i
NAME FU Sze Ting, Kitty
DEGREE BA (Hons) Finance and Investment
Management
SUPERVISOR John Tsang
TITLE Is there any bubble in Hong Kong
residential housing market?
DATE 8th April 2011
CAMPUS School for Higher and Professional
Education (SHAPE)
STUDENT No: 107011358
Project submitted in partial fulfillment
of the requirements of the
BA (HONS) FINANCE AND INVESTMENT MANAGEMENT
of Northumbria University
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DECLARATION AND WORD COUNT
I declare the following:- (1) that the material contained in this Project is the end result of my own work and that due acknowledgement has been given in the bibliography and references to ALL sources be they printed, electronic or personal. (2) the Word Count of this Project is: Section A: 3,890 words Section B: 5,720 words Total: 9,610 words (3) that unless this Project has been confirmed as confidential, I agree to an entire electronic copy or sections of the Project to being placed on Blackboard, if deemed appropriate, to allow future students the opportunity to see examples of past Projects. I understand that if displayed on Blackboard it would be made available for no longer than five years and that students would be able to print off copies or download. The authorship would remain anonymous. (4) I agree to my Project being submitted to a plagiarism detection service, where it will be stored in a database and compared against work submitted from this or any other School or from other institutions using the service. In the event of the service detecting a high degree of similarity between content within the service this will be reported back to my supervisor and second marker, who may decide to undertake further investigation which may ultimately lead to disciplinary actions, should instances of plagiarism be detected. (5) I have read the University Policy Statement on Ethics in Research and Consultancy and the Policy for Informed Consent in Research and Consultancy and I declare that ethical issues have been considered and taken into account in this research.
SIGNED: ...... DATE: 8th April 2011
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ABSTRACT
“What are your strengths and weaknesses?” is the most common question during job interviews. It is seems that getting know ourselves in depth become more and more important under this competitiveness society.
Section A of the paper shows the four personality tests done by the author and discusses on how the results bring benefits to the future.
Many people in expressed that the housing price in Hong Kong had gone far beyond their purchasing power. Is there really a bubble in the Hong
Kong’s residential market? Section B of the paper investigates on whether the property price level is not reasonable, and also the factors causing the recent situation in the market. Suggestions are made regarding the government’s policy in monitoring the real estate market.
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ACKNOWLEDGEMENTS
This paper would not have been completed if the support from some parties is not received.
The author would like to express her sincere thanks to
Mr. John Tsang, the supervisor; and
Miss Christine Tam, the module tutor for their valuable advices in the subject area and their patience in providing guidance.
The author also wants to thank those who helped to finish the questionnaires and provided useful information to the project.
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TABLE OF CONTENTS
page
TITLE PAGE…………………………………………………………... i
DECLARATION AND WORD COUNT…………………………… ii
ABSTRACT……………………………………………………………… iii
ACKNOWLEDGEMENTS…………………………………………… iv
TABLE OF CONTENTS……………………………………………… v
LIST OF FIGURES……………………………………………………. viii
LIST OF APPENDICES……………………………………………… x
SECTION A
CHAPTER 1 Who I am as a learner?
1.1 Introduction…………………………………………... 1
1.2 Implications of learning…………………………… 3
1.3 Summary and conclusions………………………… 14
CHAPTER 2 Implications for career choice
2.1 Lifelong learning…………………………………….. 17
2.2 Transferable skills…………………………………… 21
2.3 Justify chosen career choice……………………… 23
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SECTION B
CHAPTER 3 Introduction
3.1 Reasons for choice of topic…………………………. 26
3.2 Academic objectives of Project…………………….... 27
3.3 Outline of sections…………………………………….. 28
CHAPTER 4 Literature Review
4.1 Formation of bubbles………………………………… 29
4.2 The Hong Kong housing bubble……………………... 31
4.3 The supply and demand of land……………………… 35
CHAPTER 5 Methodology
5.1 Data collection…………………………………………. 37
5.2 Interpretation of data………………………………...... 38
5.3 Limitations……………………………………………… 38
CHAPTER 6 Findings and Analysis
6.1 Questionnaire survey………………………………… 40
6.2 Data analysis in residential market………………...... 46
6.3 Critical review and discussions……………………… 51
6.4 Reasons behind the bubble………………………….. 56
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CHAPTER 7 Conclusions and Recommendations
7.1 Conclusions……………………………………………. 61
7.2 Responsibilities of the government………………...... 62
REFERENCES………………………………………………………….. xi
BIBLIOGRAPHY………………………………………………………... xvii
APPENDICES…………………………………………………………… xviii
REFLECTIVE STATEMENT…………………………………………… xxxix
LAST PAGE……………………………………………………………... xliii
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LIST OF FIGURES
Page
Chapter 1
Figure 1.1 The linkage between the four learning styles from 4
Honey and Mumford (1982)......
Figure 1.2 Results of Honey & Mumford Learning Styles 5
Questionnaire………………………………………
Figure 1.3 Results of VARK Questionnaire…………………… 7
Figure 1.4 Preferences of Myers Briggs Personality Type 9
Indicator………………………………………………
Figure 1.5 Results of Myers Briggs Personality Type Indicator 10
Figure 1.6 Belbin Team-Role Contributions………………….... 12
Chapter 2
Figure 2.1 Lifelong learning plans………………………………. 19
Figure 2.2 Comparison of two job requirements……………… 24
Chapter 4
Figure 4.1 The Tulipmania………………………………………. 30
Figure 4.2 Performance of CCL…………………………………. 33
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Chapter 6
Figure 6.1 Geographic distribution……………………………… 40
Figure 6.2 Distribution of age……………………………………. 41
Figure 6.3 Do you think the residential price level is 42
reasonable?......
Figure 6.4 How many percentage of the price should be 43
readjusted?......
Figure 6.5 How many percentage of the monthly income do 44
you think is affordable for mortgage………………
Figure 6.6 Performances of CCL Sub-index………………….... 47
Figure 6.7 Performances in Hong Kong Island and Kowloon… 47
Figure 6.8 Performances in New Territories………………….... 48
Figure 6.9 Comparison of residential unit prices……………..... 52
Figure 6.10 The 39 Conduit Road………………………………… 54
x
LIST OF APPENDICES
Page
Appendix A
A1 Honey & Mumford Learning Styles Questionnaire xviii
A2 VARK Questionnaire………………………………… xix
A3 Myers Briggs Personality Type Indicator………… xix
A4 Belbin Team Role Profile…………………………… xx
Appendix B
B1 Curriculum Vitae……………………………………… xxi
B2 Two Job Advertisements……………………………. xxiv
B3 Application Form…………………………………… xxviii
Appendix C
C1 PowerPoint Presentation……………………………. xxx
Appendix D
D1 Copy of Questionnaire………………………………. xxxi
Appendix E
E1 Log of Meeting……………………………………….. xxxiii
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SECTION A
CHAPTER 1 Who I am as a learner?
1.1 Introduction
Since we were born we have to learn for everything. In order to catch up
with the ever-changing world, and to maintain relationship with people, we
keep learning even we become old. In this aspect, ‘Learning styles’ helps
individual to know self well about one’s preferred methods to learn. Thus
he/she is able to learn best efficiently and effectively. According to LdPride
(no date), ‘Learning styles’ are simply different approaches or ways of
learning.
