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2000 Real Estate Situation : Hong Kong

(VAT News 1/2000 page 14)

Prof. CHAU, Kwong Wing
Technical Director, Centre for R.E & Urban Economics Uni. of Hong Kong

2000 Global R.E. Industry
    In the future, the global real estate industry will be more integ-rated. The influence of the financial sector on the real estate industry will continue to increase; eventually, the real estate market will be part of the financial market. Real estate professionals today must equip themselves with knowledge in finance if they are to remain com-petitive. Due to the globalization of the financial market and the in-creased freedom in the mobility of funds across national borders, there will be stronger interdependence among real estate markets. In the future, public sector involvement in the real estate sector will continue to decline. Resource allocation in real estate in any country will rely more on market mechanisms.

HK R. E. in the Year 2000
    The land supply in Hong Kong has been changed since the hand over in 1997. Asset price inflation like that experienced in the 80s and 90s is very unlikely to happen again in the foreseeable future since land sup-ply is no longer artificially restricted. In turn, demand for residential pro-perty is still strong due to the long-suppressed demand and also the re-cent increase in the supply of cre-dits for residential mort-gages. But demand for commercial and indus-trial buildings is still very weak and will remain weak during 2000. Prices of residential properties will be stable but those of office & indus-trial properties will continue to dec-line with increasing vacancy rates.

Innovations in the Industry
    There will be two major areas of innovation. One relates to the phy-sical real estate asset and the other relates to the rights over the physi-cal real estate. Buildings will be more intelligent and more environmental-ly friendly. Real estate production will also rely more on the use of prefabricated components that are produced under factory conditions.
    A majority of real estate inno-vation in the future will be related to the delineation of packages of rights over the real estate and the institut-ional arrangements for transaction of these rights in the market. This in-novation can take the form of stand-ardized and graded lease contracts, securitized real estate etc. These instru-ments were invented to lower the tran-saction costs of buying-selling real estate directly and help to improve the efficiency of utilization of space.

Tackling the Thai R.E. Mkt
    In the long run, the more open the real estate market, the more efficient the market in terms of allocating re-sources. The government's role in the market should be confined to the protection of the rights of property owners, enforcement of transaction contracts and enhancing the transmis-sion of accurate information about market activities. Other forms of inter-vention such as direct investment in, or provision of, real estate, rent control, price control and varous forms of taxes which aim at "regulating the market" should not be encouraged.

Valuer Cautions
    Be prepared for changes in the coming decade.

For Thai Valuers
Appraisers have to equip themselves with knowledge in economics, finance and in-formation technology. The real estate sector is not an isolated sector; it is closely related to the financial sector. Therefore, understanding the dyna-mics of the interaction between the two sectors is important for apprais-ing real estate values. The recent advances in information techno-logy will also change the way real estate is located, transacted and used. The impact of such changes on real estate values and valuation methods cannot be ignored.

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