Posted by
punter
13 yrs ago
No one's buying though...
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Milty
13 yrs ago
I beg to differ. I just signed with a developer to buy my apartment in Sheung Wan. I signed for twice the amount that I paid for it 15 months ago.
And I have another apartment in negotiations to sell to a developer....for 6 times what I bought it for in 2003.
And before anyone jumps down my throat, I am 29 and did not get any money from my parents. This is all my cash and I have been working for 6 years and yes, it's not properties worth HKD 10M + but i have been smart in the types of apartments I have bought.....
oh and I only moved to HK in 2008 and I work full time too !
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Milty
13 yrs ago
sorry, I mean I have been working for 9 years !!!!
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Would it have been better if the OP said, "If you have investment properties, sell now"?
That would be sensible, right? But every investor have a different strategy....and results.
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bdw
13 yrs ago
I have a H+0.7% mortgage and there is no chance I am giving this up. I live in my own place. I pay $23k per month mortgage, of which $19k is principal reduction and only $4k is interest. If I were to rent it, I would be paying $25k rent.
There is no way I am paying $25k rent vs $4k in interest.
You go ahead and sell your property. Im keeping mine. I bought it for $6.3m in 2008 and Im already getting offers of $8.5m earlier this year. If it drops 20%-30%, Im still laughing because I pay only $4k interest vs the suckers paying $25k rent.
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bdw, what if the effective rate goes to 8% ? When rates go up, rents go up so you may still be ahead.
The problem of course is when homeowners' income do not go up as much as the rates do. Worst case scenario: rates go up, salaries goes down (or goes up but not in step), and homeowners have problem paying the mortgage.
For multi-home owners, repeat the problem above by the number of property they own apart from their own home.
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ltse
13 yrs ago
For the real rate (nominal less inflation) or even effective ie just nominal rate to go to 8%, central banks will have to raise rates very aggressively, not likely to happen for at least a few years minimum, and IF it does happen at all, assuming home prices remain stable, many homeowners can refinance their home due to the increase in equity base ie increase in home value, and use those additional funds to service the mortgage.
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I really wouldn't be panicked into selling. Firstly, I don't think the price is going down because there is no transparent price due to lack of speculation. If you are buying, you have to find a desperate seller to get a good price. If you are selling, you have to find buyer that will use all the poor economic news to knock your price down. As the economy is pretty good in HK, neither of these scenarios are likely. So it basically boils down to you either living in your place or renting. Rents should go up with inflation which will probably rise further after Obama drops a trillion dollars on infrastructure this evening. If you plan to stay long-term in HK then selling your only flat may not be such a good idea. Once inflation takes hold, HK$7m will look like nothing. If you don't believe me, we bought our last flat for 5.5m 2 years ago from the original buyer. He paid HK$186,000 for it in the 1980s.
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I'm also very bullish on HK property stocks. The developers can now buy land cheap and still sell at a good price. Henderson now trading at 60% of book value, Hysan 70%, SHKP 95%. Hang Lung pricey at 1.16x book. Great Eagle is 47%.
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bdw
13 yrs ago
I dont think rates will go up in the near future (next 2 years). The banks know this. Thats why they started raising the +XX% suffix on their rates so that new customers start paying more. It went from 0.7 to 0.9 to 1.3 to 1.5 and now to 1.8!!! But probably they would prefer the overall H to rise so they dont have their old customers 'locked in' on these amazingly low and unsustainable 0.7% rates for what now seems like the next 2 years. I will enjoy this 'once in a lifetime' rate for as long as I can.
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As long as you can pay your mortgage, there's no problem really even if the rates go astronomicaly high.
In an investment point of view, if you believe prices are going down, the right thing to do is to sell and buy again when prices are low (just like shorting). It is agreed that most will not do this using their primary residence. For investment flats, it might be a good idea.
Take for example the 3,000+ who are losing their HSBC jobs. If they can't find a new job immediately (say, in three months), what do you think they will do with their investment properties? It would be safe to say that they might sell some if not all.