1.1.1 The importance of ‘learning to learn’
The proponents of ‘meshing hypothesis’ suggested that teachers should
assess the learning styles of their students and adapt their classroom
methods to best fit each student’s learning style (Dunn R & Dunn K, 1978).
Thus it can be seen that everyone should pay attention to their personal
learning styles, and apply in daily lives whenever we have the opportunity
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to learn.
Failure in making use of the appropriate learning methods may resulted in the waste of time or resources. It becomes a bad mistake when we are working in a team. However, such mistake is actually avoidable after we understand how we should learn.
1.1.2 What kind of learner are you?
To find out how we learn best, we can rely on the different theories or models suggested by specialists, for example the popular Honey &
Mumford Learning Styles (Honey and Mumford, 1982) and the Fleming’s
VARK model (Fleming and Mills, 1992).
The assessment methods of different models are usually based on the professional and well-designed questionnaires or online tests. They provide computerized results, or sometimes full reports, which show one’s preferred learning styles. Some of them even suggest further possible strategies to help us for accommodating the learning styles.
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1.2 Implications of learning
The author has finished the following four assessments to find out her own preferred learning styles. She would summarize and match the results all together at the end of this chapter.
Honey & Mumford Learning Styles Questionnaire (1.2.1)
VARK Questionnaire (1.2.3)
Myers Briggs Personality Type Indicator (1.2.5)
Belbin Team Role Profile (1.2.7)
1.2.1 Honey & Mumford Learning Styles Questionnaire
According to Honey and Mumford (1982), the Learning Styles
Questionnaire is designed to find out the participant’s preferences for learning, which can assist in maximizing the benefit gained from the whole range of learning experiences during lifetime. There are four types of the learning styles, and they are linked with the steps we go through during learning, as shown in the following figure.
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Figure 1.1 The linkage between the four learning styles from Honey and
Mumford (1982)
At the top of Figure 1.1, activists are open-minded and they enjoy having new and challenging activities. Second, reflectors prefer to view or plan things from different perspectives, before coming to any conclusion. Then, theorists tend to be perfectionists who like analyzing ideas logically within structured environments. Finally, pragmatists are essentially practical, that they keen on applying new ideas into ‘real life’ and see if they work in practice.
1.2.2 Implication on Honey and Mumford Learning Styles Questionnaire
The following Figure 1.2 displays the author’s scores on each of the four
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major learning styles. With those the higher scores, the author is told that
her preferred learning styles are Theorist and Pragmatist, while her weaker learning styles are Activist and Reflector.
Learning Very Very Score Low Moderate Strong Style Low Strong
Activist 7 ■■■■■■■■■■■
Reflector 12 ■■■■■■■■■■■■
Theorist 16 ■■■■■■■■■■■■■■■■■■■■■
Pragmatist 17 ■■■■■■■■■■■■■■■■■■■■■■
Figure 1.2 Results of Honey & Mumford Learning Styles Questionnaire
The author was not surprised when she got ‘Very Strong’ for the preference
of Theorist and Pragmatist. Usually, she can learn best from information
that is presented logically and theoretically. Mostly, she agreed herself as a
perfectionist, which she won’t be comfortable if things aren’t tidy and follow
their steps. At the same time, she finds herself very practical that she is
proficient in solving real life problems, analyzing case studies or even, for
example, setting up action plans. She can only be familiar with what she
learned after she put it into real practice.
The author was also agreed that her preference for Activist and Reflector
style were relatively low. She does not resist trying new things or
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experience, but she is more skillful in handling things exist. For example,
she cannot immediately get with new system of the computer. Furthermore in past experience, like when she was doing school’s projects, she found it
more difficult for opportunities to work with other people, or as part of a
team. She would rather do things by herself. This problem may caused by
her weakness on listening to or observing others.
1.2.3 VARK Questionnaire
VARK is a questionnaire that provides users with a profile of their learning
preferences. Fleming and Mills (1992) suggested that ‘VARK’ stands for
Visual, Aural/Auditory, Read/Write and Kinesthetic sensory modalities.
These preferences are about the ways that the users want to take-in and
give-out information.
To simplify, ‘Visual’ means graphics, such as maps, charts, diagrams and
other devices used to represent and explain that is covers. The
‘Aural/Auditory’ describes information that is heard or told, like lectures or
presentations. Then, ‘Read/Write’ represents information displayed as
words and lists, for example PowerPoint and dictionaries. Lastly,
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‘Kinesthetic’ means learning through real personal experiences and practical applications, such as case studies and demonstration.
1.2.4 Implication on VARK Questionnaire
The author’s results of the VARK Questionnaire are presented below at
Figure 1.3. It shows as a ‘multiple preferences’ type, meaning people who
may have more than two (even four) strong preferences to use for their
interaction with others.
VARK Models The Author’s Scores
Visual 8
Aural/Auditory 5
Read/Write 9
Kinesthetic 6
Figure 1.3 Results of VARK Questionnaire
The author gets the highest scores for Visual and Read/Write. Personally, she is very interested in color, layout, design, or the look of an object. She
likes drawing helping herself to descript things or memorize some data and information. During studies, she learns well through studying charts and
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graphs, or textbooks with colorful pictures and diagrams. Besides, the
author finds it easier to understand if things are written down or printed as
handouts. She also likes materials to be presented by PowerPoint or other
forms that is in words.
On the other hand, based on the scores, the author has relatively weak capabilities in Aural/Auditory. In fact, the author would not easily rely on or believe things to be told by someone. She believes that the low score of this preference, to some extent, reflects her weakness of listening or accepting others’ ideas. This brought to her difficult times when she was
required to work or cooperate with other people.
Moreover, the score of Kinesthetic is not very low, which also reflects that she sometimes accepts to learn by having real experiences or practices.
For example, she likes cooking, rather than just reading recipes.
1.2.5 Myers Briggs Personality Type Indicator
Team Technology (1995) stated that the Myers Briggs model of personality
helps to develop a good understanding of our personality type and the
inborn preferences. It benefits us in all sorts of ways such as choosing a
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suitable career, developing leadership skills or even influencing other people.
The result of the Myers Briggs questionnaire produce one of the sixteen four letter codes of preferences (E or I, S or N, T or F and J or P) as shown in Figure 1.4, and each of the following letters identifies a preference for a style of thinking or behaving.
Extraversion (E) Introversion (I)
Sensing (S) Intuition (N) V.S. Thinking (T) Feeling (F)
Judging (J) Perception (P)
Figure 1.4 Preferences of Myers Briggs Personality Type Indicator
1.2.6 Implication on Myers Briggs Personality Type Indicator
Figure 1.5 shows the author’s questionnaire results. It produces
percentage scores for the sixteen four letter codes indicating how close
each of the generic personality types is to the unique personality.
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ISTJ ISFJ INFJ INTJ 60% 58% 58% 60%
ISTP ISFP INFP INTP 59% 57% 57% 59%
ESTP ESFP ENFP ENTP 57% 56% 56% 57%
ESTJ ESFJ ENFJ ENTJ 59% 57% 57% 59%
Figure 1.5 Results of Myers Briggs Personality Type Indicator
The test results of the author are quite even that they are all between 56%
and 60%. However, among the sixteen codes, she is more likely to be
‘ISTJ’ or ‘INTJ’ with both the scores of 60%. Team Technology (1995) states
that, ISTJs are introverted Sensing with Thinking, while INTJs are
introverted Intuition with Thinking.
