If you can afford to buy, you feel secure in your job and you can cope with a sharp increase in interest rates, then buy. I don't think the secondary market will drop on Hong Kong island or Kowloon. A lot of new supply in New Territories.
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Look back at the last time the consensus amongst those forecasters was for a 10-20% drop. That was the end of last year, after a tiny drop of a few percent, there as a 10% rally. So the best thing you can say about those forecasts, is that they tell you more about Market Sentiment, rather than what is actually going to happen in the market.
My own forecast record is not bad, and the forecast record of some others here is also better than the consensus you pick up in the press. I can tell you than I am MORE BEARISH now than I was at the beginning of the year. I now think a 10% or greater drop in reasonably likely.
Why the difference?
+ Charts look more bearish
+ Spreads have been cut, and could be cut more, but they are nowhere near as as ripe-for-cutting as they were at the beginning of the year
+ A slide in mainland China property prices is now well-and-truly underway, and that may progressively undermine the buying appetite for mainland chinese for properties in HK
+ New properties sales in HK are showing some sluggishness not seen before for many months, even years
+ The global situation looks more and more like 2008, and if stocks crash, it could trigger a global loss of confidence, and more tightening of credit, like in 2008
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5,000 per square foot? That's very tight for Austin. You have the high speed link coming in soon. Are you looking for a dilapidated flat? Even then, most owners will hang on for a developer buy out. What about Yoho Town in Yuen Long? Why do you think CY Leung is going to destroy the property market? He will mainly be building in Fanling and Tung Cung.
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5,000 per square foot? That's very tight for Austin. You have the high speed link coming in soon. Are you looking for a dilapidated flat? Even then, most owners will hang on for a developer buy out. What about Yoho Town in Yuen Long? Why do you think CY Leung is going to destroy the property market? He will mainly be building in Fanling and Tung Cung.
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GW80
13 yrs ago
HKBY, if you're happy with a 10% decline, you probably dont need to wait till next Feb or Mar. I would make offers discounted by 15% whenever sentiment is weak (like the past 2-3 weeks). Chances are, you could settle 10% cheaper with the right landlord.
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HKBY,
I suggest you take a look at Tai Kok Tsui, perhaps one of the older buildings. Very convenient transport to HK-Central, and to the airport. Buses to TST are also easy.
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I wouldn't pay too much attention to the "experts" - I am not aware of any that has been consistently right. A quick trawl through recent news feeds will throw up a mixture of predictions ranging from the mildly positive/its a good hedge against the "inevitable" inflation to the insanely negative (CY Leung will attempt to out do his role model Tung Chee Hwa and crash prices by more than 70% or financial armageddon is upon us).
If you find something that is (i) comfortably affordable and (ii) you will he happy living in for the very long term, I would second Loyd's advice. A flat in a very old run down building would not meet these criteria (at least not for me).
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Not so fast, Jim Fit !
If CYL drives down prices, he is going to make many existing HK homeowners very unhappy. Remember, the reaction to the explosion of suplly under CH Tung was not universally positive. He got forced out, because too many people were losing money on their properties. And that policy was desined by CYL (from what I have read.)
I think you will find CYL adding new homes in places far away. His hope would be that first time buyers can find affordable homes (maybe in somewhere in the NT, like Tung Chung), about existing owners would not see a huge drop in their home valuations.
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@ Jim Fit - good luck with holding out for a massive drop in the market. It may (or may not) happen but I wouldn't base my life plans on that outcome. What will do you do if all the money printing results in long term inflation? At even 5% inflation a year, the value of a dollar halves in about 14 years.
It's also worth bearing inmind that CY is already proposing to expand the civil service, he made his career servicing the property industry and he is a Kuk man to the core.
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"50% drop ...if prices did drop would your nerve hold to enter the market? "
That is a very good point from walkup.
For a 50% drop, people will have to be very scared, and those who are selling at 50% will be worried that prices will drop further still. And they will have Very Good Reasons for being afraid.
That's the way market psychology works: Big Fears create Big Drops. And confidence, and good reasons for it, encourage gains.
It is easy to look back at market turns and tell yourself that you could have bought on the lows, and sold on the highs. But it is not quite so easy to do that in real time.
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I bet Bob Dylan owns quite a few properties.
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I reckon Bob Dylan took a pile of money from suckers and then piled it into bricks and mortar. It would be interesting to find out what he actually does own.
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There is absolutely no reason to panic now.
Rental Yields are 3% or higher, and interest rates are 2% or so for mortgages.
If you "sell out" you get almost zero for money in the bank. Whyever should one panic with a situation like that?
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Jim Fit. Tell us where you think prices will be in 6 months. Can you give us a ballpark guess?
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I don't think anyone is arguing that 12 months ago to PRESENT was a good time to buy, in fact, you can contort any period of time as a good time. What does matter is your realized gain/loss when all transactions are done. As people have said in this thread before (and I am paraphrasing), a loss isn't a loss unless you sell. By the same token, a gain isn't a gain until you sell.
