my agent who is really nice and not into hard selling by showing me flats that do not fit into the required category, haggled for me with three landlords today.
their asking prices were around 1.6 - 1.8mil so i offered my bottom price as 1.5mil which i thought would be ok to ask for as it isn't a huge difference from the asking prices. the landlords said that their bottom prices is 1.58mil. do i haggle for 1.5mil or buy it for 1.58mil? the flats are between 400 sq foot - 500 sq foot and around sai ying pun/kennedy town.
my friends are telling me to wait till CNY for the prices to go lower but i need to move out from my flat in april. i wont have enough time to apply for the mortgage and go to the lawyer, etc if i want the property's keys in my hands by april. also, i dont think the prices which are already low like 1.6-1.8mil would go any lower. am i wrong on thinking like this?
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Hi Missy your friends may probably be right, but with your budget, target area which has good turnover and size of flat and a having piece of mind with your timing it should be okay for you to go ahead, even though many are saying don't buy now.
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hi sweetsue. thanks for your reply. i do think it's a reasonable price considering the location/size/future mtr/etc. and i know many are saying not to buy now but i've got some personal commitments so i have to take the jump unlike the rest of hk. i dont think that 1.5 - 1.7mil flats are going to go any lower but the high priced ones like 5 - 20mil (and more) will def go lower in coming months.
just wondering whether i should haggle the asking price to my bottom price or just buy the 1.58mil flat. hmmm. i will keep on wondering for another two weeks but would appreciate some input.
ta!
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thanks, walkup2 and sad sack. i will try for a little bit less since i do think that these flats are already in a low price range. the two that i liked are also partly-furnished like they come with double beds and built-in wardrobes. i'll wait another week and make the offer again.
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thanks, lgmv and sad sack. i would have waited if i didn't have personal commitments. the prices which are in 1.5 - 1.7 mil range for 400 - 500 sq foot in sai ying pun/kennedy town are already low (i think) and i agree that prices will def go lower in coming months but will only affect those high priced properties and not 1.5 - 1.7 mil ones.
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I think you are making the wrong decision personally. Doesn't make sense to buy now and gamble when the entire world is sort of uncertain. Up to you though, it's your life. Regardless of whatever 'personal commitments' you may have, everything in life has a compromise. Good luck.
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thanks, elsdon for your 2 cents! as i have mentioned before, i could wait but i cant. dont you think that if i had a choice to wait, i would wait just like the rest of hk? how lower can an OK-sized flat on hk island go than 1.5 mil in another 6 months-12 months? 1.4 mil...1.3 mil..1.2 mil...1 mil...500K...50K...500? if the landlord is not budging from his bottom price of 1.58 mil now, he is hardly going to budge from his bottom price even if the markets fall.
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LGMV writes: "What if we get some good news out the US?"
What possible good news can you get when the US shed over 500K jobs just last month and their "unofficial" unemployment rate is approaching 12.5% (remember, if you have been unemployed for more than 12 months, then you are classified a 'discouraged worker' and no longer considered in the 'official' unemployment rate.
This is going to be one long and slow recovery. Property in HK is highly unlikely to make a 'V' shape recovery in the next 12 months in my opinion.
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Sorry a long post. If people really knew what they think they know (eg 99.9 chance - what does that make it, much less than 99.9%?), they would be gazillionaires by Friday (last year). I suspect that they aren’t, so keep that in mind. Neither am I. But have bought and sold a few properties, which is probably a few steps more than most who have commented already.
Suggest you ask friends, family and colleagues who bought in recent years what influenced them and what did they learn – those who bought in ‘97 (ouch, hot hot) and SARS (ka-ching, cool).
Did a 5% discount make any difference at the end of the day? It could as $80k/5% is a lot of dosh, but you are either buying well or aren’t. 5% difference is unlikely to turn a bad investment into a great one (or vice versa).
Assuming you have made your decision, and have run the numbers (buy v rent) and checked them thrice, I would say an additional 5% discount in today’s market should only take a few hours of negotiation. If the agent can’t close the deal, find another agent or more properties to look at.
Keep in mind that there ARE inside deals - agents and families and friends who own/sell properties. It happens. Be sceptical. Talk to other agents around the district. I remember once being quoted 33% above market.
Treat it like you are buying for your mum or someone like that. Don't get emotional, if possible.