For the first letter, the author does not fully agreed with ‘I’ (Introversion)
because more than dealing with the ‘inner world’, she sometimes prefers
dealing with the ‘outer world’ like people, things and situations.
For the second letter, either ‘S’ (Sensing) or ‘N’ (Intuition) represents the
personality of the author. She finds that ‘N’ (Intuition) may be more suitable in expressing herself as she likes using her imaginations or to face new
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ideas, possibilities or perspectives. For example, when choosing assignment’s topic, she would prefer to have a new, interesting topic than a clear, inflexible one.
In making decisions, the author would refer to analytic and logic information, but not only based on her personal beliefs or feelings. It matched with the third preference of ‘T’ (Thinking).
Lastly, the author is partially agreed with ‘J’ (Judging) as she likes her life to be planned, stable and well-organized. However she sometimes also likes flow, flexible situation which allows her to bring special ideas and thoughts.
Overall, the author is not satisfied with the result produced by Myers Briggs questionnaire. The scores of the sixteen types of personality are so even and close to each other. It is confused and not clear to tell which kind of characters she really belongs to.
1.2.7 Belbin Team Role Profile
The Belbin Team Role (Belbin Associates, 2010) suggested by Dr Meredith
Belbin in the 1970s, helps participants to identify their behavior in team contributions. He defined a Team Role as:
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“A tendency to behave, contribute and interrelate with others in a
particular way.”
It was found that different individuals display different Team Roles to
varying degrees. The results of the Belbin Team Role Test are based on totally nine Team Roles, and they are subjected to three divisions (Belbin e-INTERPLACE, no date), as shown in Figure 1.6.
Shaper
Action-oriented roles: Implementer
Completer Finisher
Co-ordinator
People-oriented roles: Team Worker
Resource Investigator
Plant
Cerebral-oriented roles: Monitor Evaluator
Specialist
Figure 1.6 Belbin Team-Role Contributions
1.2.8 Implication on Belbin Team Role Profile
It was very professional that the Belbin Team Role Test provided to their
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applicants individual reports, with not only the resulted scores, but also the given descriptions of their characters and further details such as interview reminder.
As shown in Appendix A, the author’s personal Belbin Team Role Report, her preferred roles (those with 70 marks or above out of 100) are ‘Plant’,
‘Shaper’ and ‘Completer Finisher’. If we referred to the above Figure 1.6, she tends to be action-oriented with her roles of ‘Shaper’ and ‘Completer
Finisher’. On the other hand, she has her 3 least preferred roles all in the division of People-oriented roles, with the lowest role of ‘Team Worker’ for only 10 marks. The rest of the Team Roles were identified as manageable roles.
The author is totally satisfied with the results shown in the test, for both her strengths and weaknesses. She agreed that she is creative and good at solving problems reflected by her role on ‘Plant’. Her roles as ‘Shaper’ and
‘Completer Finisher’ could easily be identified when she was doing school’s team projects. She is self-motivated and perseveres in finishing her work and leading the team to accomplish goals or even to reach a higher level of standard. She believed herself as a perfectionist, that she is apprehensive
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lest things go wrong. She will put her effort on getting things done, and will
not be satisfied until the matter has been put right.
Meanwhile, as shown at the results of the test, the author found more
difficult to be a supportive role. This is her biggest weakness as she found
herself sometimes too pre-occupied with her own thoughts in
communicating with others. She prefers to lead rather than to support, and
therefore she sometimes prone to provocation or to offend others. She always has problems if the situation requires her to be subordinate and this
really brought negative effects to her when working with a team.
1.3 Summary and Conclusions
The author found the four tests she has done very useful as a reference for self-examination. Not only showing her preferred learning styles, the results of the tests also suggest the strengths and weaknesses of her personalities, which can really help participants to confront and avoid problems during work or communication with others.
To summarize, the author is a logical and practical person who like absorbing reasonable and theoretical information, rather than just based on
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personal beliefs or feelings, before ending up any decisions. She is also
creative and full of imaginations and new ideas. Besides, she is a
perfectionist that she is perseveres to keep things right and tidy, or to
accomplish the goals.
On the other hand, nearly all of the test results show her weakness in
listening or accepting others. It doesn’t mean that she is not willing to have
good relationships with people, but she sometimes has problems to support
or cooperate with others during teamwork, because she may be
pre-occupied with her own ideas.
1.3.1 Family and friends to comment
In order to verify findings of the tests, the author interviewed some of her family members and friends for her personalities. She found that their comments were nearly the same with the outcome.
Her parents comment that they have a strong-minded and outgoing daughter who has her own thoughts and not afraid to express to others.
This may due to the growing environment that her parents tend to be very straightforward and encouraging children to be independent and outspoken.
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They also agreed that the author is sometimes too obstinate to stay with
her own mind and avoid others’ opinions.
She asked for other comments from friends who have been worked with,
for school’s projects or the part-time job. They expressed that her hard-work and conscientiousness in accomplishing works made them pleased and willing to work together with the author. However, they thought that she sometimes tends to over-manipulate the team’s purpose bringing to her own beliefs. They were sometimes indignant at her continued disregard of other’s opinions.
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CHAPTER 2 Implications for career choice
2.1 Lifelong learning
We live in the times of frenzied evolution of technology and living style, with the unpredictable environment around us changing everyday. Today’s employers are looking for workers not only skilled or full of academic achievements, but also intelligent, up-to-date and flexible to get with new ideas and opportunities. Therefore, nowadays the most important element lead to success is our willingness to learn during the life. Knowles (1984) suggested that learning is a lifelong process, and lasts as long as the life last, therefore, attitudes of individuals should be focused towards the same.
It is a trend that people are concerning their lifelong learning in order to accomplish higher achievements.
2.1.1 Channels of learning
It is suggested by The World Bank (2003) the difference between traditional methods and the lifelong methods for learning. For the traditional way, people receive knowledge from teachers, self-learning from resources like
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books, and tests are usually been given to us to identify mature, advanced learners who are permitted to continue a higher level of education.
However, lifelong learning are comparatively flexible and with no boundaries, that we learn through experiences of doing, groups and from each other. For professional lifelong learning, assessment is used to guide learning strategies and to identify pathways for future learning. People develop individualized learning plans and access to learning opportunities over a lifetime.
2.1.2 Application of lifelong learning
Some of our lifelong learning may be unconscious, for example improved communication skills after meeting many different kinds of people. However, in accordance with Tough (1971), a large amount of learning is planned and purposive. We have to make plans for our lifelong learning before ending up to any real actions.
The results of the Honey and Mumford Learning Styles Questionnaire and the Belbin Team-role test show that the author is self-motivated and active in achieving goals and exploring new opportunities. Therefore, if she can
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apply her ‘multiple preferences’ learning style of the VARK Questionnaire together with a well-designed learning plan, she can be a successful lifelong learner to facilitate further development for her career.
To make an individual lifelong learning plan, the author refers to her future goals and the findings from the four learning style tests mentioned in
Chapter 1. After her graduation of the degree program, she plans to work as a front-line staff of financial institution such as banks. This requires further knowledge in financial area and academic achievement. She also needs to improve her communication skills and widen her social network.
As shown in Figure 2.1, the author’s plans for her lifelong learning are divided into ‘Short-term goals’ and ‘Long-term goals’.
