Beijing’s Liaison Office has been snapping up residential units in the city – chiefly in Sai Wan – and with property prices skyrocketing as a result of rising demand and acute land shortage, those units are gaining a lot of value fast.
The cash-rich de facto second government of Hong Kong is now sitting pretty in at least three housing estates.
At the end of 2016, it shocked the market by taking up 14 two-bedroom units in the upper floors of The Merton, a New World Development project in Kennedy Town.
The Liaison Office paid more than HK$120 million for those units, an average of HK$8.57 million for each or about HK$18,000 per square foot.
Now those units cost more than HK$23,000 psf, up by 30 percent in a year, according to an online mortgage valuation by three top local banks, Ming Pao reported.
That followed the Parkcrest deal in 2014. The Office paid HK$480 million to Henderson Land chairman Lee Shau-kee for the entire 48-unit residential building in Sai Wan.
It is believed that the price of the property has doubled, thanks to surging home prices over the past five years.
The Liaison Office also bought nine units at Connaught Garden, which is just next door to its headquarters.
Thanks to the MTR line extending to the Western District, the prices of those units have shot up by some 40 percent since they were purchased in 2015.
The Office, then under Director Zhang Xiaoming, started swapping assets in the area three years ago when it sold two office units at Sheung Tak Centre in Sheung Wan for HK$148 million.
That followed a HK$238 million sale of a house at 6 York Road in Kowloon Tong, which it acquired in the mid-1980s.
The house was famously next to two residences owned by former chief secretary Henry Tang Ying-yen, whose illegal basement was one of the reasons he lost the chief executive race in 2012.
The Liaison Office may have been better off if it had not made the property swap. But the nice thing about it is that Office, just like the SAR government, does not have to pay stamp duty for those transactions.
If it had to pay the double stamp duty, it would have to shell out an extra HK$36 million for The Merton purchase.
And just as the new Liaison Office chief Wang Zhimin famously said that Sai Wan and Central (Chung Wan) should walk hand in hand, we see the Island West district, just like Central, falling into the hands of mainland enterprises.
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