What we're talking about is not a specific time window and it's a bit longer term than that. If you can buy and hold absolutely, then you should be fine. What I'm banking on is trying to optimize the highs/lows of the market so I can buy at the best times, and sell before the worst ones.
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A lot of people either have no mortgages or interest rates that are around 1%.
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Trouble is Elsdon, the HK property does not 'trade' like it used to do. It's now made up principally of end-users plus some ultra rich players that can buy on dips. If you intend to trade, instead of buy and hold or just live in the property, it would be better to look at property stocks like Uncle Four suggested not so long ago.
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Ed
13 yrs ago
Lloyd... as you know, that is not correct.
You continue to make these misleading statements even though others have posted data that demonstrates that you are wrong.
You earlier said that over 50% of residential properties are not mortgaged... but forgot to leave out the rather critical... 'of properties occupied by the owners'.
I can't be bothered to dig through this thread (or was it the previous one) where someone exposed your misleading comments by posting a link to an article that demonstrated that you had that completely wrong.
There is massive speculation in the Hong Kong market as evidenced by that previously posted article that indicated there were a very large number of apartments not occupied by the owners - and which carried mortgages i.e. these properties were bought as investments... not as homes...
It would be useful - and add some credibility - if you would footnote your statements with something to back them up.
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Ed
13 yrs ago
Eldson... further to your comments...
HK property prices have no exceeded the absurd levels of 1997...
I can't find an up to date graph that demonstrates this ... but this gives you a good idea of how mammoth that bubble was... http://www.howprofit.com/wp-content/uploads/2010/10/HongKong-Real-Estate-Prices.png
I guess the question is - how much higher can they go? A better question is - how much more money can Central Banks print?
Worth keeping in 1997 there were loads of people who refused to acknowledge the property bubble who continued to buy....
Who were soon enough nursing up to 70% losses on their investments.
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Ed. When the 1997 bubble burst, it burst in about a week. I remember fielding loads of calls from agents trying to off-load property. If this market has been stable right through 2008 then what does this tell you? In the US you had NINJA mortages, in HK post 1997, it was 30% down and we can check your entire credit history including credit cards and loans from other banks.
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"say something soothing to OffThePeak to calm his nerves"??
Why would I need to "calm my nerves", Jim.
I am completely relaxed: living in a debtfree property, with enough cash to buy another 2-3 (small ones) without loans. In fact, I would like to see lower prices so I can find some bargains.
If I sell my remaining property, I may be nervous about how the interest on my deposit is less than rents.
You are welcome to try to talk the market lower. I don't think you will succeed, and I think others who have read my posts know that I "play with a straight bat" here.
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Ed. For a bubble, people need to have over-borrowed. If that isn't the case, it can't be a bubble. It's fundamental, it's like you need a fire for a barbecue. Expensive does not necessarily mean bubble. Property is expensive in central London, Manhattan and Monaco but it doesn't mean there is a bubble. Prices have risen sharply but, in my view, that was a recovery rally. They are only up a fraction from 1997 so it depends on the cut-off point for the graph. The current bubble is in US treasuries. When the money comes out of there, bond holders are going to get whacked on a) the prices they sell at b) the high price of equities if they switch and c) inflation.
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Bond bubble, bond bubble, bond bubble.
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Ed
13 yrs ago
Mallani - of course they are higher in real terms when you factor in inflation... but that is not the point.. the bubble was so massive in 1997 that anything exceeding that now - even with inflation factored in - is IMHO - a bubble...
What are you looking for me to back up? Usually when I post comments I link to supporting articles (much to LLoyd's chagrin because he refuses to read them)
I've provided the graph demonstrating just how far a property market can crash... which was the point I was making...
What would be interesting to see is a more up to date graph that compares property prices - in real terms - over that period ... I can't find one.
When I see prices exceeding their all-time highs... it makes me wonder how much higher can they go....
Lloyd... speaking of bonds... this is flashing across a few sites...
Spain 10-year bond at 7% http://www.marketwatch.com/story/yield-on-spain-bond-yield-hits-highest-ever-at-7-2012-06-14
And Italy is closing in... once the other PIGGS hit that yield on the 10yr they went parabolic... and required massive bailouts...
Between the two of them they owe over 2 trillion dollars... are Central Banks going to print and LEND to them those sorts of numbers?
And I upper case LEND because that is what the Central Banks do - they print - then lend to already insolvent countries... a bail out is not a solution... it just allows the countries to fight a few more days... it just makes their debt burdens even more unsustainable...
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Ed
13 yrs ago
Found a far better graph....
Real or nominal prices ... when I see a line on a graph go straight uphill like that... I smell not just a bubble... but a Hindenburg in the making:
http://media.economist.com/sites/default/files/imagecache/290-width/images/print-edition/20120428_FNC097.png
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Ed
13 yrs ago
Actually I missed that ...