Getting the licenses for trading financial
products Short-term goals Achieving the CFP Certification (In 5-year time) Achieving a higher level of certificate on
Japanese learning
Long-term goals Enhancing my communication skills and
(In 10-year time) listening skills
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Widening my social network
Achieving a pose of managerial level of
financial institution
Figure 2.1 Lifelong learning plans
For short-term goals, as objectives for the coming 5 years, the author first
wants herself to be licensed for trading financial products include stock and
insurance. Then, she aimed to become a Certified Financial Planner (CFP) awarded by the Institute of Financial Planners of Hong Kong, which requires education for an amount of modules and 3-year experience of working in financial institutions. These goals will make her qualified to work as a front-line staff and show her motivation and expectation to be promoted. Furthermore, she believes attending extra lessons like Japanese course will widen her social network and to be well-equipped to meet different kinds of customers.
For long-term goals, as objectives for the coming 10 years, she aimed to improve her skills of listening and communication by attending workshops of team working at community centre. Her weakness of not listening to or accepting others should be improved, as it causes problems during work,
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especially for being a front-line staff. She also wants to widen her social network by joining social events or associations like The Hong Kong
Institute of Bankers. At last, she hopes that she can achieve sales targets and at a pose of managerial level in banks, and be successful working in the banking industry.
2.2 Transferable Skills
To achieve the author’s goal of being success in the banking industry, she needs to do a ‘transferable skills’ analysis. In accordance to Mckay (No date), transferable skills are the skills we’ve gathered through various jobs, volunteer work, hobbies, sports, or other life experiences that can be used in the next job or new career.
In this part, the author first analyses the transferable skills that she has gained from her past experiences, and how these skills would contribute or to be used in the future as she plans to move towards the career in financial industry. Then, she suggests further skills which are relatively weak for her, but may also be required during the career.
To become a front-line staff of banks or other financial institutions, who
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involve in client meetings and products and services selling, it is extremely important to have good communication skills to handle different kinds of customers. The author worked as a part-time mattress promoter for more than two years, and her speaking and customer orientation skills have already been improved. Because of the family background, besides
Cantonese and English, the author also speaks fluent Mandarin and
Taiwanese. She is recently attending Japanese courses in order to enhance her foreign language skills. Furthermore, with the well-designed education system in Hong Kong, she gained transferable skills of oral presentation, interpersonal skill, flexibility and problem solving. Computer skills was also be obtained since primary studies.
As shown in the results of VARK Questionnaire and Honey and Mumford
Learning Styles Questionnaire, the author has her weakness in skills of listening and team working. She aimed to improve these skills during the experience of work or during lifetime. As she wants to get a promotion towards the managerial position, she believes the post needs individual who can perform skills of leadership, creativity and also willingness to learn.
She to confident to perform these skills in the future, and with the
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experience she gains, she can become a perfect fit for the post.
2.3 Justify chosen career choice
It is clear that after graduation, the author wants to pursue her career in the
banking or financial industry. In the following part, the author analyses the
basic requirements listed on two advertisements (see Appendix B) found
on Careertimes.com.hk. She then matches the requirements together with
her abilities or skills, to see whether the job is suitable for her.
2.3.1 Requirements of the positions
After finishing the four learning style tests mentioned in Chapter 1, the author found herself as an outgoing, self-motivated, and active person.
With her interest and experience in serving customers, she believes she can be a good sales person or front-line staff for banks. The two job advertisements from two banks are both positioned at the front office.
The category of job nature of the two positions is nearly the same. However, the advertisement from HSBC states detailed responsibilities in the role of the position (See Appendix B). It states that a ‘Financial Services Officer’ is
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responsible for meeting with walk-in and new customers. After identifying their needs, introduce suitable products or make referrals to responsible staff of other products and services. Advertisement of Hang Seng Bank does not provide further descriptions for the role of the job, but it is also about meeting new clients and bringing sales opportunities. Their requirements of applicants are listed as below in Figure 2.2.
Hang Seng Bank HSBC Requirements Financial Services Financial Services Trainee Officer
With university degree Pass financial products licensing examinations Working experience in sales and service Sales, service or customer orientations Motivation to achieve sales targets Outgoing personality Good communication skills Foreign languages skills Ability to work under pressure and competition
Figure 2.2 Comparison of two job requirements
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2.3.2 Conclusions
The author found that the requirements of both the above positions match
with her abilities and personalities shown in learning style tests. For
example, she has working experience in sales and service, and it benefits
for being a front-line staff of banks because she is familiar in meeting and
promoting products to customers. Her personalities of being outgoing and self-motivated to achieve goals would allow her to have good performance as a sales person.
For further development of her career, the author still needs to improve her interpersonal skills as it was found in Chapter 1 that she has her biggest weakness of listening and working with others. Therefore, she should keep the positive attitude of life-long learning, in order to reach bigger achievements.
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SECTION B
CHAPTER 3 Introduction
3.1 Reasons for choice of topic
The chosen topic for this section is ‘Is there any bubble in Hong Kong residential housing market?’
Based on the findings in Section A, the abilities and personalities of the author made her proper to work as a front-line staff in financial institutions.
As a long-term goal, she aimed to become a successful financial planner, who is responsible to manage clients’ finance by achieving investment goals. Thus she believed that it is important for the worker to be insightful and to know well about the recent market information and trends. Therefore, the recent real estate market has been chosen as a target for research.
It has been a few years that Hong Kong’s real estate market is told to have bubbles. People from different groups expressed that the housing price had gone beyond their purchasing power. Recently, the government is trying to curb the speculation in the property market through imposition of additional stamp duty. According to the Legislative Council (2010a), the rate of stamp
27
duty payable for property valued more than $20m was increased from
3.75% to 4.25% starting from April 2010. Soon in November, the new
Special Stamp Duty (SSD) rate was issued for properties sold within 2 years (Legislative Council, 2010b). It has been suggested that the mass speculative money entering the Hong Kong market was caused by the cut of US interest rates over the past 2 years and its QE2 policy (Flatt, 2010, p.80).
In addition, a US consultancy company Demographia (2011) has released its 7th annual survey in January, which shows the property in Hong Kong is the most unaffordable market among the countries with the highest median multiple 11.4.
3.2 Academic objectives of project
The main objective of this paper is to find out whether the current residential housing market in Hong Kong is having bubbles or being traded overpriced. Through questionnaires, the author wants to collect opinions of citizens from different districts about their ideal mortgage affordable and property prices. The project also aims to make a conclusion of the reasons
28
behind the findings regarding the trends of the residential prices in recent years.
3.3 Outline of sections
After introducing the reasons and objectives behind the selected topic for section B, the content starts with a brief explanation of the general ideas of economic bubbles. As a background for the topic, the recent Hong Kong property market is discussed with a comparison in the situation in 1997.
Chapter 5 shows the methodologies and limitations about all data and information in this paper. In the part of “Findings and Analysis”, it shows information collected by questionnaires and analysis of data of the present residential market. Afterward, critical review is given for the discussion of whether there is a bubble in the Hong Kong residential housing market.
After considering all information, the author states the reasons caused today’s situation in the market. Finally, conclusions are made with some recommendations regarding the responsibilities of the government.
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CHAPTER 4 Literature Review
4.1 Formation of bubbles
Normally, a bubble is a thin film of soap what forms into a ball with air inside.
It usually floats for only few moments and then burst. Therefore, the term
“bubble” is usually used to describe phenomena when things become
unstable (Krtayanavaj, 2008).