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You would sell in a scenario where prices keeps going down, interest rate goes up, rental income does not cover mortgage, etc.
Can these scenarios happen? Sure.
If you take a buy and hold (forever) strategy, that's your option.
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Punter. Of course, it's great if you can sell and buy back cheaper but you have just as much chance of getting it wrong as right. I am a property bull however I would not touch anything in the New Territories.
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Sell my property now?
Value of property: 12m
Net after paying mortgage: 8m
Current mortgage and charges: 22k pm
Rent of similar property: 47k pm
Monthly additional costs = 25k pm
Interest on 8m (per month) based on 0.002% pa = 1.3 k pm
Inflation losses on 8m (based on 7% inflation) =46.6k pm
(25k + 46.6k) – 1.3k = 70.3k per month worse off
Who in the right mind would want a pile of cash rather than assets when inflation is at 7% and interest rates are pretty much nothing (and going to stay that way for the next 2 years)
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I must admit that I was a little surprised by the NEGATIVITY expressed in yesterday's SCMP. There were several bearish articles, centering around the "lower than expected" prices on the Land auctions. It was almost as if someone On High had asked SCMP writers and editors to Talk the Market Down ! The Estate agents would like to see that too, since they know that they will do more business now if vendors cut their asking prices.
The only problem is: Prices are not falling much. In fact they are still rising in some areas, like West Kowloon.
Hong Kongers are lucky, because the property market is very transparent here, and there is plenty of data. And I am one of those people who actually bother to study it carefully. That is so that I do not have to "buy it" when Estate Agents or the Press are spouting BS - as some to be doing at present.
So here's what I see:
+ Rents are still rising in Hong Kong
+ Interest rates are off their lows, but still near historically low levels
+ As a result of these two factors, it is cheaper to own than to rent for most people
+ We are not (yet) seeing the sort of mass exodus of expats that we saw in 2008, before the property market collapsed
As a further check on the reality of the current state of the property market, I look at the data from Centaline. It shows only a tiny nudge down from the highs, which - according to their data came in the week ended 5 June 2011 when the Centaline City Leading Index (CCLI) hit 100.72.
Here's a comparison:
Index-2011: 05.Jun. : 28.Aug. : change
CCLI----- : 100.72 : 099.41 : - 1.30%
CMMI---- : 097.67 : 095.43 : - 2.29%
W.Kowloon*: 100.64 : 102.95 : + 2.30%
*An index composed of: The Arch, Sorrento, Central Park, Island Harbourview
Please, any press folk reading this... A little bit more research and a little less "winging it" with pure "opinion" if you please !
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Dannyboy, is your property your home and your only owned flat? Then there's no reason to sell of course.
If it's an investment property, and say, you project that in 2 years time home prices in Hong Kong goes down by 30%, you will have a paper loss of about 3.6M. That's a lot bigger than the 70k x 12 months x 2 years = 1.6M that you computed.
But who knows what's going to happen in 2 years time? Who knew what was going to happen in 1997/98?
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Most folks who look at long term prices see a Cycle of 18 years...
That's 14 years up and 4 years down. Occasionally it stretches, especially the bad times, after a big spike up.
Harrison's 18 year cycle: https://youtu.be/_C-Nd_MStxU?si=p__xzTzOW5-DT20N
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bing2
13 yrs ago
change to RMB and enjoy 3.7% annual interest and 3-5% appreciation rate in the next year or so.
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It really depends on the strategy you want to take, or the projection you can make (the best that you can) on what's going to happen in the next year or 2.
If you have the guts to call a fall in prices, say 30%, in the next two years, you can just even put it in a HK$ account (earning close to zero interest) and wait for the prices to fall and buy new investment property at a lower cost (Sell high, buy low).
If you call it right, you still have an investment property but gained some. If make the wrong call, or time it wrong, then you lose some money just like in all investment schemes.
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for your information re yuan deposits, to get 3.7% on one year fixed deposit/3.1% on 3 month fixed deposit if you put your money in mainland china. the deposit will leave hong kong and will be subject to manland admin and law.
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