Are you saying the Economist has confused real with nominal?
Somehow I doubt it... feel free to post support that demonstrates they have got it wrong
So if we are too assume the Economist knows the difference between nominal and real prices... then property prices are now significantly higher than in 1997...
My bigger concern is not so much the price but the fact that this has happened in such a short period of time...
Again - whenever I see such a steep graph - regardless of the asset - it is usually a bubble...
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Ed
13 yrs ago
"Such concern looks justified. The Economist’s own quarterly home-price index compares prices in 21 economies. The most recent index, published in March, found that Hong Kong property was then 58% above “fair value”, which we define as the long-run average ratio of prices to rents and incomes. That put Hong Kong second only to Singapore as the most overvalued property market in the index."
http://www.economist.com/node/21553462
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Ed
13 yrs ago
As I have said it doesn't matter if the Economist is right or wrong on real or nominal terms...
When I see a steep mountain like that... I wonder what's at the top... is it a plateau (almost never)... or is it a cliff...
That's all I am saying... nothing more ... nothing less...
But as usual... the perma bulls don't like it when the discussion turns that way....
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I love Ed's graph. Short period of time? It shows a steady, near decade long recovery in prices. Armageddon? Look how significant the Lehman crisis was. You've got to be very accurate to play for those quick dips. Unlike 97 property money isn't so much borrowed this time. Maybe a short downturn and then HK property will come roaring back again. This is money making town, it costs for a seat at the table. Can't pay? On your way.
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Never argue with a troll, onlookers may not be able to tell the difference.
(With apologies to Mark Twain)
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@mallani
Yes, when looking at comparisons between now and 1997, it is often overlooked that the real value of the HKD has depreciated BUT we also have to remember that there was a period of very low inflation/deflation during that time period as well. I'd have to hunt for some statistics but I'm not sure if inflation has averaged 3-4% pa since 1997. Intuitively, I would have thought a bit less?
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1.5% devaluation each year means HKD1.00 at the begining of 1997 was worth about HK$0.80 at the end of 2011 - a 20% decline suggesting that the mass market at least is still below 1997 levels in inflation adjusted terms.
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I see Deutsche Bank has put out a report (June 13 2012) by Tony Tsang and Jason Ching that HK property may fall 'up to' 20% because of CY Leung's new land supply. This follows a prediction of a 40% 'worst case scenario' drop from Raymond Ngai at Bank of America last. They could be right. However, the LGMV view is that they may be utterly clueless given all the money printing, lack of debt and pent up demand. However, I wouldn't buy New Territories property. At the very best, flats there will tread water. Still super bullish on HK side though.
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Anyway, please make a note in your diaries. We should check again next year and see who is right.
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I think walkup3 is playing his hand right. He knows an area, he knows it very well, and I agree that certain areas in Hong Kong are simply too strong to realize a loss. They're relatively cheap enough and resilient to rental vacancies that you can hold through anything short of a nuclear holocaust.
I, on the other hand, can't be bothered with the fussy old Sheung Wan and west of area..
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Ed
13 yrs ago
Countering the assumption HK property will drop....
As long as governments continue to print trillions it would appear that the markets... both stock and property... can continue to move upwards... but make no mistake - there are zero fundamentals driving these markets...
The one and only thing pushing them ahead is a printing press:
Stocks cheer 'intervention'
http://www.marketwatch.com/story/europe-stocks-rise-on-central-bank-hopes-2012-06-15
Debt crisis: Markets rise on hopes central banks will offer help
http://www.telegraph.co.uk/finance/debt-crisis-live/9333028/Debt-crisis-live.html
However... at some point the printing must stop... the trillion dollar question is - WHEN?
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Mallani. I understand your point. However, I think the HK property is becoming more mature. I don't know if you are familiar with London but ask yourself if Chelsea, Kensington or Fulham property would go down if they started building a load of new flats in Barking. Like Walkup said, nothing is 100% bomb-proof, but HK side between Kennedy Town and Taiko looks pretty safe to me.
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Barking = Kennedy Town ?
You'd have to be Barking to live in such a place
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I fail to see why everybody compares prices to 97 and then deduct current prices are inflation adjusted reasonable. 97 was a complete anomaly and a massive bubble. If you look at the centa city index which puts 97 prices at 100 - then consider that at the time property was probably overvalued by as much as 60 % or more - so start from there at a level of 40 and add 3% a year- this brings you to a level of about 60 today. So 40% overvalued.
Incidentally if you look at incomes and rents which really is what should determine property prices then you would probably also come out at a price level of bout 60 - so in my opinion HKG property is well overvalued at the current level of 104.
As we all know this is due low interest rates and speculation - also all of China has now become one massive property speculation market because people has nowhere else to put their cash due zero interest rates and a crappy stock market.
So Lloyd's arguments as to why property is reasonably priced is nonsense. However his arguments as to why it may not go down much are reasonable.
