Posted by
OffThePeak
14 yrs ago
The explanation of "people waiting to buy" makes no sense to me. I think that rising rents have more to do with the financial sector going back to aggressive hiring once again. The SFA is now certifying a record number of finance professionals, more than the heights of 2008.
Is this sustainable? My view is that it is not. Anotehr leg donw in stocks may "put PAID" to the hiring spree.
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That's an interesting point, Walkup. And I see some evidence of it too. In fact, I am an Expat private investor without a housing allowance - making it on "my own wits" here in HK. (Part of the reason that I am here, is my partner is Chinese - she was born in HK, and we returned together from London, because she wanted to "improve her job prospects", and be closer to her parents.
I expect that the arrival of more Expat investors might be good for property values in places like HK, because once you have your housing sorted out, HK is a cheap place to live. And good quality housing can be found at a reasonable price in TC. It is fine living there, as long as you do not have to come into Central for work every day.
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SC_HK
14 yrs ago
Hi Offthepeak,
Why do you think that westkowloon is the new midlevel?
I went visit there, the buildings are new but it does't seem to have a lot expat around. Also the air quality seems to be not that great.
What are the main selling point of west kowloon apart the price?
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^there is this railroad that they are building which is going to be the hub of travel to China.
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"Steadily increasing demand had so far boosted rents by 16.7 per cent this year, it added."
That's plenty, but did you notice: Sorrento and OneSliverSea in West Kowloon were up 5% in a single month. Part of that is from tenants who recently moved into ICC and are discovering that West Kowloon represents much better value-for-money than the Expat-choked Mid-Levels areas.
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Rents are going to the moon. The leases signed during the 2008 crisis are coming up for renewal. Expect increases of at least 25%. This will push up inflation by quite a bit in HK.
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(Posted elsewhere, but copied here with the permission of the writer):
RACE TO RENT as Buyers retreat - say SCMP headline (in Property section)
"Flat hunters are finding it increasingly difficult to rent a home in Hong Kong as uncertainty about the market outlook means there are fewer buyers and more tenants."
+ Complaints about flats available being snapped up very quickly (within one day)
+ Buyers reluctant to buy, are seeking to rent instead (after seeing prices rises of 10pc or more in 2011)
+ Flats in places like Yuen Long have jumped in rents: from HK$8500-9000 range to HK$10000-12000
+ 42 pc of deals are sales, with the rest rentals, and in a more robust market 70pc might be sales
+ Overall rental index is now at HK$22.13, very close to its Sept.1997 high of HK$22.20
Article concludes saying that "summer is always the peak season for the residential leasing market"
(Perhaps because people find it easier to shift when children are out of school, and expats flood into new flats in August and Sept.)
== == ==
I think the agents are trying to talk price lower at the moment, because they are getting heavy resistance from buyers. But I do not think that rising rents are bearish for property. In 2008, before prices collapsed, there was first a big drop in rental demand, as expats left HK.
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Remmy
13 yrs ago
My observation, both directly, and from friends who have tried to rent recently, is that gready landlords are asking for high rents. They know we need to live somewhere, and they know people's leases are coming up for renewal. And they also can afford to hold off renting immediately as their borrowing costs are so low. So of course rents are rising.
Once interest rates rise though, owners might be more keen to get money coming in, and I wonder if they might drop their rental asking prices due to the need to more quickly find a tenant to cover the cost of their mortgages.
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Remmy. I'm one of those landlords you may be talking about. Yes, I'm putting the rent up because that's where the market is. I used to rent a place at HK$12,500 in 1997 and cut it back to HK$5,000 in 2003 because, again, that's where the market was. Put it up to HK$9,900 in 2006 and back down to HK$6,900 in 2008 during Lehman. Now asking around HK$12,500 again. If I am being greedy then I could just as easily say the same for you. Why do you think you deserve a subsidy? If I ask too much then the flat will just remain empty and I shall be getting nothing.
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Remmy. It's just market forces as Loyd mentioned. There comes a price point where landlords are willing to rent out and tenants are willing to pay.
I guess I am one of these greedy landlords too, if that means that I worked hard to pay for my properties and now want to rent them out for as much as people are willing to pay.
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Remmy
13 yrs ago
Guys - don't get me wrong. I see nothing wrong with "greed" so long as its fairly acted upon. I think its quite right for landlords to make hay while the sun shines. As you have said, they have taken risks, and been prepared for both the down side and the upside, so why not ride the upside when it comes.
