Few business stories get clicks like a (probably paywalled) Bloomberg report of blood and mayhem among property tycoons and luxury brands…
Only three of the more than 30 units at the [1881] mall owned by billionaire Li Ka-shing’s CK Asset Holdings Ltd. are occupied, and its colonnaded courtyards are quiet.
On nearby Canton Road, a shop previously rented by Swatch Group AG’s Omega for about HK$7.5 million ($962,000) a month is leased to a bank for 80% less, according to real estate agents familiar with the deal. Over in Causeway Bay’s Russell Street, a Transformers-themed fast-food restaurant has taken the place of Burberry Plc. Its rent is 89% below the HK$8.8 million the British firm was forking out in 2019, the agents said…
…Official figures show fewer Chinese tourists are visiting the city than before the pandemic, and those who are coming spend on average only half of what they used to … In the first seven months of this year, sales of luxury goods — which includes items such as jewelry, watches and department store receipts — were 42% below 2018’s level.
The subdued spending and shuttered stores are adding to a deepening sense of malaise in Hong Kong. Home prices are at an eight-year low, office vacancies are near a record high and the benchmark stock index is among the world’s worst performing. The city’s aging problem has been accelerated by an exodus of younger residents, while the government’s crackdown on dissent has shaken international confidence in the city. Squeezing businesses further, borrowing costs have surged due to a currency peg with the greenback, which forces the city to import US monetary policy.
In a sign of weakening confidence, household spending fell in the three months to June for the first time since the third quarter of 2022, while analysts project economic growth will slow next year from 2023.
New World Development’s share price plummets as the debt-heavy company warns of losses…
Its stock has slid some 80 percent since its peak in mid-2021…
Even more if you go back further: it was over HK$100 in 2008, and is below HK$7 today. An old saying about Chinese family corporate dynasties: the first generation makes the wealth; the second generation enjoys it; and the third loses it.
More from HKFP…
Hong Kong’s retail sector woes may last into next year, an industry representative has said, as sales fell 11.8 per cent in July compared to the same period last year.
Chairperson of the Hong Kong Retail Management Association Annie Tse made the forecast on Monday, adding that inbound tourism only had a minimal effect in easing the situation.
…Hong Kong has seen a shift in spending patterns with Hongkongers “heading north” for inexpensive dining and shopping, while “citywalks” – exploring the city on foot and taking photos – became the dominant mode of tourism for visitors from mainland China.
…She called for a 30 per cent rent cut to help the retail sector, saying that some retailers had seen rent reductions of around five to 10 per cent – which she described as being “better than nothing.”
Why do landlords prefer keeping properties empty to just cutting rents? One of those eternal mysteries. Similarly, why can’t Hong Kong officials face reality and stop trying to return to the old model of huge tourism numbers and over-reliance on land revenues? The old days of 12% annual growth in the Chinese economy and Mainlanders’ apparently endless demand for overpriced brands are not going to come back.
On a brighter note…
The Working Group on Patriotic Education under the Constitution and Basic Law Promotion Steering Committee launched a theme song titled Our Home yesterday to promote patriotic education.
“Why do landlords prefer keeping properties empty to just cutting rents?”
Because every HK landlord is certain that there’s a sucker willing to pay big money around the corner (or at the next market uptick), and, for them, winning = not missing out on that sucker. HK banks don’t let landlords get too leveraged, so it takes a while for them to feel pain.
As long as the major landlords hold prices, the market can stay irrational (= flats and shops remain empty) for a very long time. We’ve seen all this before.
The clever young men and women at Liber Research are contemplating whether this is finally the end of the 180 year-old high land price policy. Government land auctions are failing left and right, and nobody wants to invest in the Northern Metropolis. If Hong Kong is going to be just as repressive and unpredictable as the mainland, what’s the point of being here? Besides money laundering.
We can finally stop juicing the real estate for the sake of white elephant construction projects for the sake of juicing the real estate, right? Right? Unfortunately, the government won’t get the memo until after they’ve ripped up another priceless wetland.
“…a Transformers-themed fast-food restaurant has taken the place of Burberry Plc. ”
Stop press! The Transformer shop (actually a big laundry shop) has already announced its closure.
“Why do landlords prefer keeping properties empty to just cutting rents? One of those eternal mysteries.”
Not a mystery: if the landlords reduce rents, they admit to their bank that the property’s valuation is way above its real value.
Bremridge was a bloody genius – his time-delay poison pill only took ~40 years, but really worked wonders… especially when combined with General-Secretary He-Who-Knows-Everything’s help – kinda like necking some sorta medicine that shouldn’t be washed down with an alcoholic beverage, let alone a coupla cases of Maau Toi.
Has anybody else noticed the change to the Alibaba Morning Bird Cage Liner (aka South China Morning Onion) yesterday? Only presents the first four or five paragraphs of articles now…
‘JPMorgan analysts said in a note to clients “The loss is not as drastic as the headline suggests” ‘
Stock price Sep 23 : $16.94
Stock price Sep 24: $6.69
Guess it’s those pesky headwinds and external factors, they’re everywhere these days.
The landlords did in Hong Kong.
All the woes of Hong Kong derive from them, not principally from the so-called Communist Party. Well…the Party just gave them free rein so I suppose they are strictly guilty too.
So heartening then to see New World sink like a lead balloon and all the rest of them looking so “Who Moved My Cheese”-ish.
The Communists are supposed to shoot landlords first. Then the moneylenders and brothel keepers.
Oh, the snows of yesteryear…
Still, at least Bakehouse is doing well – maybe Hong Kong can become Asia’s pain au chocolate hub?
Joe Blow beat me to it re the exit of Transformers. Bloomberg reporter may not be a local.
Ageing diva Cally is a savvy bird, she now has a guarantee of annual gigs at blue gatherings. The new Liza Wang.
And surely ‘Our Home’ is effectively a surrogate anthem. The new ‘Glory to Hong Kong”
Why would one be condemned while the other is lauded?
Joe Blow has a point (or so I’m told). Banks are happy to lend based on a theoretical rental value. But if the property brings in a lower actual cashflow, the borrower has breached their covenant and the loan is called in. I don’t know if this is just a HK thing?