Don’t blink – agents aren’t your friends, though I like some of them. Still, it is business. Say, $1.5m, that’s it. For $80k you can afford to spend more time looking and a few months in a serviced apartment – that’s a year’s imputed rent at 5% yield (what is the rental yield?). Agent and seller will blink. Like all the scaredy-acts on this forum (buying gold – if they are right, suggest we all buy canned beans and soup). People think the world is going to hell, maybe. Or maybe just might be time to see how much bang one can get for a buck.
Apply for the mortgage in advance – mreferral will help I think. Std Chartered used to give pre-approval – don’t assume you will get finance that is the problem today, banks won’t lend to mere mortals. Once you sign typically no going back without losing your deposit. Get advice on how to buy. Any building or fire orders? Can you pay interest of up to 10-15% if that were to happen?
Also prices could easily go below $1m (eg SARS), but why are you buying? Just don’t ever be a forced seller. I have paid for my place with imputed rent, with the naysayers staying on the sidelines throughout.
Finally I will take the bait: (1) “all rent money” is NOT money down the drain - it is the opportunity cost of living in a place. It can be more economic to rent than to buy, but both are a cost. (2) It ain’t gambling if you do economic analysis of the cost of rent v buying. Uncertainty yes (um, that's why it is called risk-reward); gambling no. Suspect too many comments from people who either got burnt during ’97 or have never bought, and of course spruiker extraordinare Loyd (notice that he screws the price down, so he too is not buying at any price, just having a bit of fun - he merely is on the other side of the trade - kind of like is HSBC cheap today or not, one party sells and the other buys and we are none the wiser as to its direction tomorrow).
Please do update us with what you did as other should find it of use. Remember buyer's remorse kicks in pretty quick the first time, keep your decision making notes handy - is it compelling or not? If not, wait till it is. If it is, move forward. Note that you can easily get a lease for 6 months these days, likely in the building you are looking at. That can help work out which flat to buy! But you seem convinced to buy, just the price. A good agent should fix that by 5pm as someone will want to sell today - if only to buy into shares, they are already 50% off, nice.
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thanks, lgmv. i do think that the bottom price from the landlord is reasonable since the flat is near to the park, seaside, bus stops, tram stops and other local amenities and the best part is the part-seaview from both the bedrooms but i'm hoping that the agent will do her best in getting the flat for me for 1.5 mil even though the landlord is not budging even after many offers upto 1.55 mil. i'm looking at more properties tomorrow and in the weekend so fingers crossed that i come across a nice flat for 'my' bottom price.
thanks, spaceren. yes, i could lease the current flat for another 6 months but i'm 4 months pregnant and i want to get everything sorted out before the baby comes out. once the baby is here, i dont think i'll have spare time to keep on looking for more properties. i'm also working full time so it's a bit difficult to keep everything organised after the delivery of the baby. i do appreciate your very useful post though! i might have to change my agent because she is nice and isn't aggressive as some other agents i've come across so i'm guessing she isn't being aggressive to lower the price with the landlord(s) either. i'm not waiting for the market to go lower as i dont think my baby will be able to wait another 6 months/1 year to come out. anyhoo, i'll keep on looking and see how it goes. :)
btw, BEA and BOC did the valuation for me and the flat with part-seaview is worth $1.6 mil so i do think it is fair enough of the landlord to not budge from his bottom price. what would you think of this if you were the landlord?
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KM - just worry about your side of the deal (negotiating 101). I agree pretty much with LGMV, if you like the flat take it - but that assumes the numbers are compelling. And an agent is required to take your offer to the other side. If they won't, move on immediately. There is fear now (not quite SARS but pretty close I'd say - who knows next week), so bargain hard (takes a little time for property owners to feel the fear and act decisively, but they do, it is HK!). But don't be silly and try to get the best deal ever. When something is cheap, it is cheap even at 5% more - esp if pregnant and a definite timeline. Is it cheap (ie run the numbers)? Ultimately though most simply split the difference, it seems to work for most deals I have done (science goes out the window and everyone thinks they win!).
SS - no need to guarantee anyone here, you must be able to find a comparable share and short it. I'd love to hear what you have done or will do (getting my teeth ready to grind with envy as I am wrong yet again).
