Following is the transcript of a CNBC interview with Nicholas Brooke, Chairman, of Professional Property Services Group. The interview was broadcast on CNBC on 25 April 2017 at 11:40AM SG/HK Time, during CNBC's "Hong Kong versus Singapore" theme week.
All references must be sourced to a "CNBC Interview".
Interviewed by Emily Tan, Anchor, CNBC, Pauline Cho, Anchor, CNBC and guest host Kelvin Tay, MD and Regional CIO, UBS Wealth Management.
Emily Tan: Now we are seeing property prices near record levels here in Hong Kong, but you're saying this is not a property bubble. What's the situation?
Nicholas Brooke: It's a function of an imbalance between demand and supply, demand far, far outweighs supply and as a result prices continue to escalate. I mean governments try to calm the market as you know by introducing some duty particularly on outside purchases, non-resident purchases, but that's failed to calm the market. It really is all about supply, increasing the amount of supply and the range of choice that's available to first time buyers.
Emily: We've seen Chief Executive after Chief Executive try and put measures in place. Now what does Carrie Lam have in place in her arsenal that she can try and put the situation under control so that she can bring the divide in Hong Kong, many Hong Kong are very unhappy that their housing situation here is just not, it's not viable. We can't get into the housing market.
Nicholas: It's about increasing supply and I think she… or I know she has some initiative in mind. We're not short of land for development in Hong Kong, but we're short for land that's ready for development so we have a whole range of brownfield sites in new territories, sites which could be developed for residential purposes are being used for unauthorized uses, tolerated uses, grasping brave decisions to step in and to clear those sites and make them available for residential development. The developers also sitting on large tracts of rugged culture land the in new territories. This can be converted to building land and in partnership, I think governments and the developers can produce a lot of products using those production sites.
Kelvin Tay: In my view, we think that high prices tax as a tax consumption is a tax on creativity and it's a tax entrepreneurship. Have you in your line of work… have you ever done any studies on how high property prices actually affect the other sectors of the economy because it's like the Dutch disease of the eighteen hundreds where a lot of capital is actually diverted to one sector and then after that you find that the other sectors of the economy basically suffer from a lack of capital? I'm just wondering whether there were any studies done actually to actually bear that view to the front.
Nicholas: No I support your view and your contention. Indeed studies have been done that real estate sucks out of the other sectors if you like in a major way. And certainly our other sectors at the moment are suffering because of the concentration of attention, if you like, and investment in the real estate sector.
Pauline Cho: Nicholas, it's Pauline here in Singapore. You were talking about the imbalance between supply and demand and there's just not enough supply. Well here in Singapore, 80 percent of the housing is public housing and it's nice housing. What's the model there in Hong Kong? And is the Singapore model something that Hong Kong lawmakers would be looking to?
Nicholas: Well, we certainly need to increase homeownership in Hong Kong. At the moment there are only 52 percent of the population own their own home, and one of the challenges I think we face is that there's not…not enough ranges of choice, if you like, particularly for people trying to get on the housing ladder. We only have one model at the moment which is called homeownerships. The homeownership scheme, where people buy at a 30 percent discount, if you like, to get on the ladder, and then they have to hold the unit for five years before they sell it. We need a lot of intermediary stages I think, before you get to the HOS, and indeed, after the HOS, when you want to move from the HOS to the private sector, again, I think we need help to make sure that people can make that step in an affordable way.
Emily: Can you give us an outlook for the Hong Kong property market? We're in a situation where we're going to get a couple more interest rate hikes this year. We got capital inflows into the Hong Kong market which is what is supporting these high property prices. Where do you see property prices for 2017?
Nicholas: When you see property prices continue to increase, residential prices continue to increase, as you mentioned, and we heard earlier the inflow of capital. There's a lot of money sloshing around the market, if I may I put it that way. Interest rate hikes so far have had minimal effect. And I think it's not 25 basis point increase, which will impact is probably three, four times 25 that we need before we see any impact on prices. So, short medium term until we address this issue of supply, both land supply and supply of products. I honestly think prices are going to edge up.
Emily: Are you able to put a number on it?
Nicholas: I think between five and 10 percent. In the next 12 months.