bank Sector – Eager to lend you an umbrella on a sunny day and ask for it back when it rains. Bank sector in Hong Kong has been under rather strict scrutiny by the quasi-central bank, the Hong Kong Monetary Authority(HKMA). There has never been a major deregulation as such.

Real Estate Cycles in Hong Kong Proportion of loans to property investment outweighed that to individual for purchasing private housing flats in the mid-80’s, but the situation got reversed since late 80’s until after the burst of bubble in Banks have been keen on trying channel their funds into mortgage loans, eg. Pushing down mortgage rates.