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bing2
16 yrs ago
the flat cannot go any lower than 1M in the worst case scenario. having a peace of mind when you are delivering a baby is worth much more than 500k. you and your baby will have a home....hmm i wonder if you could put a price tag for that. you may lose 500k in a few months as 100% guaranteed by sad sack but to you have 20 years to pay that 500k. if you can hold on to it long enough, the market will eventually go back up especially with the new mtr. if you have a steady job, i would say take it. it meets the bank valuation- price is very reasonable....
sad sack, your prediction is as good as anyone else's. although there are many indications that the economy is in really bad condition around the world but there are also joint efforts and collective measurements by world leaders to solve this problem, which we never saw before. your guess is as good as anyone else's. the truth is no one knows what's going to happen in 6 months time.
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thanks a lot for the posts. so far, i have seen 28 flats and will be seeing more this weekend. if anything catches my attention this weekend then i'll make an offer. i'm picky and everything has to be right with the flat (size/layout/location/age of the building etc etc) so the flat for 1.58 mil is the nicest i have seen so far. my hubby is pickier and he also gave me the nod for this flat. i just want the landlord to budge a little lower.
well, i dont want to keep on ranting about the same thing so we'll see what the results will be like this weekend. hope luck will be on my side! (fingers crossed) thanks once again for your posts! :)
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Hi Kissy-Missy. not sure if you have already bought your apartment - and you already received good input from others - but i just wanted to share my experience with you as someone who was also in a similar situation.
We started househunting when I was still pregnant (end-2007) as we wanted to upgrade to a bigger place but didn't find anything suitable so after a couple of months, we stopped (as i was almost ready to deliver!). We resumed househunting again in April/May 2008 (a couple months after baby was born) but prices were too high and we couldn't find anything we liked. Of course, we were keen to move so there was an emotional element to the whole buying exercise and a couple of times we did make an offer but the owners weren't budging and so (luckily) we didn't end up buying at - what is now - peak prices. While we certainly motivated to buy, what kept us from "leaping in" was the fact that we had put our own apartment up for sale and there was very little buying interest, which alerted us to the fact that the market in April of 2008 - while prices were still very high and owners holding firm - was softening (despite what agents will tell you at the time.)
We ended up buying a place in early Nov. It was much larger (20%) than we originally aimed for with our budget, and the price was near the bottom end of what we budgeted for. While we do not expect our price to have bottomed out by any means, we did rationalize the buying as it was something we needed (we really don't have enough space right now and we want to move in by mid-Feb 2009 for a variety of reasons, incl allowing my father from overseas to stay with us so he has more quality time to play with our son).
Now a word of advice (hope it's not too late). The bank valuation should only serve as a guide. Bank valuations can be over or under, depending on the property in question. For us, we bought an older, large (1500 sq ft) flat on Conduit Rd (midlevels) which in good or bad times have only half a dozen transactions a year. Since the bank refers to past transactions as a guide (as well as recent market transactions in the area), in a falling market, they tend to value higher, those flats with fewer recent transactions. (Whereas highly transacted properties - like the Belchers/Bel Air - will tend to be valued lower than asking prices). For our flat, the bank valued it at almost $1 million MORE than what our (accepted) offer price was.
Finally, here are my two cents on your situation: I think your offer of $1.5 million and the asking price of $1.58 million is close enough that a good agent should be able to close. (Having said that, I know one friend who missed out on a good deal in Tai Koo Shing during SARS as he would not budge on the $50,000 gap bet his offer and the asking price. He still regrets it today.) Maybe you can offer something in-between? (For us to close the deal on our flat, we lowballed the offer price and the owner came back with something reasonable, and we ended up offering $100,000 above our initial offer price, so both parties felt good about the transaction.
Whatever else, be sure to lock-in your mortgage from a bank first before you commit to anything. Banks are also taking longer to process mortgages so be sure give yourself a comfortable settlement period, so you're not caught short in case the bank takes longer to come up with the mortgage money.
Anyway, good luck!