I can also see though, why tenants feel a little aggrieved. There are some tenants who genuinely want to be owners, yet with the 50% deposit requirement, this pretty much keeps them out of the market, meaning they need to rent (which in turn helps existing owners, and only widens the gap between the haves and have nots, keeping the renters as renters, who are then working hard to make landlords richer?).
I have some friends, who earn an OK living, and decided to make HK their "home". They worked hard the first few years in HK (of course also have fun as well), and saved around 900K after 2 years in HK. Now when they came here, they rented a 750 square foot apartment on Park Island, which at the time they knew they could buy at around 2.5m So now, when they thought they are ready to buy, they find that prices are 4-5m., and that further they need to deposit 50% of this for the loan. So as you can see, its like the carrot is dangled, but always a little out of reach. Meanwhile, others who were in the market already, have seen their value rise, and can much easier use that equity for another property or other investment.
So you can see why some people are reluctant renters, who feel they deserve to be an owner, did what they thought werre the right things, but are still not owners yet.
Why not reduce the deposit requirement for mortgages to first time buyers, or offer a first time buyers home loan?
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Remmy. That's unfortunate but they only need a 30% deposit for a flat of 4-5m I think - unless the owner is asking above valuation - or maybe only a 10-15% deposit via the HKMC. It sounds as if your friends simply missed the boat by being overly-cautious or possibly overly-greedy (ie wanting something for nothing like a cheap flat with no risk). By the way, nearly everyone who doesn't own world-wide is a 'reluctant renter'. I was one in London. I moved down there from the north of England and saw half my salary go in rent and the rest in transport, clothing and food. No savings after 5 years. I'm not sure what you mean about being 'fairly acted upon'. Let me ask you a question, if I were having a problem paying my mortgage, would your friends be willing to pay me more than the going-rate in rent during a downturn?
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"By the way, nearly everyone who doesn't own world-wide is a 'reluctant renter'."
This is not always true. Many countries, Germany in particular, have very low ownership rates. Berlin is something like 13% of the population owns, and yet Germans are legendary for their ability to save. I would hardly call them reluctant renters, as they are fully able to purchase their homes, and yet they do not.
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Yes liebster but that is a cultural thing in Germany. I know many Germans and once they leave their country and work abroad they buy property, because they realise the value. The reason why most Germans can buy in Germany is because property there is worth very little. Only Hamburg and Munich have expensive property, but even that isn't too expensive. Most Germans tend to put their savings into super and pension funds.
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" they rented a 750 square foot apartment on Park Island, which at the time they knew they could buy at around 2.5m So now, when they thought they are ready to buy, they find that prices are 4-5m., and that further they need to deposit 50% of this for the loan."
It is called "hindsight trading".
Many do it. But unfortunately, you have to make investing decisions in real time, not in hindsight. And making those decisions in real time requires cajones, and not everyone has got the balls to make a decision, while everyone can weep afterwards when they see they have missed out.
I do not think this is the time to be buying. The best time to buy is when prices are low because everyone is afraid - including the banks. I reckon we will see times like that again someday. So learn... and wait.
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We can always hope, especially if rent increases filter down to the rest of the market.
That said, the expectation of lay offs in the banking industry may reduce rental demand.
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coty
13 yrs ago
They are still laying people off from 2008.
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DanUK
12 yrs ago
I just have to respond to this quote:
Ricacorp's head of research, Patrick Chow Moon-kit, said rents in Taikoo Shing used to be higher than those in nearby Nan Fung Sun Chuen, which are 34 to 35 years old but where the living environment is better. "But recently we found that owners of some flats at Taikoo Shing were asking for only HK$25 per square foot." Nan Fung Sun Chuen rents were still a minimum HK$26 per square foot, he said.
When the rental prices in Taikoo started going crazy in 2008 with the imminent opening of One Island East my wife, daughter and I moved across Kings Road from Taikoo to Nan Fung Sun Chuen.
It (the area) turned out to be a total dump and one of the biggest mistakes we ever made. Taikoo is soooo much nicer than Nan Fung Sun Chuen that this guy just has no clue what he is talking about!!!
With this kind of statement from the Head of Research at a major realtor it just goes to show how crooked the real estate business in HK really is!
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