No Brains No Gains
Zeppelin Real Estate Analysis Limited
Recently, a luxurious residence in Hong Kong was reportedly sold for
around HK$31,500 / ft2 (approximately US$4,000) of floor area. Later, it
was reported there were 2 other units transacted with the same buyer and
the price rates for these were lower in the HK$15,000 ¡V 17,500 / ft2 or
so range. This prompted some people speculating whether the sales prices
were reflective of market conditions and a few suggested having tighter
rules or even new laws to ensure that market prices were used.
author is not privy to the transactions nor has he heard any special
information other than those reported in the media, and it is NOT the
intention here to examine whether these prices are reflective of market
levels or not. Rather, it is the notion of having further potential rules
and regulations to govern real estate pricing that is concerning. While
the suggestion may have been well-intended, we have reservations
about it. Reasons are as follows:
ft2 or so is still way above the average / median price
= this is close to or on par with properties in the traditional luxurious
neighborhoods such as the Peak or Repulse Bay, and is 2 to 3 times those in
the middle class / mid-level districts including in general the area where
the said high-priced unit is located. In short, it could not be said
HK$15,000+ was under-pricing.
difficulty in determining ¡¥one¡¦ price (that fits all)
= ask several real estate appraisers and you are likely to get several
different answers on the value of any piece of real estate, and sometimes
these answers can fluctuate widely. This in turn implies any rule,
regulation, or law governing real estate pricing is bound to be ineffective
and / or cause unnecessary constraints on business activities including real
estate marketing and pricing.
society, please! And encourage the market (participants) to think
= market participants such as consumers and investors should have some
protection e.g. against fraudulent practices or criminal intent.
Nonetheless, as long as there is sufficient access to and reporting /
recording of market information and transactions, market participants should
also (are deemed to) use their brains to analyze such market data and make
investment decisions to suit. Somehow societies in general have already gone
the way whereby weather stations after predicting rain for the day need to
tell you to bring an umbrella when outside as well in order to avoid
catching cold etc. This is perhaps an added service of the weather stations
but then again people, even kids, should know this, right? = rain and
you carry an umbrella and / or a raincoat when going out.
real estate pricing?
= Supermarkets, restaurants, airlines, and most service businesses would
engage in promotions of specially (lowly) priced items to attract customers
from time to time. Commonsense tells us that these low prices would
eventually need to be recouped somewhere, somehow, and somewhat. If pricing
governance is to be adopted in general, it is not difficult to imagine the
interruption on normal business conduct. It not only takes the fun away from
doing business, it may NOT even be fair because extremely efficient
operators may be wrongly accused of low-pricing their goods or services.
as long as market data and information are abundant and of reasonable access
and accuracy, and that the various transaction systems are broadly open and
fair with sound legal and financial infrastructures, there is no need for
further protective measures on pricing. Real estate buying and selling
requires maturity, and market participants should be deemed matured adults
who should be responsible for their own actions and decisions including
errors and misjudgments.
The article and/or content contained herein are for general reference only
and are not meant to substitute for proper professional advice and/or due
diligence. The author(s) and Zeppelin, including its staff, associates,
consultants, executives and the like do not accept any responsibility or
liability for losses, damages, claims and the like arising out of the use or
reference to the content contained herein.
to Home /
Back to Simple to Read Stuff Section