I realise that just because I think its overpriced doesn't mean it will come down.
I am a big believer in reversion to the mean though....
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I know plenty of people who have been waiting for the 30% drop... sold their properties expecting to repurchase.. and instead now find themselves having lost their properties, and even unable to rent in the same area.
Why are the peak 1997 property prices deemed to be unaffordable in 2012? And how does a steady rise in property prices over 8 years equate to a bubble?
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The rise came after a 9 year recession and deflation. China has grown quite a bit over the last decade.
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I'm talking about between 1997 and 2006 thereabouts. Years of deflation and strengthening of balance. Then property prices rise as most of the financial weak holders have been shaken out. Add in another financial crisis in 2008 and strict government measures against speculation, and what you are now left with is HK property owners who are financially strong and don't speculate. They are all buy and hold. This is why it is very hard to find something cheap and why there are few transations in the secondary market.
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Ed
13 yrs ago
Doesn't look like a steady rise to me... it looks like a spike that started with Central Banks (including China) pumping trillions of dollars into the global economy in 2009...
http://media.economist.com/sites/default/files/imagecache/290-width/images/print-edition/20120428_FNC097.png
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Ed. Hong Kong is an entrepot and open economy but just how did this hot printed money come into Hong Kong? Who were the main beneficiaries of the printed money and when did they choose to park all this printed money in the mass residential property market? Okay, it meant lower mortgage rates but I don't think they have been the main driver for the rebound in prices. in my view, the main driver has been solid individual balance sheets. I respect The Economist as a magazine on world politics but it is not my first port of call when it comes to HK property. For that, I try to use my own wits.
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Ed
13 yrs ago
Where do you think the cash came from that has fueled a massive buying binge of mainland buyers in HK?
The PRC government unleashed the mother of all stimulus packages... they pumped enormous amounts of easy money into their economy....
And that has been driving the HK property market http://www.theglobeandmail.com/globe-investor/investment-ideas/breaking-views/mainland-chinese-eye-global-real-estate/article4097040/
In addition to this, Central Banks have pumped trillions of dollars into the global economy... that money is sloshing around causing bubbles in everything from the prices of commodities to property...
We are seeing record prices in places like Vancouver, London etc... strange considering we are in the midst of the biggest financial crisis in modern history... I wonder what is driving those prices?
Are your wits telling you that suddenly in the last two years... the balance sheets of all those rich HK people improved so dramatically so as to result in this massive run up in prices?
Were the balance sheets weak in the years prior to the current bubble?
http://media.economist.com/sites/default/files/imagecache/290-width/images/print-edition/20120428_FNC097.png
Let's also recall how property prices were down 25-30% post Lehman...
So how did that recover so suddenly?
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Ed. Mainlanders are no where near the main buyers in the mass residential secondary market. They only figure in the the luxury primary sector. The so-called 'drop' in 2008 was due to weaker speculators exiting the market quickly at fire sale prices. Once they had left, the people holding HK property was essentially long-term investors with strong balance sheets. I know this is less glamarous then your financial melt-down theory, but it is a much simpler explanation. Later all speculators were driven out when the HKMA introduced the Special Stamp duty. This killed off the secondary market reducing to a series of dribbles at very high prices as buyers were forced to buy from a) someone who didn't need to sell or b) someone who needed to sell in order to be able to trade up at today's high asking prices.
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Ed. Just tell me why the above theory is so poor.
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Hrm.. My question is, where did all this 'new' wealth come from? Assuming it's from the young families growing up and being able to buy new, permitting previous owners to trade up..
We've had an increase in flats in HK since 2008 (based off HKMA figures):
Year # of Loans Made Total $ of Loans Average $ Per Loan
2008 92810 $184,754,000,000.00 $1,990,669.11
2009 96553 $199,295,000,000.00 $2,064,099.51
2010 141993 $324,216,000,000.00 $2,283,323.83
2011 95854 $227,775,000,000.00 $2,376,270.16
Divide transactions by half (1 transaction for 'new entrant', 1 transaction for 'trader up')
Hong Kong workforce is about 3.9M, so that gives us about 1-1.5% of the workforce entering the private housing market each year. Feasible? Looking at average salary since 1997, this isn't the probable case but what else can explain it?
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So where did the increase come from? It wasn't an increase. It was a quick fall and a quick recovery once the fast money ahd left. You are taking the bottom of the sharp sell-off post Lehman as your starting point and Ed is confusing this with hot pribted money post Lehman (as if major US banks want to invest in mass residential HK property instead of repairing their own balance sheets). This was a blip on low volume. In 2008, the property market had just recovered after 11 years of recession and about 9 years of defaltion. People, had been saving for a decade. That's where the money came from. That, plus the fact there are a lot rich people here.
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Ed
13 yrs ago
http://hongkong.asiaxpat.com/forums/hong-kong-property/threads/146934/the-state-of-the-hong-kong-property-market-%285%29/#bottom
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So why isn't the HK property market tanking?
