Egyptian balloon tragedy creates eerie bursting-property-bubble metaphor

Safe Hong Kong mourns yet again for its apparently catastrophe-prone tourists overseas.  Financial Secretary John Tsang prepares for what pundits expect to be a weirdly cautious budget starting in a few minutes. The rebates, allowances and other handouts to which we have all grown so accustomed will – the soothsayers say – be tweaked downwards, as if we need to be surreptitiously weaned from them.

While they are waiting, lawmakers accuse the government of negligence while Cheung Kong signed up buyers for its Apex Horizons sort-of-hotel development. At the mercy of commission-driven real-estate agents, the story goes, hapless purchasers thought they were getting residential units; now Lands Director Bernadette Linn makes it clear they weren’t, and threatens to send her valiant Hotel Residency Inspection Gestapo SWAT Team into suites to check that no-one is staying more than 28 days, putting pictures on the walls or getting too comfortable on the couch. Inevitably, the lawmakers liken the case to the Lehman Minibonds Scandal Outrage Saga Massacre.

While the parallels aren’t exact, it is easy to see why the government is going to come under pressure to bail out the investors/buyers/victims/fools. First, obviously, the alleged mis-selling. Then, according to an expert on RTHK3 this morning, the initial paperwork buyers signed committed them to signing the final no-turning-back purchase agreement within an uncommonly short time. On top of that, there’s the government’s ‘negligence’. The South China Morning Post today says:

Linn said her department had reminded the developer in January that the buyers could not keep the units for private residential use.

“We did not take the case public because at that time there was no evidence of abuse or of anyone being misled,” she said.

Of course there wasn’t: the big sales push hadn’t started yet. Bernadette’s officials could have issued a factual statement advising buyers of the non-residential status of individually sold hotel suites. True, it would have been an unusual step. True, it might have pissed off Cheung Kong boss Li Ka-shing – or more to the point, looked as if it were designed to do so. True, the government back in 2011 had reminded the developer it would have to alert buyers as to the project’s status. But these are strange times. The only thing that’s ticking over as usual is Hongkongers’ heightened sense of ‘fairness’. It could have been anyone’s mother or brother buying one of those suites, or sitting in that hot air balloon over Luxor.

If the government buckled, would it bully Cheung Kong into refunding or compensating buyers? Or would it pick on the intermediaries? Presumably, the government will stand firm. With a bubble due to burst at some point, and thousands of idiots at risk of being plunged into negative equity, this would be an insane time to set such a precedent. More likely, we will see disgruntled investors sitting outside Li Ka-shing’s many properties and outlets banging drums in protest for years to come, as per the minibond folk. (Did any minibond victims also buy a unit at Apex Horizons? There would be a movie in that.)

To cheer everyone up, the Standard indulges us with no fewer than four heart-warming stories. Chinese Estates Holdings is (it says) getting HK$80,000-90,000 a square foot for retail property in Causeway Bay. ‘Veteran investor’ Johnny Cheung made HK$2 million by flipping a shop in Western. (Talk about a role model – good old Johnny!) A 900-sq ft apartment in Taikoo Shing has been rented out for an unprecedented HK$41,000 a month. And a Mainlander stumped up HK$1.5 million in stamp duty to buy a shoebox across the road in Kornhill. Four little rays of sunshine to brighten up all our lives.

 

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10 Responses to Egyptian balloon tragedy creates eerie bursting-property-bubble metaphor

  1. Bela Bubble says:

    I notice that the second headline in the Standard is about compensation.

    That’s why Hong Kong people never make good kidnapping victims – their relatives are too busy applying for compensation to get the ransom together.

    Why are Hong Kong people and journalists so predictable?

    And why are nine Government aids flying with ten relatives to Egypt? Freebie anyone? A Government forensic officer is packing his bags too. WIth the Hong Kong and Chinese Central Government flunkies on the ground and flying in from anywhere close, it’s going to be SPOT THE RELATIVE in Luxor.

    Oh…Was that Allen Semen I saw dismantling the balloon at Ocean Park?

