Hong Kong: Is it possible to Call the Low?



POSTED BY OffThePeak (12 mths ago)
Having Called the Peak reasonable accurately (or even precisely*) almost two years ago,
I will now call the LOW in HK property in 2020 +/- 1 year (actually: 2019-2021)

Hong Kong Property Index - A look Ahead?

The HK Property index is often a bellwether for HK property prices (and the Centaline Index).
If it follows the 18 year cycle, with a Low in 2019-2021, it might show a pattern something like the following

HKI Prop
(Note: the above shows one of several possible pathways)

*Here's a link to the prior thread on Calling the Peak:
You can read it and see how good you think the Call was
** HSI Prop / HK:110003 ... update: http://www.aastocks.com/en/stock/detailchart.aspx?symbol=110003&hb=0#GTop


Baap (12 mths ago)
And how low do u expect the centaljne to get?

3 years from now at 20,000/month rent means my propert would need to drop by 10% just to cover the loss from paying rent.

Of course one can buy shares, and hope to not lose everything...

booth (12 mths ago)
Or stability may improve.

hellohellohello (11 mths ago)
Or how about new highs? Looks like we're pretty much back to peak levels now.

OffThePeak (11 mths ago)
"my property would need to drop by... just to cover the loss from paying rent.
Of course one can buy shares, and hope to not lose everything..."

Well, I can tell you what I did...

I sold my property in 2016, somewhere near the high.
And invested the funds in:

+ three houses in Philadelphia, generating 11% pre-tax, and
+ three properties in greater Manila
+ some HK property shares, now sold for a smallish profit
+ HK$ deposits
+ Some Gold calls, sold for a profit (I reinvested recently in more, about 2 weeks ago)

The yield and gain on the HK property shares have covered my Rental costs in HK.

The Houses in Philly have provide a cash flow, over and above the cost of my HK rental.

I am splitting my time between HK and the Philippines, while I try to decide where I may live longer time.

I am happy, to have sold last year, even though the last HSBC valuation shows a slightly higher price than where I sold. The gains on what I bought instead more than cover that theoretical gain.

My position is not right for everyone, since if I had a salaried job in HK, I would need to spend more time here. So I am taking advantage of my own flexibility. And why not?

OffThePeak (11 mths ago)
If you want a picture...
Here's what the Cyclical price moves might look like


Last (announced 01/06/17): $14,595 psf - 0.51% in the latest week.

Could bottom below $10,000 psf in 2019-20

Baap (11 mths ago)
I hope you are right, so I can buy a new property in 2019-2020. But somehow, with the demand there is, I can't see a drop unless China enters a crisis and Chinese investors have to sell.

In the meantime, what do you think is the best investment in the share market? I am not buying a property in the Philippines (or anywhere else except HK, if the prices drop considerably). I am looking in particular at REITs in the US. Do you think there is upward potential? They are about 20% off the top price in 2016, and have a good yield. Methinks while the interest rates are set to rise a bit, as the economy improves the rents will also rise, which will keep the yields up. I am mainly interested in long-term returns.

I have given up trying to time the market, and I am interested in high (above 4% or so) dividends.

OffThePeak (11 mths ago)
"What do you think is the best investment in the share market? I am not buying a property in the Philippines (or anywhere else except HK, if the prices drop considerably). I am looking in particular at REITs in the US. Do you think there is upward potential?"

I think REITS may be a good area to research. But I will not start any research until after:

+ A drop in US stock indices of at least 20% (since I think a minimum drop like that is possible this year
+ Some further rise in interest rates.

Until we see on or both of these, I think REIT stocks maybe be too risky, and highly vulnerable to these kinds of moves

Baap (11 mths ago)
Thanks. Yes, but Reits have already dropped 20% from the top. Hasn't the market already factored in the future increase in interest rates? The fed has made it clear that they will increase interest rates at least twice this year, and again next year.

Do you think the dividend is going to drop? Some (such as OHI) have very high dividend, so I would keep them just for that. Others (such as O) don't have a very high dividend (4.14% today), but they have grown 10% a year (compound) over the last 25 years, so I would buy them for growth.

OffThePeak (11 mths ago)
Sure there was a drop, and if you brave you can buy the drop.

But how long will you stay in the trade: 2 weeks, a month?
Personally I think the major bottom in Reit stocks is a long way off. And I would want to wait for a more important bottom.

