Posted by
ahead
12 yrs ago
We are just about to put an offer in for a small flat in Aberdeen. We have found one and it is decision time. We have been looking for a few years. We have two children and this flat would work for us.
So now we are doing research and thinking is this a bad time and should we wait? Will the prices come down? Is it foolish to buy now?
Any advice would be great.
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@ Ovolo98
Why do you say thet mortgage rates will go up to 5-8% in "a couple of years maximum"?
Given the peg and the extent of the the US debt problem, it is far more likely that we will have low interest rates for some time. The Fed itself has said that it expects to maintain its zero rate policy out to 2014 and it would be brave fortune teller who speculated on the HKD being either depegged or repegged in any given time frame.
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Renting with kids is very stressful. You cannot be sure of your budget or expenses and moving is a nightmare. If you can afford it, feel secure and could live with a mortgage rate increase - I would say up to 5% max (though will probably remain low for a year or so), then go for it. Rent is dead money and if prices go up, you are in big trouble.
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"Sentiment is important in prices of product, because they drive these prices"
That's is generally accurate. Some think that prices fall AFTER sentiment turns down. Normally they move at the same time. So if sentiment becomes (extremely) negative, and prices move lower just a little, then a more bullish shift in sentiment can drive prices higher. That is what we saw since year end, when prices moved down 6% going into year end, and then moved up by about 10%.
Many here were Bearish at year end (I wasn't) but that was actually a small buying window, rather than a reason to sell.
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While higher interest rates will dampen property prices (probably - there have been times when higher interest rates have occured and property prices have boomed), I am yet to be persuaded that an economic recovery will necessarily result in much higher interest rates until after the recovery has been underway for quite some time - it is also possible that policy makers will aim to continue with negative real interest rates becuase the heavily indebted developed nations simply cannot afford to pay much higher interest on their national debt.
Who knows? The only thing I am certain of is that I don't.
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"am yet to be persuaded that an economic recovery will necessarily result in much higher interest rates until after the recovery has been underway for quite some time"
Look at what happened to interest rates in: Greece, Spain, Italy, and Portugal, and then consider that there are other ways
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ahead
12 yrs ago
This discussion is proving very helpful. Thanks everyone.
I understand that property prices and mortgage repayments are affected by changes interest rates. However, can someone explain if there is any relationship between increased interest rates and rental cost? For instance, am I right in assuming that if a landlords monthly mortgage repayments increase this will drive up the rent?? Or are rent increases/decreases generally only related to property value which you would expect to go down if interest rates increase???
Just trying to compare the cost of staying in the renting game for the next 2 years, rather than moving over to a mortgage?
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Ahead. Landlords charge what people are willing to pay. There is no direct correlation between rate rises and rentals. However, rents like property values trend upwards as the years go by. If you commit to renting for 2 years at 20,000 per month, that's an upfront loss of HK$ 480,000. That means a HK$4m (guess) flat would have to come down by 10% over 2 years just to break even. Given that inflation is 4% and there are no major construction plans in the pipeline for HK island, I don't think this is likely. Also, the overall market may fall 25% but you still need to find someone who will cut his/her price and, should such a cut happen, you have to move quickly. If, on the other hand, the market goes up 10% you have to find the extra money and the rent - which which also probably be going up. Don't worry too much about getting in at the absolute best price, it's almost impossible. The main factors are location and your ability to pay the mortgage.
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@OffThePeak - the countries you list all have massive deficit/debt problems and lack both a floating currency and the ability to print money - the market is forcing them to pay higher interest rates because they fear that they will either default (like Greece) and/or drop out of the Euro. In spite of the best efforst of the HKSAR Govt to waste taxpayer money on overpriced and unnecessary infrastructure and vastly overpaid civil servants, Hong Kong's finances are in excellent shape. As for the US, they have issues but they still have the ability to print as much money as they like. The USD is also viewed as a world reserve currency and a safe haven making it very different from Greece etc
@ ahead - interest rates may affect property prices and usually (but not always) do so. I do not believe that there is any direct relationship between interest rates and rent levels (although the same factors that move one may have the potential to move the other). From 2003 to 2009 they more or less moved in opposite directions. From 2009 to 2011 they moved in the same direction.
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Ovolo98. It's safer to have a roof over your head before investing your capital.
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If you are not secure or you are over-extended, then don't buy. If you can cope, personally I would nearly always buy. The market is just back to where it was 15 years ago in nominal terms after years of deflation. I think HK-side property will rise steadily but will not collapse. I you need it to fall by over 10% which is what you need to break-even on renting. Jim Fit. How long have you been in HK? Do you own or rent? If you rent, how much have you paid over the years?
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I think Jim's got one thing right - certainly everyone knows about it. Now, while my heart tells me CK have done it to be charitable to the HK populace, my brain tells me they know they'll have a hard time shifting this lot because of location. Hence much mainland promotion.
I don't understand why perma-waiters think everyone has to sell. Bit scary standing on the quayside watching that HK property boat sailing out of sight.
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Everybody need not sell, but those who do will get lower prices. That's the effect, technically. Still, buyer-seller need to agree. If nothing else, buyer and seller will not agree on price and transaction numbers will continue to go down.
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Jim Fit. I don't think HK home owners are getting hot under the collar as they didn't get that bothered in 2008 and have completely shrugged off this current crisis. Apart from being secure, most HK homeowners know a) there are a lot of people who want to buy b) they can take rent which will usually cover their mortgage if they have one c) all the new supply that government keeps shouting about is in the New Territories (mainly Tung Chung and Fanling plus a smattering around Nam Cheong) so, for many, may as well be on the moon.
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Jim Fit. Why is it unimportant?
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Ed
12 yrs ago
'when the Euro Crisis clears'
You mean when the EU collapses? http://www.cnbc.com/id/47978274
If not then how do you see it 'clearing'...
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Well if CNBC says the EU is going to collapse, it must be true. ROTFL.
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