Banker Perks Slashed - Impact?

According to today's SCMP:

"Investment bankers in Asia see payouts cut by 30 to 40 per cent and lose their housing allowances amid a weak trading environment and a lack of deals"


What is the likley impact on HK's housing market?

IMPACT?


+ Some high end rents may fall, if the I-bankers are not replaced by other incoming expats


+ Paradoxically, demand for cheaper flats may rise, if I-bankers "trade down" into less expensive flats.


The article talks about how housing allowances were slashed and eliminated in 2008, and then quitely reinstated. But many are being cut once again.


Specifically mentioned is Deutche Bank, which is cutting allowances.


To me, living in Kowloon, the allowances seem beyond extravagant:


+ MD at Citibank getting HK$250,000 per month, and even

+ HK$15 - 25,000 for a junior associate


These are way beyond the budgets of local hires in similar job brackets.


Instead, the I-bankers may now get lumpsums, which they c an spend as they please.


I reckon that some may take advantage of the recent dip in prices, and try to buy middle-priced properties at say HK$5 - $10 million. So it is possible we will see a jump in demand for flats in that bracket, either for sales or rentals.


Obviously, the higher end flats over say HK$25 million may be hit by these cuts, making the mindless Estate Agents who are always offering misguided soundbites like: "high end flats never go down" look silly once again.

I've already seen one tenant give notice to trade down to something cheaper (but she was due for a rent hike when the lease ran out at the end of Feb anyway).


I agree that demand for cheaper flats may rise unless some of those who have lost (or had reduced) housing allowances all stay in Hong Kong. I would expect that many will do so but even that general statement is a complete guess.


Bottom line: if they are going to stay in HK they still have to live somewhere.

"If they are going to stay in HK they still have to live somewhere."


Indeed, but there are places that are loads cheaper than MidLevels. If you a banker working in the IFC (or near there), the train journey from Tung Chung is 26 minutes, and you can get 2x-5x as much space for your money there.

MORE JOB CUTS - this is a place to keep track


Macquarie Cuts 10% of Asia Investment...


Macquarie Group Ltd. (MQG), Australia’s biggest investment bank, cut about 10 percent of its investment banking workforce in Asia last week, two people with knowledge of the departures said.Koichiro Yano, a financial ins...


link: http://www.aastocks.com/EN/News/HK6/RUM.120214_121958.html

How to commit "career Hari Kari"?

Resign from your job in a weak market, with nowhere to go.


Many may be set for this


36pc of HK bankers may quit if bonus disappoints - say SCMP article


"... slightly higher than the figure for London, where only 33% would seek a change if disappointed"


"...there might not be enough jobs in the market to meet bankers expectations"

- said a headhunter. "Local bankers expectations were... out of touch with reality."


"Indeed, local bonuses could fall 30 per cent from 2010, given the sector's poor ppeformance."

Calling their bluff - that's what banks are doing



The End of Wall Street As They Know It



Before the crash, when compensation slid, the banks risked seeing their top talent run for the doors to rival firms or hedge funds. Now, with a glut of hedge funds and an industry-wide belt-tightening, bank chiefs are calling their star traders bluffs. "If youre really unhappy, just leave," Morgan Stanley CEO James Gorman bluntly told Bloomberg TV a few days after his bank announced its meager bonus numbers.


"Among the many dislocations Wall Street has suffered since 2008, none may have been more destabilizing than the headlines that flashed across Bloomberg terminals on the afternoon of January 17, when news leaked that Morgan Stanley would cap cash bonuses at just $125,000. A week later, Bank of America announced that it would be cutting the cash portion of its bonuses by 75 percent, giving the rest in stock. All across Wall Street, compensation is crashing. Goldman Sachs, coming off a lackluster fourth quarter, slashed compensation by 21 percent"



"For New York’s bankers and traders, the new math suddenly reordered their assumptions about their place in a post-crash city. “After tax, that’s like, what, $75,000?” an investment banker at a rival firm said as he contemplated Morgan Stanley’s decision. He ran the numbers, modeling the implications. “I’m not married and I take the subway and I watch what I spend very carefully. But my girlfriend likes to eat good food. It all adds up really quick. A taxi here, another taxi there. I just bought an apartment, so now I have a big old mortgage bill.” “If you’re a smart Ph.D. from MIT, you’d never go to Wall Street now,” says a hedge-fund executive. “You’d go to Silicon Valley. There’s at least a prospect for a huge gain. You’d have the potential to be the next Mark Zuckerberg. It looks like he has a lot more fun.”



/more: http://nymag.com/news/features/wall-street-2012-2/


Whoops!

There's not much "silicon valley" in HK. At least not yet.

In today's news, more bankers lost their jobs in HK. I'm sure they can't buy the newly more-expensive flats at Festival City.

They (bankers) have to live somewhere.


If ex-bankers want to stay in HK, they may need to "trade down." Some may become tenants in places like Festival City (Tai Wa), Tseung Kwan O, and Tung Chung. Places that they were too stuck to even visit back when they were still living "in the bubble"

Is ECA in a time warp, or just "ramping rents" for some selfish reason?


Today's headline in the SCMP Business section:


HK the world's most expensive for luxury rents

Demand lifts top-end rents 15pc, with unfurnished 3-BR unit costing an average of US$11,813 a month


Yer, ah, what planet is that on? And what crazy company would pay such an extravagent rent?

(Whatever co they may be, don't give them your business, since they may be gouging you to pay such ridiculous housing allowances)


Other sources, more local to HK, have written about falling rents, so I am mystified by the ECA.


ECA says: they are "concentrating on areas and unit types commonly sought by expatriate employees." Could it be that ECA is listening too much to a few over-priced estate agents, who deal only with some head-in-the-clouds landlords?


The article makes this claim:

"A significant proportion of the local population (has been) unable to buy property dfue to steep increases in property prices, is looking to rent instead."


"This has put renewed pressure on the already limited supply of rental property here, resulting in these large rent increases."


Huh?

I suppose you could have made such a claim 6-9 months ago, but not now.


This very dated market appraisal suggests that any report from ECA is useless. They have totally undermined their usefulness to all but a few agents who are still trying to ramp HK propeerty prices and rents.


This report even makes the normally ebulliant Ms. Sage seem sage.