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Ed
13 yrs ago
I would suggest that is because Central Banks are still printing hundreds of billions of dollars...
The UK recently announced yet another major round of QE... and the other day another stimulus plan injecting money into banks...
China is talking about renewed stimulus as their growth numbers are stalling as their massive stimulus is starting to run out...
QE is in the air as Operation Twist concludes in the US... and the economy again starts to grind to a halt....
Japan basically never stops printing and borrowing.
Stock markets and property markets around the world have been buoyed by this unprecedented amount of money printing... there is absolutely no question about that...
And absolutely no doubt this could continue... because Central Banks and governments are not going to stand by idly and allow their economies to sink...
But realistically... just because you don't want a bad outcome doesn't mean you can stop it...
At the end of the day the only way out of this mess is growth... and unfortunately most of the key countries in the world are in recession or are generating the most feeble of growth in spite of all these trillions...
So increasingly it looks like no way out. Endless money printing will always result in a Zimbabwe-like situation....
It's convenient to say the HK property market will drop when this happens... but so will everything else... I guess the bigger question is... if you think the outcome from all of this is bad... what do you invest in?
Many ultra wealthy are indeed dropping money into property - see the London market - I suppose they are thinking 'better to have something for my money if it's to be devalued or wiped out at some point'....
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The equity market fell like a stone, why not HK property? Why aren't property agents phoning me up with great offers? Why is the HK government trying to talk down the market and releasing more land?
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Ed. I'm not just talking my book, my personal ratings for NT property now is 'junk' thanks to this idiotic government which tries to help but makes things worse. I would only pay 3,000 psf for NT property now. HK side, 10,000 psf minimum (with perhaps the exception of Chai Wan).
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Ed
13 yrs ago
Historically property falls after the stock market... why?... because property is less liquid... you cannot just unload a property like a stock by pushing a key on your computer...
Property speculators that I know who have played the market for 20+ yrs tell me that the hit usually comes about 6 months after the stock market gets clobbered (and stays clobbered)
The graph from the Economist looks to confirm that...
Why is the HK government trying to bring down prices? Probably because when they look at the numbers they see 'bubble'... and it is far better to try to ease prices slowly down than to have them implode...
Look no further than the US and Spain to see what happens if you allow a property bubble to grow to outrageous proportions... people were screaming at Bernanke to do something well before the 07 blow up.... but nope... he insisted at keeping interest rates ultra low... looking the other way... and letting the mother of all bubbles happen.
China is also trying to slowly deflate their bubble with policy... because they know that if they don't eventually speculators run for the exits and you have a full blown implosion of the market... and that is far worse for the general economy than a gradual reduction in the asset price...
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Ed - there are some massive differences between the recent US and Spanish bubbles - the most important of which are:
(i) bank lending policies - banks in HK have always been subject to LTV limits on their housing loans. The near complete absense of either meaningful deposit requirements in the US and Spain was a major contributor to the problems tat followed;
(ii) HK banks require evidence of ability to repay. During the US and Spanish booms, anyone could get a lone without having to verify their ability to service it. Here in conservative HK you have to show that you have the ability to service the loan.
Put differently, during the post 1997 downturn when property prices fell 60-70%, no banks in HK went under. Why? Because their lending policies protected them. Today, lending criteria are tighter than they were in 1997, speculators have largely been driven from the maket, property prices (ex luxury sector) are below the 1997 peak in real terms and interest rates are much lower than in 1997. If HK property prices come down, it will not be for the same reasons as the US and Spain (over extended borrowers) or a rise in interest rates - IMHO it will be because of inceased supply and/or a decline in mainland demand (with a change to the USD/HKD peg as a wildcard).
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Basically, the HK market is now solid. However, new supply in NT will lead to trouble in the NT further down the line. This could affect HK side but I'm betting it won't due to a) inflation and b) the almost infinite long-term demand for HK island property assuming no political or social disasters in HK and China. If you don't agree, then remember that Fulham, Notting Hill and Islington used to be working class areas. That's in my lifetime and I'm 48.
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Fulham - Sheung Wan, Notting Hill - Tai Hang, Islington - Tin Hau.
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Yes. Farringdon is a better comparison.
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So what's your argument Jim Fit?
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Fulham - Sheung Wan, Notting Hill - Tai Hang, Islington - Tin Hau.
Barking = Kennedy Town,
since "you'd have to be barking (mad) to live there"
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House prices in Yorkshire look very expensive compared to when I was a kid in the 1970s. They're up by about 13 times.
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Interesting stuff in the Standard today, with Colliers calling a 16-18 drop in small-medium properties over the next twelve months.
Now, while we like to differ with Ed's macro view, it's surely a bit difficult to be this accurate with the problems in Europe as yet unresolved.
