HONG KONG: "Buy land, they are not making it anymore."

The famous quotation by American writer Mark Twain is Shih Wing-ching's motto. To the chairman of Centaline Holdings, the owner of one of Hong Kong's biggest real estate firms, Centaline Property Agency, there is no investment that is more rewarding than buying properties.

"It is a limited-version product. I would always buy some land when I have gathered enough money," he told China Daily.

While stressing buying properties is a safer bet than investing in stocks and other financial products, Shih suggests the government should be very cautious in land auctions and land and flat supply increases.

"Some 60 percent of Hong Kong households own their own homes; excessive flat supply will dilute the current residential property value and hit the city's property market."

"It is an undoubted truth that the land supply is getting limited, especially on Hong Kong Island, but the government is responsible for helping secure the value of the city's properties."

There has been much comment on the acute shortage of land supply and flat supply, which is currently driving up real estate prices, primarily in the luxury sector.

Chief Executive Donald Tsang said in his policy address last week that the government "will fine-tune the land supply arrangement and hold discussions with the Urban Renewal Authority and MTR Corporation Ltd with a view to quickening the pace of bringing readily available residential sites to the market."

Concerns about a shortage are the principal driver of a demand surge. To tackle the problem, the government should urgently embark on a series of land auctions of attractive residential sites, said Nicholas Brooke, chairman of the Professional Property Services and the Hong Kong Science Park.

Housing completions in Hong Kong have been lower than initial government projections in the past two years. But Centaline's Shih argued volatile stock markets impelling investors seeking alternative investment products and low mortgage rates offered by cash-rich banks are the two main drivers of a sharply rising property market.

"People involved in the stock market are very disappointed seeing their holdings drop by half or even more. They may realize relying on some paper notes is not safe, so they turn to housing market, which is more tangible."

The government's economic stimulus effort and banks' readiness to lend also give home buyers confidence amid the recession, he added.

Analyzing a big disconnect between accelerating residential sales volumes and prices and the slower pace of recovery in the wider Hong Kong economy, Shih said surging properties become affordable even in a downturn thanks to Hong Kong people's thriftiness.

"As the unemployment rate reach record highs, the cash injected into house market cannot be fresh money, but capital accumulated after years of saving. When banks offer a nearly zero deposit rate people would rather turn their cash into bricks."

Whether the property market will sustain its growing momentum in the rest of the year, Shih said, depends on the government's next-step stimulus measure and central banks' monetary policies.

Vincent Chan, an executive director at Midland Realty, said that there might be short-term corrections, but that overall prices are unlikely to tumble sharply.

"Given the correlation of property and stock prices, home prices are unlikely to fall much if the Hang Seng Index stays at 18,000 to 20,000 points," he said.

But some short-term adjustment may provide buying opportunities. Determining the peak of housing prices is difficult. Nonetheless, for the next 12 months, the uptrend will continue, he said.

Driven by the upsurge in housing prices that have climbed 10 to 30 percent so far this year, the number of people being lured into the sector by the prospect of earning easy commissions as licensed estate agents increased sharply.

Data from the Estate Agents Authority show that by the end of last month there were 26,147 licensed agents, compared with a low of 22,529 in February. The current headcount is the highest since records began to be kept in 1999.

"The property agency industry is one of the few sectors of the economy that is expanding," said Shih. But he warned potential job seekers that it is very difficult to survive in this industry.

"Many new hands can't even survive the first three months; the job is very demanding, but salary is not stable," said Shih, who himself used to be a successful property agent.

"New hands will have to work very hard or they will not make money even in a booming market," Shih said.

"Only half of the new property agents are likely to survive for a year, because of the long working hours and high pressure," said Willy Liu, a managing director at Ricacorp Properties.

Despite the warning, property companies are ready to recruit.

Centaline Property and Ricacorp Properties along with their rivals in the city expanded their network since March this year as concerns over the crisis began to ease and housing demand recovered.

"Since March we have opened 10 branches and taken on 250 new agents. We aim to have 100 branches and a staff of 1,400 agents by the end of this year," said Liu.

By February, Centaline Property had cut the number of its branches to 182 from 233. Its staff levels were cut 27 percent to 2,529. The agent has recently built its network to 191 and its headcount to 2,843.

We have to be cautious on expansion, because the actual economy has not improved, Shih said.

(HK Edition 10/20/2009 page4)