4.1.1 Definitions of economic bubble
Economic bubble was defined by Smith and Smith (2006) as “…a situation
in which the market prices of certain assets rise far above the present value
of the anticipated cash flow from the asset”. In most of the cases, the
general concept of bubble (or economic bubble) explained by researchers refers to companies or industries which had expeditiously rising prices, or occurred infeasible expectations of future price increases.
A bubble called so because it also followed by a departure from the expectations, and a sharp drop in price usually resulting in financial crisis.
According to Garber (1990), markets with bubbles are usually been traded
30
in high volumes at prices that are considerably at variance from their
intrinsic values. Combining the idea with the above definition by Smith and
Smith (2006), the features of a bubble market are: rapid rising prices,
investors who only speculate on future prices rather than the particular
asset’s cash flow, and a dramatic drop in prices when the bubble pops.
4.1.2 The origin of term
Searching for the origin of the term “bubble” would lead us back to the 16th and 17th century during the Dutch Golden Age, called the “Tulipmania” period in Netherland (Garber, 1989).
Figure 4.1 The Tulipmania (Source: Wikipedia)
31
According to Hirschey (1998), the first tulip bulbs were brought to
Netherland in 1559. The rage for possessing tulips had then widely spread to the middle classes of Dutch society by 1634 and investors began to
accumulate the bulbs for resale and trading. At its peak in 1637, contracts
of some single tulip bulbs sold for more than 10 times the annual income of
a skilled craftsman (Dell’Ariccia, 2009). Although Peter Garber, the
economist and tulipmania expert, believed that tulipmania was actually not
a mania at all and can be explained by simple supply and demand factors
(French, 2006), the term is now usually used metaphorically referring to
any large economic bubble.
The famous British South Sea Bubble in 1711-1720 was also one of the
earliest modern financial crises described by Garber (1990). Other
examples of bubble events in the history include the Gold Rush in 1848 and
the Railroad construction in 1860s (Money, 2010, p.170-171).
4.2 The Hong Kong housing bubble
It has been suggested that the recent Hong Kong property market has
entered into a bubble territory back since 2009 with its continued rising
32
prices, which is now even approaching 1997 levels (Asia Monitor, 2010).
There are now growing concerns that the bubble will end up soon with a collapse similar to the burst of the 1997 property bubble. According to Asia
Monitor (2010), it caused a 6-year slump that left the prices 66.2% lower than the peak in October 1997.
4.2.1 The Centa-City Leading Index (CCL)
In accordance with Chau et al. (2005), the four main providers of the real
estate price indices in Hong Kong include the Rating and Valuation
Department, Jones Lang LaSalle, FPDSavills and Centa-City. Among the
four of them the Centa-City Leading Index (CCL), provided by the property
agency Centaline, covers housing units in large-scale residential
developments in Hong Kong. It is a weekly index based on the current
contract prices in the company transactions that reflects the latest property
price variations (Centadata.com, 2011a).
33
Figure 4.2 Performance of CCL (Source: Centadata.com)
Figure 4.2 shows the performance of the CCL from 1994 until 25th Mar
2011. Looking back for the last bubble in 1997, the housing price in Hong
Kong began to rise since 1996 and reached nearly 103 points at the peak
in 1997. With the burst of the bubble, the property market was suffering with a whole year of significant drop to nearly 45 points in 1998.
Skip to the Financial Tsunami in 2008, in general, the housing price was decreasing for the whole year. But then starting from the end of 2008, the
CCL had risen from nearly 58 points to today’s 97.41 (latest on 1st April
2011). It has been increased for about 67.95% and it is about to reach the
1997 level at 103 points.
34
4.2.2 Effectiveness of the Special Stamp Duty (SSD) rate
As mentioned in Chapter 3, the whole new Special Stamp Duty (SSD) rate was issued by the Hong Kong Legislative Council (2010b) in Nov 2010, assigned for properties sold within 2 years. It has been nearly 4 months since the announcement of the new measures, short term investment should not be profitable for now and there should be less speculative actions in the property market. However, if we refer to the market data shown in Figure 4.2, the housing price is still increasing in this year. It seems that people have overestimated the effectiveness of the stamp duty rate in decreasing the prices of the property market.
In fact, according to Centadata.com (2011b), the property prices have been increasing even more rapidly after the Chinese New Year. On 25th Mar
2011, the CCL was at 98.15 points and the increasing rates are 4.43% for the previous month and 1.70% for the previous week. Prices of some of the residents have even exceeded their 1997 levels, reported by The Sun
(2011).
Before the introduction of the new stamp duty measures, many investors believed that the expensive property market was caused by the speculators,
35
and the market would be back to “healthy” if those speculative actions
could be attacked effectively. Nevertheless, the market performance today
has proven that the situation was not caused by speculations. Speculators
only entered into the market because of the rapid rise of the market prices.
4.3 The supply and demand of land
Knowing that speculator’s actions are not the basic factors deciding the
property market trend, people tried to see the market in a different way.
There are many economists suggested that the supply and demand are
important determinants of the house prices (Tse, Ho and Ganesan, 1998).
If the market can really be explained by the simplest economic ideas, the
recent situation of the property market would be the consequences of the
unbalanced supply and demand of land in Hong Kong.
Peng and Wheaton (1994) had examined the effect of restrictive land
supply to the Hong Kong’s housing prices. However, the land supply is not
able to be responsive to the changing demand because land made available for houses is actually restricted by the government planning system (Barlow, 1993). Usually, the policies are made according to the
36
market situation, rather than with a view to influence it. According to Tse
(1998), government tends to release more land for sale when the market is booming, and reduce land sales when it is sluggish.
According to Lai (2009), the Land Sale by Application System in Hong
Kong was launched in 2004, which the government releases an official list of sites that are available for sale by application. The system has drawbacks which led to insufficient land supply in Hong Kong, and it will be discussed later in Chapter 6.4.
37
CHAPTER 5 Methodology
5.1 Data collection
Data collection is the starting point of an exploratory and analytical research, and basically there is a division of primary and secondary data.
With the time limitation, a lot of the data used in the research is likely to be secondary in nature. Types of secondary information to be used in the paper include books, journals, articles, newspapers, magazines, reports, electronic database, internet, etc. Information regarding the property prices and bubbles in Hong Kong, reports from the government of HKSAR, as well as other vital information is the typical kinds of secondary data to be used in this study.
To collect primary data for the research, 150 questionnaires were made for personal interviews, to gather further reliable data for the project.
Passersby in New Territories, Kowloon and Hong Kong Island were the targeted respondents.
38
5.2 Interpretation of data
The data obtained through the various methods discussed above would be
either quantitative or qualitative. We need to process the sources to useful information.
Quantitative data is needed to be organized in the form of charts, tables, with percentages or averaging figures. The average of the ideal proportion of mortgage affordable is a typical example from questionnaires.
Qualitative data is expected to be more frequently used within the research
than its quantitative part. Other than articles, results of questionnaires
required more complicated processing to summarize the different
comments collected.
5.3 Limitations
Due to limitations of the time and number of words, there are other related
information failed to be covered in this report and the final outcome may not be the full picture of the facts.
There are also limitations for primary data collection. The sample size of questionnaires was only 150, and therefore, the results cannot represent
39
the public’s thought. Information gathered was based on personal opinions
and it may consist of respondent’s bias, which caused by the aspiration to
create false personal image or to end interview quickly.
