News Hong Kong Property & Finance

TRACK RECORDS, Housing Predictions

ORIGINAL POST
Posted by OffThePeak 12 yrs ago
TRACK RECORDS, Housing Predictions


(Barclay's Bank: Paul Louie, Zita Qin):


TRACK RECORDS, anyone?


Tom Holland reports a track record at the beginning of today's column:


"Two years ago, at the beginning of Nov. 2011, Barclay's Bank published a research report forecasting that Hong Kong home prices would fall 30 per cent over the following two years... Two years on, and local housing prices have actually climbed 24 per cent."


That's a near 50% miss. Pretty impressive, eh?


They may be right eventually, but you'd better not set your watch based on their market calls.


Barclays says:

"Owners of investment properties - who Barclay's believes are typically sitting on realised capital gains - will rush to take profits, putting further downwards pressure on prices."


I wonder about that. I have two issues:


+ The market is becoming more and more a market of owner-occupiers who are unlikely to sell, since they need to live somewhere


+ The investors are only likely to sell, if they have other more attractive investment opportunities. Who knows now, what may or may not be available then?


At the end of the article, Tom Holland says:

"The timetable may be a little hurried. If the Fed holds back, the fed will take a little longer. But the magnitude of the likely slump looks entirely reasonable. We have been warned."


Maybe he should have closed with:

"You have been warned... again."


(per Main thread)

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COMMENTS
traineeinvestor 12 yrs ago
OffThePeak


I agree with almost everything you say. The only (minor) quibble is that I suspect that there are a reasonable number of investors who will not sell even if other attractive opportunities come along - some (like me) who are happy with a but of rental income as part of a diversified portfolio and some who simply don't trust the sharemarket or the banks.


Can you point to any recent data showing the split between investors and owner occupiers? I had a look this afternoon, but didn't find anything that looked solid.

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OffThePeak 12 yrs ago
Sorry, TI.

I have no hard data. Just hear-say anecdotal info


Obviously the new taxes favor Owner-occupiers, and discourage investor

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traineeinvestor 12 yrs ago
Thanks - only have anecdotal data as well:


- more end users and relatively few investors

- frustration for those looking to trade up

- a reasonable level of suppressed investor demand (which often comes with a "if prices were lower" tag)

- a diversity of opinions on where the market will go next but a majority expecting it to go lower to a greater or lesser extent


I have no idea whether this is representative of the market as a whole or not.

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OffThePeak 12 yrs ago
(from the other thread):


Posted by kmn911:


Anyone see this article yet?


Read More


OTP, what do you think?

They on crack. lol

or writing fluff for a new short instrument they're selling.....


seems they're forgetting alot of variables.

eg: how buyers from up north pay in cash and don't need a mortgage..

also I think alot of mainland buyers are looking for an invesment outside China, and are willing to sit on it for a long time. (also they may not want their equity showing up on some banking statement or for whatever other reason just don't want to leave it in the banks)

etc...

=== ===


I agree with those points.


And don't forget, the HK govt may remove or cut the extra taxes after the market drops by 10-15%, or some number much less than 30%. And THAT move could easily stabilise the market, or ven kickstart it again.

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OffThePeak 11 yrs ago
(Here's a LESS BEARISH prediction):


Sky may not be falling on Hong Kong property



Monday, 4 Nov 2013 | : Leslie Shaffer for CNBC.com


Analysts claiming the sky is falling on Hong Kong's property segment, with predictions prices could decline as much as 30 percent by the end of 2015, may just be playing the fabled Chicken Little, frightened by an acorn.


"We are not expecting a boom-bust scenario," Morgan Stanley said in a note.


"Strong end-user demand backed by low unemployment rates, increasing numbers of new marriages and babies continue to support the mass-market projects," the bank said. "(The) recent discount model on luxury projects is also working well," it said, noting inventory is clearing at discounted prices and generating decent margins for developers.


(Read more: 30% correction coming for Hong Kong housing: Barclays)


Play Video


Hong Kong property to enter downturn: Barclays

Paul Louie, MD, Head of Property Sector, Asia Ex-Japan Equity Research at Barclays expect a synchronized downturn, with office prices falling by 20 percent.


To be sure, Morgan Stanley expects Hong Kong's residential property prices to fall around 10 percent in 2014 in anticipation of higher real interest rates and rising supply, but it believes a recurrence of the property-price crashes in the 1997 Asian financial crisis or the 2008 global financial crisis is unlikely amid minimal levels of speculation and the absence of an external shock.


===

> Read More

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OffThePeak 11 yrs ago
MORE BEARS making forecasts in today's SCMP

========


Price Cuts to spread from Luxury to Mass Market - says SCMP Headline


"Developers set to launch 9,900 flats for sale this month and next;

expect price cuts of 15-20 pc"


/ Look, I think the reporter has missed the big story:

How well a surge of fresh supply was absorbed at Kowloon Station, and Olympic /


He reports about: SHKP's Cullinan:

+ New Flats launched at HK$29,097 psf

+ After discount price was: $25,024 psf

+ Secondary market price: $31,763 psf


The reporter, Yvonne Lui, is not clever = All her figures are wrong !


+ Prices were raised by more than 10% after first launch

+ The Secondary market was 5-10% below where she says it was.