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hi housed, thanks for the post! well, the seller wasn't going to budge and after seeing lots of flats in 3 weeks time, i didn't think i can get a better priced for an OK sized flat and after seeing more flats, my heart just ran back to the 1.58 mil flat. the seller had bought it for 1.8 mil in 1997 and he was selling it to me at a loss so after 'trying' to haggle again and again, i said OK to 1.58 mil.
i have just signed the initial S&P with the agent and the seller is signing it tomorrow. i'm getting the mortgage from BEA since i got recommended by a good friend and BEA managed to give me a good deal (after looking at my bank statements/credit card statements/pay slips/other necessary docs/etc)..well, better than what they offered at first! BEA and my lawyer both said that recent transactions for mortgage approval have been successful within 1 month so i hope i can get the mortgage within 2nd week of feb (the completion date). BEA has all my necessary docs so they said that they will process ASAP knowing that i have a tight deadline esp. with all these hols coming up!
my only worry now is about not getting the mortgaged approved within the completion date or worse, getting my application rejected!
one worry after another..my baby is probably going to be the most stressed out baby in the world. +.+
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why don't you apply in another 1 or 2 banks that offers free processing of mortgage application? e.g. DBS, standard chartered or China construction bank.
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hey missy...my 1.5 cents worth...its a no brainer for u to buy something if you make a medium to long term commitment to HK..as someone said here, if you are paying rent, its dead money...a friend who works in the property industry in HK said to me "its a no brainer if you are paying rent and want a place to live"...so, if you can afford the deposit, it shld be a no brainer to buy a property...and esp one at that lower end level (HK1.5-2.0M)..,you are insulated from property drops bc u are paying for your own mortgage (see below)...
my fren told me that he had a client who was & still in HK...for 10plus yrs...in that time, he'd paid rent and effectively paid someone else's mortgage...so, if he invested in the prop, he'd own it by now....
so, theoretically, if you bought for HK1.58M, and if you're paying HK15K/ mnth for a mortgage...then per annum this is: HK180K. so, if you hang onto your prop for 1 yr....you're insulated from price falls of HK180K (ie thats 11% fall)....so, after 1 yr, even if you sold your prop for HK1.4M, you broke even...but this is worst case scenario....
so, if you can afford ur deposit and mortgage repayments, buying is a no brainer...and at those lower level purchase prices, as u said, prices arent gng to drop drastically....i've been scouring the local HK papers, sites, and agencies for 400-500sq ft apartments at the HK1-2.5M range...and there's not much good quality ones around..so, if you've found something u like...I say go for it !!
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Jon_99, there is a flaw in your breakeven logic. Assuming the interest component of the mortgage was HK30K over 1 yr, you would only "break even" by selling a flat costing HK1.58M for HK1.4M if you were previously paying HK210K a year in rent, and that's ignoring fees and taxes.
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eh? if you're paying 15K/mnth in mortgage payments, ...thats 180K / yr right? or have i got my sums wrong? 15,000 x 12 180,000. Am just talking abt the mortgage payments...if you paid 180K in rent (and at 15K/ month, thats quite cheap)....you'd be paying someone else's mortgage. We dont really care abt whether its interest only or interest plus principal..its an all-in mortgage repayment...
if you want to pay for my mortgage of 180K plus plus / year...pls get into touch with me, and i will buy a property and you can rent it out from me! hahaha
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think about it. if you bought the flat without a mortgage at all then your monthly repayment would be zero. if you then sold the flat in a year for 1.4 then would you have made a profit? probably not, so how could you break even by having a mortgage?
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um....if you bought a flat without a mortgage...u probably dont need advice on this column right? cos u've got the cash.....its the difference btw renting and buying w a mortgage...cashflow vs capital gain
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Being IN TUNE with the economic uncertainty which I believe is a certainty that more bad news is on the way clearly points to further bad news globally.
Read the Property Correction Link which we have been posting on for maybe a year?
Q309 HK property will be worth looking at! There is always a HK owner who needs to dump the property. Waiting and explaining the waiting to your agent is the best thing to do. 85% of the agents will be driving taxis soon anyhow.
At 800K that's not allot of downside but relatively speaking maybe it is for you. Either way, throwing money away is silly. Put it this way, I was looking at a house for $26M in April. The last house that sold for $23M in end Feb. Asking is now $18M. I plan to purchase this property for $12-13M in Q3.
However, if you need a high ratio mortgage, these will be begin drying up so you may find that at the lowest entry price you cannot qualify for the downpayment.
When the STUFF hits the fan throughout 2009, banks are going to get real tough on lending. Here's an idea, RENT! and there are some really cheap one's out there. Take the diff and keep it dry for some real returns on other investments.