The outcomes are only referred to several literatures, data and surveys,
and other information gathered from the questionnaires. All the suggestions are not the absolute or perfect solutions for the problem of property price
bubble in Hong Kong. The technical problems in practice are not
considered as the scope of discussion. Moreover, internal information of
the financial industry is out of the capabilities to cover in this report.
40
CHAPTER 6 Findings and Analysis
6.1 Questionnaire survey
Property is one of the basic needs to live and the housing prices are always closely related to us. In order to collect reliable information for the paper,
150 pieces of designed questionnaires (a copy at Appendix D1) were finished by visiting different districts to interview citizens in Hong Kong.
6.1.1 Distribution of types of interviewees
The survey aimed to cover the types of interviewees as wide as possible in order to collect the most comprehensive information. Overall, 78 females and 72 males were interviewed.
Kowloon, 39
Hong Kong Island, 51
New Territories, 57 Others, 3
Figure 6.1 Geographic distribution
41
One of the factors affecting people’ beliefs and personal values is the
environment of places where they live. 50 questionnaires were assigned for
each geographic area – Tsuen Wan in New Territories, Mongkok in
Kowloon and Central in Hong Kong Island. However, some passersby interviewed may not live in the places where they were staying at and the above figure shows the distribution of districts where they actually lived.
Most interviewees lived in New Territories and Hong Kong Island, and there are 3 of the rest lived in other islands like Cheung Chau.
No. of Age people Below 18 50 or above 1% 18 to 29 Below 18 1 22% 25%
18 to 29 38
30 to 39 37
40 to 49 30 to 39 27% 25% 40 to 49 41
50 or 33 above
Figure 6.2 Distribution of age
The targeted age group of interviewees is 18 and above, because the author believes that teenagers in general do not have enough knowledge of
42
the property market. They are also lack of personal or working experience that may lead to the incapability of answering some of the questions, especially those related to monthly income. As shown in Figure 6.2 that interviewees were separated quite evenly in terms of their age.
6.1.2 Findings of survey
The major purpose of the survey is to find out whether people think the recent price level of the property market is too high or has gone beyond their affordability.
No. of No comment Answers 5% people
Yes 36% Yes 53
No 88
No 59% No 8 comment
Figure 6.3 Do you think the residential price level is reasonable?
A table of the recent average prices of the private domestic (up to Jan 2011) provided by The Rating and Valuation Department (2011) was included in
43
the questionnaire. It gave the interviewees references on the property prices per meter square in the specific districts, for the specific size of the property.
With references of the average property prices, nearly 60% of the respondents disagreed that the residential price level was reasonable.
Relatively, there are 36% of them were actually satisfied with the price level and thought it was reasonable.
For those 88 respondents who stated “No”, they have been asked for how many percentage of decrease in price of the residential market would make them satisfied.
20% or above
10% to 19.99%
5% to 9.99%
Less than 5%
0 5 10 15 20 25 30 35 40 45 No. of people
Figure 6.4 How many percentage of the price should be readjusted?
44
As shown in the figure, most of the respondents were hoping for a decrease in price of residents for 10% or more and even 20% or more. Let
us use a 60m2 resident in New Territories as an example, priced at
$3,261,360 under the average price level $54,356/m2. A 20% decrease in
the price will make it drop to $2,609,088, under 43484.8/m2.
60
50
40
30
No. of people of No. 20
10
0 Less than 20% to 30% to 40% to 50% or 20% 29% 39% 49% above
Figure 6.5 How many percentage of the monthly income do you think is affordable for mortgage
All interviewees were asked for their ideal and affordable proportion of their monthly income for mortgage plans. As shown in Figure 6.5, most of the interviewees were willing to draw 30% to 49% of their monthly income for mortgage. There were 18 interviewees who were even willing to pay for
45
more than 50%.
Furthermore, they were also being asked for “What do you think is/are the
main reason/s leading to the recent property market bubble?” Most of the
respondents believed it was because of the appearance of new potential
investors from the Mainland China in Hong Kong property market. Many of
them expressed that people from China have become rich in recent years,
leading to a great increase in demand of Hong Kong’s property market.
Other opinions include insufficient/decreasing supply of land in Hong Kong
in recent years, low interest rate and good economy.
6.1.3 Conclusions of the results
Through the questionnaire survey, the author found that more than half of the interviewees agreed that the price level of today’s property market in
Hong Kong is too high. Most of them expressed that the prices had gone beyond their purchasing power. Besides, those respondents tend to wish for a large decrease in prices, which means that they believed the prices were so not reasonable.
Asking for what the reasons they believed had caused the current situation,
46
most of the respondents complained about the great number of new
investors from Mainland China entering into the Hong Kong property
market. Their actions had affected the demand in the market, thus pulled
up the prices.
In addition, the author noticed that people with higher income tend to put
more money for property investment. For example, there were 2
respondents with $35,000 or more monthly income stated that they were
willing to pay 50% or above of their income for mortgage. Some of the
interviewees buy houses for investment rewards rather than living purpose.
6.2 Data analysis in residential market
6.2.1 CCL Sub-index
The Centa-City Leading Sub-index shows the residential property price level in different districts of Hong Kong. The following figures show their performances to the latest 1st April 2011.
47
1st April 2011 Previous Week Previous Month
Hong Kong Island 109.56 ↑0.88% ↑5.57%
Kowloon 92.54 ↓4.18% ↓1.34%
New Territories (East) 91 ↑1.13% ↑2.24%
New Territories (West) 75.99 ↓0.26% ↑4.47%
Figure 6.6 Performances of CCL Sub-index (Source: Centadata.com)
The above table shows that residents in Hong Kong Island have the highest property prices among all districts, and those in New Territories
(West) have the lowest property prices. Prices in Kowloon and New
Territories are similar for about 90 points.
Figure 6.7 Performances in Hong Kong Island and Kowloon
48
Figure 6.8 Performances in New Territories
As shown in the above figures, in 2003 residential prices in all the districts
were very close together, in between 30 to 40 points. After that, all of them
have a significant rise until now, and prices in Hong Kong Island rise the
most comparing with other districts.
6.2.2 The property price-earning ratio (PE ratio)
Price-earning ratio can be calculated in property market, similarly in the
stock market. It shows the payback period of a property investment by dividing the market price with its rental income per year. The lower the PE ratio, the bigger the potential of increasing value of the property.
Property PE ratio = Market Price / Rental Income per year
= Market Price / (Rate of Rental Income x Market Price)
49
= 1 / Rate of Rental Income
According to Wong (2010), the rates of rental income for general residents are 3.8 to 4% in Hong Kong Island and Kowloon, 4.1 to 4.6% in New
Territories, and that of the luxury residents are usually 2.5 to 3.3%.
Applying the data to the above formula, the PE ratios for general residents are around 21.7 to 26.3, and that of the luxury residents are around 30.3 to
40.
The results are quite high as people believe it is reasonable for ratios below
20, “high” in between 20 and 30, and “extremely high” for 30 or above. This means that to some extent residents are not very attractive for investment purpose.
6.2.3 Reasonable prices for residents
Sometimes, it is difficult to determine a reasonable price level for a specific resident. However, there is actually an international approved standard that the price of a resident should not exceed six times of its family’s yearly income.
Let us use a family with $37,500 monthly income as a sample. Under the
50
circumstance that the mortgage rate does not exceed half of the monthly
income, the family can purchase a 500 square foot flat for $6,357 unit price
in maximum. Six times of the family’s yearly income is $2,700,000.