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What does Colliers know about small-medium properties? Are they just looking at NT? Maybe in NT but I just don't think people are willing to sell at the moment.
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I'd like to take that bet.
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Ballerz. Flippers were kicked out of the market with the special stamp duty. Just wealthy people and end-users now.
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There will always be people who pull out but speculation is nowhere near what it was and is no longer a factor. It's moved to the commercial side.
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Personally, I don't think speculators are out of the market like you think. You're a speculator, you're still in the market. What makes you think that people much like yourself aren't still in there?
The dumb speculator taxi driver with 5 flats is gone but honestly how many of those were there. It's a lot of real people like yourself still sitting on multiple properties, and I am waiting for your fall.
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That's interesting. I never said all taxi drivers are dumb, just the 'mythical' taxi driver holding 5 flats being heavily over leveraged is dumb. I believe that would be your own inference on the larger taxi driver population.
Resentment? I'm excited. :D
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That's me.. I'm keeping track of which flats I want to buy first at low, low prices when he goes under and the price of interest is higher than his rent.
You could call them incantations.. I'm just counting the monies in my head.
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Jim Fit. The Cheung Kong property is more Lohas Park than Tseung Kwan O (check the address on Google Maps - No.8, Shek Kok Road, Tseung Kwan O, New Territories). Then take a look at a map of the MTR and you will see that Lohas Park is on a spur line and that you usually need to change at Tseung Kwan O (though there are some direct trains). Add in the occasional smell from the landfill and you realise this is hardly a prime location. As I said on the main thread, Tseung Kwan O is where people tend to live if they work HK-side but can't afford prices there. The MTR is quite fast though it involves a change at Quarry Bay/North Point. It's also good for East Kowloon and travelling to the mainland as you can go directly to Kowloon Tong. It's a great suburb but there is a lot of supply there and the only flats that are really sought after are the ones with a direct link to TKO MTR. The rest will just trend along with inflation. I don't see supply here having much affect on HK-side prices in the same way as extra flats in Mile End would not affect prices in Clerkenwell.
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Jim lives in some crazy parallel universe,
where facts and experience emerge from "desperation."
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Jim. Do you assume that the majority of the local population will want to move to completely different parts of HK because it is a) cheaper or b) there is more space? If so, you won't be the only one. A lot of analysts and commentators think the same. Personally, I can't see it. How many New Yorkers would be seen dead in New Jersey? Also, Jim. Could you at least give us a prediction of where the market is heading and when you think it is going to happen? It's pretty easy to play the man.
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Jim Fit. "What goes up, must come down." That is an excellent explanation of gravity. However, prices are not subject to gravity. My father bought his house for 15,000 pounds in the late 1970s and it is now - in nominal terms - worth 250,000 pounds. In real terms, this may be the same, I can't say. yes, the price will eventually fall below 15,000 pounds again when the sun stops burning and earth is eventually destroyed. I really can't see it happening before then. By the way, it's just as easy to say you have a vested interest so I suppose this makes everything equal and the form valid.
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Ed
13 yrs ago
Hmmm... if you bought in 1997 the apple fell rather quickly to the ground... and remained there for the worms to gnaw on for years...
Of course over the course of time property values will generally increase just as the price of an apple increases... due to inflation...
It's all about timing of course... and avoiding buying when there are clear signs of a bubble - which there are in HK at the moment (as has been indicated by govt authorities)
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@ Ed - citing HK Govt authorities in support of an argument is far from convincing :-)
While I will agree that HK prices are high, I have yet to be persuaded that a market which has only barely got back to where it was 15 years ago (1997) in nominal terms, is still (about) 20% below that old peak in real (inflation adjusted terms), has low turnover, low participation by speculators and low gearing levels is a bubble. Most of the people crying "bubble" in public are either doing so for political reasons or because they missed the boat.
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Ed
13 yrs ago
The price doesn't have to surpass 97 in real terms to be a bubble...
Even if it's 20% below that price it is still sky high... because the 97 price was such a massive bubble...
Remember - it crashed 70%... and remained there for years...
That was one of the biggest property bubbles in the history of HK... any price remotely close to that definitely should get the alarm bells ringing.
If you prefer a better reference, I have linked to articles in Bloomberg and the Economist calling the market a bubble...
But let's use some common sense... HK property is the world's priciest... clearly it's over priced... because if it isn't ... then that would mean there are no property bubbles anywhere in the world...
That would be a first
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Ed
13 yrs ago
I am recommending nothing.
I bought substantial property in 2008 here in Bali. It has tripled in price since. I harbour no delusions - this is an insane bubble.... a tripling or even doubling of a property price in such a short period is a bubble.
Am I selling even though I suspect there may be a crash coming?
Nope.
Because I am not speculating - I have just completed the structures and I am not going anywhere. I am sure plenty of people are in the same boat - even if they had a crystal ball saying their home value was about to drop 70% (as it did in 97) they would not sell.