+ By the end of sales, prices were within 10% of the secondary market

This is misleading reporting IMHO


She also said:

+ The Austin was launched at $22,875 psf

+ After discounts. effective prices were $19,000 psf

Once again, prices were raised (which she does mention), but fails to give figures.


The location of the Austin is superb in terms of transport connectivity, but most views are poor, and some flats are going to be surrounded by noise and car fumes.


Yes, I do think that the launch of 9,902 flats in two months would trigger price cuts, but if demand is not strong enough, I think you will see delays.


THE BIG NEWS is:

Developers are taking the Brunt of the price cuts, through discounts and rebates, and the secondary market is so far little impacted, because the new properties are being absorbed, and the big initial price cuts are soon followed by price increases, which the market is supporting in "good locations" like Kowloon station and Olympic.


I do agree that:

+ Areas with big supply coming, like TKO, are highly vulnerable, and may see some big price cuts - both in New properties and in the secondary locations.


But that may not apply to all areas. Location matters, and the over-supplied areas are the ones that will see the biggest sustained price cuts IMHO.

=== ===


(specific predictions to follow)

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OffThePeak 11 yrs ago
Louis Chan Wing-kit, MD of Centaline Properties:

=======

+ 30 pc (initial?) price cuts on luxury properties

+ 10-15 pc (initial?) discounts to secondary market prices in mass mkt areas


Patrick Chow Moon-kit, Research Head of Ricacorp

========

+ No stamp duties subsidies are likely in the mass market, but

+ Prices cuts are likely

+ Asking prices of New properties used to be 30-40 pc higher than secondhand

+ The price difference has fallen to 20 pc


"Developers with New properties to sell (in a hurry) will take the brunt of the correction... at least until rates rise." (But the secondary market may get hit by more than 5%, when the new supply of property is especially high in certan areas.)


- per Off-the-Peak-kit:

(Since it helps to have a "kit" in your name, if you want to make predictions)

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OffThePeak 11 yrs ago
Donald Fun Tung, Paliburg Director

===========

+ "I don't think the ... cooling measures will lead to plunging prices"

+ "There's a shortage of housing... which led to sharp increases in prices, and the measures are aimed at buying time."

+ "Prices could fall by up to 20 percent"


And Paliburg is backing this prediction by HK$10 Billion in new HK projects:


+ Four Hotels: Sheung Wan, North Point, To Kwa Wan - could provide almost 1,000 rooms

("no longer require many restaurants and shopping")

+ Two residential projects

+ A commercial project

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Ed 11 yrs ago
So once these price cuts start to filter through to the secondary market ... what happens?

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OffThePeak 11 yrs ago
why should they, ed?


of course they may in some areas.

but in kowloon station and olympic, hundreds of new flats have been sold with little impact on the secondary market.


i was one of the few who predicted exactly what has happened


the big risk for good areas will come when rates rise imho

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gdep 11 yrs ago
so everything is stacked up against buying now..


higher supply + possible rate changes in 2015 + QE wind down in 2H 2014..


with such huge SSD/BSD why bother investing to get 2% yields in the primary market..

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OffThePeak 11 yrs ago
Suggest:

Don't buy something with a 2% yield!


Earlier this year: $2.7 Million would get $9,500 per month


= That's 4.22% Gross Yield


But you will need to buy an older building to get something that high

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OffThePeak 11 yrs ago
Choose a good area, and someone will buy it.


Make sure it is solidly constructed, and that there's liquidity (and a bank valution at or above what you pay.)



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traineeinvestor 11 yrs ago
If you buy in an older building, make sure you have a properly set up body corporate and professional building manager appointed. The longer term maintinance and legal issues if there is not a means to ensure that all owners pay their share can be significant.


@ OffThePeak - do you know what the net yield would have been on that property? By the time stamp duty (at the lower rate), vacancy, decoration, management fees, rates and any other expeneses are taken into account, I would be surprised if it was much over 3%?

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OffThePeak 11 yrs ago
Sure. Way over 3%.


Redecoration cost was about 1.5 months rent


The management fee is very low, because there is no clubhouse.

I think the NET is about 3.5%


We nabbed a bargain, partly because the flat was occupied when it was bought, and we took a chance on condition - (the agent showed us some photos he had taken less than a year earlier, so the risk was not as big as it seemed.)

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traineeinvestor 11 yrs ago
3.5% net of outgoings, vacancy etc is a really good deal. Congratulations!


I would probably need at least 3.5% net to be interested in buying another property in HK over Tracker fund or other equity investments.

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OffThePeak 11 yrs ago
The bank valuation is now at $3.08 million, and agents say, there's "no stock."


(There are some dismal unrenovated flats on lower floors, but I would avoid those. We wanted something we could live in, in a pinch. Or use as a HK base, if we lived elsewhere.)

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OffThePeak 11 yrs ago
"There is zero chance that property prices will go up this year," said CLSA property analyst Nicole Wong, adding that developers had already been forced to price homes in newly built properties some 20 to 30 percent below those for sale in older buildings.


"In 2014 there will be pressure to cut prices further for inventory clearance," Wong said. Supply for new homes may increase by up to 85 percent in 2014, she said.

==

> Read More

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OffThePeak 11 yrs ago
HK Real Estate History on a Chart:


TRACK RECORDS Housing Predictions image 1

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