However, the price of the flat is $3,178,500 ($6,357 x 500) which is more
than 7 times of the income and it had gone beyond the family’s purchasing
power in accordance to the international standard.
6.2.4 International Housing Report
As mentioned in Chapter 3.1, the consultancy company Demographia
(2011) has released its 7th annual survey on international hosing
affordability in January.
The report shows that Hong Kong ranked the top for “Severely
Unaffordable Housing Market” meaning the property in Hong Kong is the
most unaffordable market among the countries with the highest median
multiple 11.4 (Median House Price/Median Household Income). Comparing
with other countries, Sydney in Australia and Vancouver in Canada ranked
the second and third place with 9.6 and 9.5 median multiple. As shown in
the report, many cities in U.S., like Saginaw and Flint, ranked top for
51
housing affordability with the lowest median multiple to 1.6.
6.3 Critical review and discussions
It is actually a controversial issue whether today’s housing market is under
a bubble or not. In spite of the high prices of Hong Kong’s residents, there
are still some government officers and other commentators stated that
there is no bubble in Hong Kong’s property market. Combined major ideas
of their arguments are:
The property prices have not reached the 1997 level in general (6.3.1)
Citizens have higher affordability for mortgage comparing with
situation in 1997 (6.3.2)
New highest price records usually appeared in luxury houses which
will not affect the general market (6.3.3)
Investors from China usually don’t mortgage but purchase by a
lump-sum payment (6.3.4)
6.3.1 The 1997 price level
Chapter 4.2 has reviewed the CCL performances in 1997 and 2011,
52
referred to Figure 4.2. There are still a nearly 5% gap before reaching the
1997 price level.
Hong Kong Island Kowloon New Territories Estates Taikoo Telford Mei Foo Whampoa City One Belvedere Kornhill Shing Garden Sun Chuen Gardens Shatin Garden
(a) Unit Price in 10,460 7,904 6,592 4,969 7,635 5,972 4,888 March 2011 ($)
(b) Unit Price in 9,184 7,855 6,239 4,882 8,054 5,866 5,663 Nov 1997 ($)
(a) / (b) x 100% 113.9% 100.6% 105.7% 101.8% 94.9% 101.8% 86.3%
Figure 6.9 Comparison of residential unit prices (Source: Centadata.com)
As shown in the above figure of the unit prices of some famous residents in
1997 and 2011, most of them had actually exceeded the 1997 level.
However, the author thinks that if people want to compare the prices of the
same property in 1997 and today’s level, the property depreciation should be considered as well. Let the depreciation rate from 1997 to 2011 is only
10%, nearly all of the above residents will have gone far beyond the 1997
bubble market level. Under this circumstance, it is questionable to say that
there is no bubble in today’s market.
53
6.3.2 Citizens’ affordability
Mortgage is a kind investment lasts for usually 20 or 30 years. According to
Wong (2010), the recent proprietors’ proportion of mortgage is less than
40%, which is very healthy comparing to 90% in 1997.
However, people have to be clear that the low proportion is built under an
environment that the mortgage rate is extremely low, below 2.1%. It is an
unusual situation as the rate for the past twenty or thirty years was 5.5%. If
we use 5.5% to calculate the monthly installments, it would be resulted with
a totally different situation.
According to a civil body “Middle Class Power”, the monthly income of a
middle class family is between $25,000 and $50,000. Under the
circumstances that the mortgage rate is 5.5% and monthly installment do
not exceed half of the income, a middle class family with $37,500 monthly
income can only purchase a flat of 500 square foot under $6,357 unit price,
or 700 square foot under $4,427 unit price. Family with $50,000 monthly
income can only purchase a flat of 700 square foot under $6,357 unit price
or 1,000 square foot under $4,389.
Wong (2010) also stated that there are only 11.9% of families in Hong Kong
54
with monthly income $50,000 and above, and 2.8% of families with
$100,000 and above. The distance between the property price and our citizen’s purchasing power has proven that bubble is already existed in the market.
6.3.3 Influence of luxury houses on the general market
Some people believe that the luxury estate is a unique market and it is
never interrelated with the general market. If there is bubble in the luxury housing market, it will not affect those general properties.
Figure 6.10 The 39 Conduit Road
However, the author believes that sometimes the trading price of an
55
individual famous resident acts as an index for the biding or trading prices
of other buildings surrounding. This kind of relationship will even spread to
the buildings all around in Hong Kong.
A typical example is the 39 Conduit Road situated in western mid-Levels of
Hong Kong. The developer claimed that price on the “88th floor” was equating to US$9,200 per square foot, breaking the new world record of the most expensive apartment in the world. Soon, reporters found that there was only one sale had been completed while other transactions, including the record setting sale, had been cancelled (Wikipedia, 2011). It became a big event because people worried about the prices of other buildings surrounding would be affected.
6.3.4 Investors from China
Other people believe a bubble market is formed by leverage investments,
and since investors in Mainland China usually purchase residents in Hong
Kong by lump-sum payments but not under mortgages, there is no bubble
in the housing market.
In contrast, the author believes that most of the investors in property
56
market are still the local investors, and most of them are usual investors who need mortgages. People should not just based on those portion of
Mainland investors, and decide whether it is not much leverage investments in the market.
Furthermore, even the Mainland investors do not mortgage in Hong Kong, they may have mortgage in their home country. According to Wong (2010), an economist in China revealed that there were 458 millions loans in China for the first season of 2009, and about 210 millions among the loans entered the property and stock market. There is a chance that the capital for buying Hong Kong’s luxury residents came from those loans in China.
6.4 Reasons behind the bubble
It is difficult to point out the exact causes of bubbles precisely. However,
Topol (1991) stated that the main idea behind a creation of economic bubbles is a weak financial policy and excessive monetary liquidity in the financial system.
The author has summarized the main possible factors which may have caused the bubble in property market.
57
6.4.1 Negative Interest Rate
Negative interest rate means the real interest rate is negative after
deducting the inflation rate. Interest rate in Hong Kong remains very low in
recent years. Today’s interest rates of bank’s saving accounts are less than
1%, which means the negative interest rate has reached 3%. When interest
rate is going down, people tend to avoid putting their money into saving
accounts. Instead, they tend to lever their capital by borrowing from banks and invest into financial assets like equities and properties. Increase in demand leads to increase in prices of Hong Kong’s property market.
Eric Wong, the executive director and analyst of UBS Investment Research, stated that the negative interest rate in Hong Kong may decrease to 6% in the third season in 2011, which is higher than the 2007 and 1997 level
(Chung and Chan, 2011). It means that the situation of interest rate will become worse and the property price may keep rising in this year.
6.4.2 The Land Sale by Application System in Hong Kong
The Land Sal by Application System aims to let the market to determine the
land price and the quantity of the land sale. Under the system, the Lands
58
Department evaluates the trigger price from the applicant and identify
whether it meets with the reserve price. If the application is accepted, the
specific land will then be released for auction sale. However, if the auction
has no other bidder and the trigger price meets the reserve price, the piece
of land will automatically be sold to the applicant.
After the launch of the system, there were certain property developers
criticized the system for lack of transparencies and unrealistic reserve price.
Therefore in June 2005, a new policy of land application at a 20% discount was launched, but, if the final bidding price does not meet with the reserve price, the government would call back the land from the auction. Other changes on land sale policies also failed to bring benefit to the land sale
revenue, and the supply of the property remained insufficient to meet the
market needs.