Also because I do not want to be holding cash if (when?) hyperinflation hits due to the enormous and unending money printing that Central Banks are hell bent on continuing with - and are unable to stop without crashing the global economy.
Again I will stand by the comment - HK is the most expensive property market in the world... it has had a massive run up in prices in the last two years - surely a bubble.
There are no fundamentals to support such a run up (there almost never are) - all there is is a massive money printing machine churning out trillions of dollars - turn it off - we crash.
As for your requests to predict a market as I have said, only economists and fools believe they can predict the future- or time a market - I am neither.
But I will say... money printing is not a substitute for real growth... it cannot last.
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Ed. There is one simple fundamental holding up the property market in HK. It's called cash and most of it isn't borrowed.
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You've been repeating this line Loyd, how do you support the claim? Or is it just a guess?
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Based on a) a large percentage of HK properties have no mortgage b) all purchase now are 30-50% down c) all other previous purchase would have been mainly 30% down. Speculators without very deep already shaken out. No NINJA mortgages here.
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That answer in itself is a non sequitor Loyd. You said moneys are not borrowed, yet your number one and number two answers say buyers borrowed to buy.
Secondly, your (a) answer has been proven in previous discussions to be not so. Although a big percentage (maybe 30%) of properties have no mortgage (i.e. fully paid), the much larger percentage do.
Thirdly, who really have the accurate numbers on HK properties? I think you're just guessing.
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If 60% of the non-investment properties have no mortgages, then that's 100% equity. If the remainder were bought with 30% down years ago, I still think there is more than 50% equity in the whole market here - so most of it isn't borrowed money. I think it stands to reason..
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Ed
13 yrs ago
Lloyd... you made the same comment on the other thread... that most property owners are not mortgaged...
And another member posted data that indicated the majority of properties in HK carry mortgages....
So how about we stop making that false claim.
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The majority of end-user properties in HK are not mortgaged. I think it's 60% which sounds about right. Like you said, we have been through this. If you scroll back, you'll find this to be the case.
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"I think it's 60% which sounds about right." hahahaha. No proof whatsoever. Read back and you'll see that 60% is not 60% of all HK properties, but of something else. Com'on give this BS up Loyd.
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Posted by Elsdon:
Posted by elsdon (35 days ago)
[ Message | Report Abuse ]
Just on the 60% of mortgages paid thing.. I posted in the last thread,
reposting for reference..
http://www.censtatd.gov.hk/hong_kong_statistics/statistical_tables/ind
ex.jsp?charsetID=1&tableID=005
2.4M households in HK.
52.7% of them self-occupied, lets assume for simplicity sake, 50%.
1.2M self-occupiers. 60% of them 'allegedly' no mortgages.
700k mortgages paid. 1.7M unpaid. (Assumption: the other 50% of
investor owned homes are NOT paid in full, as that is a horrible use
of capital and not leveraging the ridiculous mortgage rates
currently.)
That's 30% of total mortgages paid, not the 60% which is a misleading
figure.
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A lot of investment properties paid off as HK people don't like paying interest. Very conservative.
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Just be accurate when quoting the 60% statistic. It's 60% of self-occupied homes, not of all homes in HK.
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Isn't that what I said? End user homes?
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Right, very funny Loyd. You're cheating hahaha.
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@walkup4 - I am one of them. All my mortgages are currently costing me between 0.86% and 1.04% pa and are tax deductable. With inflation running at much higher levels, why would I be in a hurry to pay them off.
@ballerz - do you have any stats to sho what percentage of primary sales are supported by second mortgages from developers? My understanding is that it is relatively few these days and most buyers are stuck with either 30% or 50% down payment requirements - but I couldn't find any industry data on point.
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They used to do the 5% down with 25% top-up during SARS and after the 1997 crash (that's how I was able to get into the market) but I think these deals are only offered now in particular cirscumstances - like if a development is a real dog. Also, politically it is not a good idea to offer them and they can still sell the development with 30-50% down anyway. Ballerz. Which development is currently offering 5% down with 25% top-up?
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Beaumount is a dog. Near landfill and even inconvenient for one of the most inconvenient MTR stations, Lohas Park.
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I disagree Loyd, Beaumont is just across the road from existing Lohas Park properties. It definitely is priced lower than 2nd hand flats.
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Whatever description you give to Beaumount will apply to all units at Lohas Park, so why are they priced differently?
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"Beaumont is just across the road from existing Lohas Park properties. It definitely is priced lower than 2nd hand flats."
It is further away, which is one reason the price is lower. A second reason is that CK has plenty of flats to sell, and they don't mind selling them under secondhand - They still make good money
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There is limited supply in Mid-levels and Wanchai and there is almost unlimited supply in the NT. prices in Manhattan and Kensington hold up well, why shouldn't it be the same in HK. The city and the market are now much more mature than in 1997. The demand is also much greater. I will stick my neck out here and say the NT property market has very little influence on HK side prices. NT prices, though, can affect the Centadata Index. Nobody cares about New Jersey property.