I bought shares in Hang Lung about 12-15 months ago, but I bought too soon. The shares had dropped more than 20% when I bought them, but then they dropped another 20%, and I was in loss for a long time. Then they rallied, and eventually I was able to sell them for a small gain, and I also collected a dividend. So I made some money. But i decide to sell to lock in my (small) profit. I am now watching HK-10 and HK-101, and thinking they will eventually retest last year's major low.

This time, I prefer to wait for a more important bottom, because I am not so sure I will see reit shares staying at current levels, if we get the lousy stock market that I am expecting later this year

Baap (11 mths ago)
Thanks. Well, I plan to buy and hold for my retirement (in 10 years) and keep them until I die (in 30 years), but of course it's always best to buy the lowest, even if it's for the long term.

dylchow (10 mths ago)
Seems like prices r blowing through the roof bro. Tht peak making higher highs... Probably better idea to just buy if u need to rent cuz no point speculating where the trough is. Just dun overextend budget n save capital so u hv ammo when there will be a correction

Jakob12 (10 mths ago)
Yes, I bought 5 years ago, and since the day I bought I heard that the prices are set to crash, and now is the wrong time to buy. I wouldn't buy at today's prices, but there is a lot of local unfulfilled demand, and until there is a neighbour with 1.3 billion people and a tonne of millionaires who need to hide their stolen money, I wonder if prices are ever going to drop considerably.

dylchow (10 mths ago)
Nice! Lucky u... With real interest rate being negative, 60% home owners with fully paid down mortgages (according to 2011 data) I'd say unlikely. Even if US really raises interest rates 3x as planned there is still room for HK not to follow suit.

Summerdale (7 mths ago)
Sorry to be bringing up a relatively old thread....there were some very well researched and sound views on property prices the last time I was on this site. I wonder if these views still hold? I am currently renting in Mid-Levels (and have been doing so for quite a number of years now) while waiting for the right moment (not that there really is a "right" moment) to buy. I apologise for reaching out this way and would really appreciate any thoughts anyone might have.

OffThePeak (7 mths ago)
I do realize that the Centaline property index show price making record highs
For me:
The 18 years cycle operates in most countries, and is normally : about 14 years Up, and 3-5 years down.

"Expected" peak depends on where you start:
1997 Peak+ 18 = 2015
2001 Low + 14 = 2015 (from the notional Low we "should have had" without SARS
2003 Low + 14 = 2017 (from the Actual low, brought by SARS)

I used to say: Expected peak is "2016 +/- One Year"

It looks like 2017 is now the preferred time window for the Peak, is momentum in the firts half helped on by continuing big buying volume from mainlanders
Even so, when I look at the actual prices of the HK Property share Index* ...
... I am left with the belief that an important Top is being formed
*update: http://charts.aastocks.com/servlet/Charts?fontsize=12&15MinDelay=T&lang=0&titlestyle=1&vol=1&Indicator=1&indpara1=18&indpara2=52&indpara3=200&indpara4=330&indpara5=530&subChart1=2&ref1para1=14&ref1para2=0&ref1para3=0&subChart2=3&ref2para1=12&ref2para2=26&ref2para3=9&subChart3=12&ref3para1=0&ref3para2=0&ref3para3=0&scheme=1&com=100&chartwidth=673&chartheight=690&stockid=110003.HK&period=2061&type=1&logoStyle=1&

Summerdale (7 mths ago)
Thanks OffThePeak. Always appreciate your analysis. I guess what you are saying is that the uptrend will likely last for another 1-2 years....

dylchow (7 mths ago)
No point speculating. If ur renting and need to buy then buy a place with 60% or so of ur purchasing power. Ultimately real mortgage rate is wt will determine the fate of prices.

Interest rate during 1997 was 8 -10% and now it's 2%.... So....

OffThePeak (7 mths ago)
"Thanks OffThePeak. Always appreciate your analysis. I guess what you are saying is that the uptrend will likely last for another 1-2 years.... " - S.D.

Could peak anytime... present healthy market need not persist for 1-2 years
I looks like HK Property share index has peak already, and keeps making lower highs.
That's not a good sign!

I downsized in September 2015, shifting my capital out of HK property, to markets where I am making a better return, and am living in a small and cheaper rented flat, when I am in HK.

Selling too early has not hurt me, given the returns I am making from alternative investments. But neither has it been a big windfall.

Baap (7 mths ago)
OTP already called the low many months ago. Basically, nobody knows. My impression is that there is so much unfulfilled demand that even if the prices drop they will only drop a small percentage (10-15% or so) before rebounding. Even though i wouldnt buy an investment flat at todays prices, if u like a property and can afford it u could consider buying it.

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