Although the government has been working on the problem and the supply
of land will be increased to nearly 30,000 flats in 2012, it still needs few
years until the completion of construction. The problem of supply cannot be
solved in short-term.
59
6.4.3 Appreciation of RMB
As increase in demand leads to increase in prices of property market.
There were many investors from Mainland China entered into Hong Kong’s property market in recent years.
Eric Wong stated that under the situation of the appreciation of RMB, Hong
Kong’s properties become cheaper and cheaper comparing with China’s
properties. He also pointed out that comparing the property price in
Shenzhen, China, with that in New Territories, Hong Kong, the yield
dropped from 200% in 2005 to less than 50% now.
Moreover, as the average rate of rental income in China is only about 1.5%
while that in Hong Kong is about 3 to 4%, property investment in Hong
Kong becomes even more attractive for people in China. With the
increasing amount of rich man, the number of investors from China will only
increase in the future.
6.4.4 Attractive rate of rental income
According to Chung and Chan (2011), the recent rate of rental income is about 3.45% and the mortgage interest is about 1.34%. The real rate of
60
rental income becomes 2.11% after deducting the mortgage interest.
Comparing the data in 1997, although the rate of rental income was similar to today’s level, less than 4%, the mortgage interest at that time was about
9 to 10%. As the real rate of return today is still positive, the property market is relatively attractive for investment.
61
CHAPTER 7 Conclusions and Recommendations
7.1 Conclusions
After the discussion of all the ideas of both sides regarding the bubble in residential housing market, the author believed that today’s price level is not reasonable and to some extent there is a bubble in the residential housing market in Hong Kong.
As mentioned in Chapter 4, the Centa-City Leading Index has rose for about 65% from 1997 to 2011. The demand and supply in the market is very unbalanced, with low supply for the pass through years, and rapid increase in demand caused by the increase of investors from Mainland
China. The price is still believed to keep growing in the future. In long term, the government should set new policy in rebalancing the existing situation.
Through the questionnaire survey, the author found that more than half of the interviewees agreed that the recent property price level in Hong Kong is not reasonable and most of them were hoping for a 10% and 20% or more decrease in price.
For the main evidence of the exist of the bubble, as shown in Chapter 6.3,
62
the prices of some representative residents in different districts had gone beyond the 1997 level, and prices of some general residents are not affordable even for those families with $50,000 monthly income.
Lastly, the author thinks that the main reason causing the current situation is the appreciation of RMB, which brought new potential investors from
China pushing the residential housing market.
7.2 Responsibilities of the government
In Nov 2010, the Hong Kong government tried to use the new Special
Stamp Duty (SSD) rate to hit the speculation in the housing market.
However, it is only effective in short-term and the residential trading volume and prices keep rising rapidly afterwards. According to Centadata, the trading volume of the top 10 residents in Hong Kong in Jan 2011 was totally
1,148, which increased 75.8% comparing to Dec 2010.
Since 2003, the government decided to close the production and sale of the Home Ownership Scheme (HOS). It is a scheme which the government assists lower-income families to acquire home ownership, as the Tenants
Purchase Scheme (TPS) and Hong Assistance Loan Scheme (HALS) also
63
did. The Housing Authority decided in Jan 2006, to offer for sale in phases
the unsold and returned HOS flats (the surplus HOS flats) from 2007 onwards. To the recent expensive residential market, citizens, especially those with middle or low incomes, started complaining about the unaffordable property price and the government housing policy. Many of them wanted a relaunch on building new HOS flats. However, author believes it is not the most efficient way in fulfilling the demand of citizens.
As mentioned in the paper, many potential investors in Mainland China tend to buy properties in Hong Kong which led to the increase in market prices. However, the government can limit the volume of capital from foreign countries by setting categories for residents.
The author suggests the government to separate the properties for those welcome for all investors and those for local investors only. The system provides an opportunity to control capital from foreign countries to local property market, and effectively limit the quantity demand of the market and thus control the rising prices.
xi
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REFLECTIVE STATEMENT
Part A of the dissertation gave the author an opportunity to have better understanding on herself. The four tests which had been completed, including the Learning Styles Questionnaire, VARK, Myers Briggs
Personality Type Indicator and Belbin Team Role Profile, showed the personality, earning and working style of her. With all the descriptions and recommendations provided by the tests, the author was able to have a clear mind about the decisions for her career path and to deal with her strengths and weaknesses.
Through the Belbin test, the author finds that she is logical and practical person. She tends to absorb more reasonable and theoretical data before reaching to the decisions. She is also a perfectionist and she always try the hardest to keep things right and tidy. All of these allow her to avoid unnecessary mistakes and accomplish the goals. On the other hand, as shown in the VARK test, the author is relatively weak in listening or accepting others’ ideas. She is sometimes ore-occupied with her own mind which her hard to be a supportive role during teamwork.
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Writing of this paper helped her to enhance her reading and writing skills, because the project required a mass of readings like journals, articles, newspapers, books and other information from the Internet. Data collected needed to be analyzed and reorganized before turning into useful information.
It also helped her to have a better understanding of herself. Through knowing her strengths, she can bring her talent and skills into practice and she is able to perform better than before. By knowing her weaknesses, she understands in which aspects she can not perform as good as the others. It
gives her a chance to overcome or improve her chief defects.
All of the above gains benefit her in having a clear mind for her career path.
She understands what opportunities she can hold and what difficulties she
may have to due with. She also knows what further courses or lecture she
can attend in order to achieve her goals.
The author aimed to become a successful Financial Planner in the coming future. Frontline staff meets with customers everyday and therefore good
communication and interpersonal skills are needed to maintain
relationships with clients. The author can attend lectures or workshops for
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communicational improvements. In addition, professional image is also
very important to work in financial or banking industry. The author believes
that a title of Certified Financial Planner (CFP) qualification can bring good and professional image to customers. Her financial knowledge can also be enhanced after finishing the CFP courses.
Working in financial industry also requires the author to keep track on the latest market information and data. Financial market information covers many areas like the country’s economy, stock market, and housing market.
Finally, the author decided to do a research paper in related to the recent real estate market in Hong Kong.
It is very arguable in recent years whether the housing market in Hong
Kong is having bubble or not. Looking at the property market data, after the great fall in 1997, the housing prices in Hong Kong rose significantly for about 65% until now. There are arguments among the market with a fear that when the bubble burst, the price will have a big fall eventually like the situation in 1997. Section B of the paper mainly analysis all the related market information and make a conclusion whether the bubble is exist or not.
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This section included a questionnaire survey which is done by 150
individual interviews in the three main districts in Hong Kong, the Hong
Kong Island, Kowloon and New Territories. Through the interview process,
the author gains experience of interviewing different kinds of people on the street. Her skills of data processing were also improved by making tables and charts.
More importantly, she was able to enhance her financial knowledge and get
well with the market information. For example, she knows more about the
history of the economic bubbles, the details of Centa-City Leading Index
and the calculation of PE ratio. Her market knowledge was enhanced
through reading organization’s reports or articles. The paper also involved
thinking and judgments after receiving both positive and negative ideas.
In conclusion, the author believes that writing of this paper really helps her
in developing her personal skills and knowledge. She is going to use and
put the learning in practice whenever she is working or studying.
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LAST PAGE
This is the last page of the paper. Thank you.