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Ballerz. Tell me why the price of a NT property should affect prices in Mid-levels and Wan Chai. How is it possible? If someone offers a cheap property in Barking, it's never going to affect priced in the City of London. People don't sell in the City and move to Barking cos it's cheaper inless they have woken up in the mirning and taken some drugs. No one sells in Mid-levels and moves to Lohas Park because it's cheaper.
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Here's how it works:
Kowloon Station tenants move to Olympic
Olympic tenants move to Tsing Yi
Tsing Yi tenants move to Tung Chung
===
and of course:
Mid-Levelers seeking volume-for-money, when they get their housing allowances cut might move to any of those locations, depending on how much they want to save.
That's how a fall in NT prices hit Mid-Levels
And those who try it, realise their living standards improve, and they tell their friends: "Come and Join us!"
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No one is really talking about tenants.
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Ultimately, tenants and the rents they pay MATTER when you are calculating investment returns.
Also, People trade down, when they think prices are too high.
We are considering it now
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They are a factor but it isn't a zero sum game. A lot of people want to own a flat in core Hong Kong, London, NY. The market isn't completely cut off from markets elsewhere but these core areas do, to a large extent, march to their own drummer.
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Lloyd,
Areas spring up, and/or get gentrified if there is enough demand and income to pay for new high-end areas.
In HK, we even see: Land-reclaimed-from-the-sea, such as West Kowloon
Transport links are also bound to be a key factor in an interconnected world, where people are short on time
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So now that Adam Cheng's soap opera has finished, the stock market can return to normal. Good to see that the latest European financial crisis had absolutely zero effect on the HK housing market. Should start to head a bit higher now. having said that, the political situation here is looking pretty ropey at the moment.
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THere isnt much available in that price range - and what is, will likely be old, and maybe have risen by over 10% in price in the last 12 months.
If you mention more specifics, I may have a more specific comment to offer.
"Boots on the ground" - is a good idea. Get out and have a look, see what appeals to you, and what local property values are.
You might want to focus on areas with walking distance of the XRL.
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This AX thread that I started on Olympic Station :
http://hongkong.asiaxpat.com/forums/hong-kong-property/threads/150218/the-olympic-station-tkt-thread/
... may be helpful in your search.
There's other similar info available on Kowloon Station and the XRL:
http://tinyurl.com/GEI-XRL
If you share what you find on your search, and post it here (or on the Olympic thread), you may get some useful reactions from others keeping an eye on these areas.
And others here have specific knowledge of areas like Sai Yun Pun, Kennedy Town, and Fortress Hill. So don't think that there is only one area favored by knowledgeable observers here.
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hkby - I doubt if you would get a consensus on this board. FWIW (and without claiming any great degree of knowledge on the area), I would not be interested unless I got a net yield on gross cost of at least 3%. Gross cost = purchase price, stamp duty, decoration, agency, legal fees and anything else paid up front and Net yield = rent after management fees, rates, government rent, provision for repairs and maintenance, vacancy and any other expenses (like mandatory window inspection which is currently required on many older buildings). In other words, I would not pay a penny for the possibility of being taken out by a developer - the purchase has to make sense even without that. Also, I would only buy in a building that has a proper management company.
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HKBY,
Are you talking about the Man Wa buildings?
If so, I have looked into those and have some comments to offer.
The first one is that you must avoid the 3-4 buildings which were built during a water shortage, and they mixed concrete with salt water. The concrete there is "crumbly", and that will mean some headaches for any owner.
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The main problem with the MAN buildings is the high density.
Any developer who wants to buy them, would have to pay a lot - some agents say $4 billion, for a not very large building site. The new project would be taller, I think, but less dense (on each floor) so it would not be a highly profitable project.
My thinking would be if you find something nice for own use (i would focus on the properties facing the Coronation), and the price is right - you can buy it, and live there and enjoy the location. But I would be very fussy about condition of the concrete, the view, and the light in the flat. You want something cheerful to live in.
I have found that the HK market will often underprice some of the cheerful flats with a good view. But sometimes you need to see the flat at different times of the day, or even live there, to really know how cheerful it is. (HK agents seem mostly incapable of understanding this concept well, so you need to spend time looking, to get it right.)
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Not in the four buildings with crumbly concrete due to the salt water.
(the agents should be able to tell you which ones I mean.)
Without the density issue, it would probably be a good bet.
We are expecting a similar return at Cosmopolitan Estates in Tai Kok Tsui,
off Ivy Road. The buildings are younger, and there is a different risk profile.
But the cheap sellers seem to have left the market, and there is little supply.
The Man Wah location is probably better, but I do worry how easy it will be to
redevelop them. Also: Take a look at Prosperous Garden, and see if you can find a
keen seller there, or wait for a weaker market.
Or if you are really convinced, ignore the naysayers,
and find the best property you can.
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