Realestate for the first time in 50+ years may not be a good investement option, just a home where the only reason to buy is if inflation kicks in and rental exceeds purchase and carry charges. I dont see this happening after the bottom or 3-5 years out honestly.
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thanks for your posts.
just a quick re-cap: after lots of haggling, we agreed on 1.58 mil and the lawyers and bank are already involved. i couldn't wait for Q3 because i'm pregnant and i chose to get a property before the baby is born. the bank said OK on 80% mortgage and is currently reviewing my docs to pass to HKMC. i'm waiting with my fingers and toes crossed for HKMC to approve the mortgage application before the completion date.
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thanks LGMV. i can pay the mortgage, no doubt about it! please please please let me just worry about the HKMC approving my mortgage application before the completion date, for the time being. >.<
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lace
16 yrs ago
Fingers crossed kissy, I know the feeling. We went through all that a few years ago - with the threat of a huge penalty over our head for every day the approval was late. The place we bought was owned by a bank, they put that lovely little clause into the provisional agreement. We had to out weight that with steadily raising prices at the time and the fact that other places in the area we bought were more expensive (private landlords raising the prices by the hour in late 2003/early 2004).
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If the bank has already accepted the 70% mortgage loan, and only the 10% covered by HKMC, I will not be worrying about it. It is good as approved already. HKMC is very supportive at this time to support the HK real estate market.
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thanks lace and elysium168. it is good to hear positive words when you are full of worry! as a first time buyer, i was/am completely clueless how everything works but taking one step at a time and all the comments on these forums have helped me in a lot of ways. i'm signing the final S&P agreement on monday. i'm nearly there to get that property in my name..nearly! :)
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yeah, missy...plus the contract/ asking price is not too high...so the additional 10% shldnt really worry the HKMC...its not like they are worried that you cant pay the mortgage..or the price is gng to massively drop on a HK1.58M property...u shld be fine...
congrats..and at least u dont hve to worry abt paying rent now...its a good medium/ long term investment..well done, and happy new yr
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kissy...what is the loan period that you applied for your mortgage? have you made some calculation if it is worthwhile to go for 80% mortgage loan or squeeze yourself to come up with 30% DP, and settle with 70% loan directly with the bank only? you will find that the premium for that extra 10% loan is quite high if calculated as percentage of 158K that you are trying to get from HKMC. also, by staying out of HKMC, you have possibility to rent out the unit later by only asking for bank consent.
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thanks for the comforting words, jon_99 and happy new year 2009 to you too!
elysium168, i have applied for 20 years. i will be paying 1.4% premium to HKMC. since the deal has already been confirmed with the bank for 20%, i don't want to go back and tell them to change it. i kind of feel bad asking them to change it since i am already being a pain chasing them to speed up the process due to so many holidays in dec and jan. *_* thanks for the advice though! i'll keep in mind for future transactions.
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The term Haggle,
when you negoiate my rule is someone will cry and it won't be me.
You stick to your price if they say a number you go below your offer then they shall get the message that your offer is the offer they should take.
But as with everything be prepared to walk away.
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I would wait. The market is heading lower still.
It depends also if this is a unique flat and rarely comes up for sale. if there are others similar to it on the block then wait. You will probably manage to buy it for 1.3 mil in the summer.
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Hi Kissy.Missy,
What is BEA's rate quote, and are there material differences amongst the banks these days?
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hi walkup2, the new apartment is in kennedy town (sea-side).
hi boobert, i would have waited if i could. more details can be found in this thread.
hi wolves306, not many differences amongst banks but some banks did offer cash rebate while some didn't. some banks quoted 3.5% while some quoted 3.25%. i still need to deal with the home insurance. i'm hunting at the mo. may the best deal win!
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thanks, walkup2! i agree that it is better to get the insurance with the mortgage provider. my friend got the first annual fee waived by BEA so i'm hoping to ask for the same deal. nonetheless, i'll poke around other banks too. :)
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thanks elmerthe1st. i will ask BEA and other banks regarding the insurance. came across few threads with good words on kwiksure so i will contact them as well.
ibubapek, BEA said that they will pass my docs to HKMC this week because they were waiting on the valuation report. i just hope that the HKMC will approve within the completion date.
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