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Hong Kong Baptist University Alumni Affairs Office
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12-05-2015

Alumnus Dr. Jacinto Tong Shares his Insights on the Bust of Small Flats Market in Hong Kong

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Property and stock investment have become one of the hottest topics in Hong Kong recently.  It seems that everyone in town is talking about when, at what price and what to buy.  Riding on the popularity of this topic, Alumni Affairs Office co-organised with the School of Business the Alumni Sharing Forum entitled “The Bust of Small Flats Market in Hong Kong” with alumnus Dr. Jacinto Tong, Vice Chairman and Chief Executive Officer of Gale Well Group Limited to share his insights. The Forum brought down the house with a record-breaking attendance with guests including Deputy Chairman of the Council and the Court Mrs. Pamela Chan, Chairman of the Alumni Committee of HKBU Foundation and Honorary University Fellow alumnus William Leung, BBS, JP and Miss Jacqueline Tong, daughter of Dr. Tong.  The panel discussion was chaired by Senior Lecturer of School of Business Mr. Simon So. 

Dr. Jacinto Tong reckoned that the price of small flats in Hong Kong (those of the value below HK$6 million) will fall in the coming 3 to 6 months due to a number of reasons.  First of all, the HKSAR Government and the Hong Kong Monetary Authority has launched for the 7 th times the counter cyclical regulatory policy, which was supported by 5 different government officials whom he had met in various occasions.  Secondly, the loan-to-value residential ratio for mortgage loan of some buyers has reached an alarming 70%. Reports from the news also revealed that some small flat buyers borrowed money from financial institutions, bearing an outrageously high interest rate.  When these small flat buyers cannot repay their loan, their properties will be called by the financial institutions for auction.  As such, the price of small flats will definitely drop.  Dr. Tong also pointed out that there may be miscalculation in some property indices as they are derived by taking into account the signed agreements.  Cancellation of the agreements has not been reflected in the indices.  He found that on average there are 50 cancelled agreements per month, which should not have been the case if the price of small flats only skyrockets.  In addition, the fact that some property developers sell the new residential flats with more than 20% discount would have some cooling effects on the price of small flats.  All these factors have triggered him to perceive that the small flats market may come to a burst sooner or later.  

Dr. Tong also reminded the audience that one should seriously consider their affordability when buying properties and should not easily approach financial institutions to borrow money for mortgage loan.  He also thought that the high demand is due to the fact that parents are buying flats for their children in advance.  As a closing note, he provided the following investment tips to the audience: 

  1. One should buy new flats rather than second-hand flats as the commission for agency and the cost of refurbishment could be saved.
  2. For general investors, when buying commercial properties, it is better to buy the B-grade premises than A-grade ones.
  3. When buying shops, it is better to buy the small shops adjacent to the big ones at the corner.
  4. When buying a car parking space, it is better to buy the one on the left-hand side.

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