  2. Property Developer says:

    The “provisional” S & P agreement has always worried me, since it is a binding contract, albeit unenforceable for cheap properties, lawyers are reluctant to get involved at that stage, and it’s presented as “standard”, a warning sign in itself.

    But, like mainland accidents where the number of victims is a multiple of the safe carrying capacity, it’s the details that inadvertently leak out that can be just as interesting. It seems you don’t need to sign the final S & P when stipulated, and more generally, by throwing such matters to the court of public opinion, you can often weasel your way out of anything, especially when, as usual, the government is running scared.

  3. Stephen says:

    My sympathies to the friends and relatives who lost loved ones in Luxor.

    That the Government knew about Cheung Kong’s plans for the Apex Horizon quite some time ago, but apparently did little, would seem to me, to leave itself open to claims of negligence when “investors” find that they have neither made any money from this nor it’s not the cheap kitchen-less home they hoped for. There will be moaning and a blame the government mentality, rather than face up to their own stupidity. Result the Government will cave in.

    Doesn’t the Government have back channels where it can quietly say to Li Ka Shing – “Look Mr. Li we have allowed you to financially rape Hong Kong with impunity for a great many years! Can you give us a break as there is a gap in legislation which we have been too anally retentive to plug so pretty please don’t put this on the market. If you do we are going to whine to Beijing and ask them to do you over because we know you’re not afraid of us”

    It worked once with New World and Sun Hung Kai wanted to bulldoze brand new flats in Hung Hom !

  4. The Regulator says:

    The balloon blew up because it was powered by hydrogen gas not butane

  5. farm chairs says:

    Re Lands Director Bernadette Linn threatening to send her valiant Hotel Residency Inspection Gestapo SWAT Team into suites to check that no-one is staying more than 28 days…

    All of KS Li’s Horizon properties have been marketed as service apartments from the start. I know people that have lived in Apex for months, and some who have lived in other Horizons for years (I was also told the Horizon beside the Hung Hom KCR station is home to some remarkably durable cockroaches).

    The group’s main web page openly promotes monthly rentals; they’re not pretending otherwise:
    http://www.horizonhotels.com.hk/index_en.html

    If there is anyone in the Lands Dept. that thinks these are bona fide hotels and that people stay less than 28 days, then they must have shit for brains.

  6. darovia says:

    @Stephen
    Agreed that the government will cave in on the hotel rooms after a few weeks of loudhailer-assisted, made for TV, “victims'”wailing. However, cave-ins must be carried out in strict order; we need to get a back-track on the directors’ ID card issue first, so there might be a slight delay.

    Can’t wait to see the first grandma trotted out to claim that room 2106 was mis-sold to her by an unscrupulous agent who promised spa treatments for early buyers and promised to help her install an LPG burner in the bathroom.

  7. Failed Alchemist says:

    Michael Chugani is getting sharper by the day. Unlike the mis-selling of mini-bonds especially to the elderly, Apex is a hand of baccarrat or “big or small”. An ordinary HKer has no penchant for a classic game of poker or blackjack – or games that involve the mind. Quicker, faster with high returns. Rushing to buy Apex brings fond memories of long lines trying to get Hello Kitty.

    So, good ole Mike says, don’t place measures to cool the market. Just let it go up, then crash (no pun intended especially in our empathy with the Luxor victims & family). At least we can re-set the counter.

    As for the government’s part, when the old sheriff allowed perpetual rape & pillaging, the outlaws thot the new sheriff would do like wise – role over and catch a ride on the next yacht. Or is the old dog trying to directly challenge the new sheriff to a show down in Dodge?

  8. Real Tax Payer says:

    When I read news like the Luxor balloon disaster I always feel ” there but for fortune go you or I ”

    My condolences to the families

    But when I read about the Apex Horizon idiot-buyers ( or the Lehman mini-bond victims “if a deal is too good to be true it IS too good to be true”) I have no sympathy at all.

    PS: I guess that the new owners can live there long-term just by cross leasing with each other (nothing illegal about that) , except that they must surely pay profit tax on the rental income , which must be market rate @ 16.5% , plus they must pay the hotel admin charges etc etc , so it’s going to cost them about $3-4K p.m. hahahahah

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