Hong Kong property outlook - and Data Base

[drbubb]

(I received this message by email):

 

This articles says a 30% drop in HK residential in 2016 is possible.

Commercial seems more stable.

 

Hong Kong Residential Sales Plunge 70% in February

The property slump in Hong Kong is showing very few signs of abating.

Residential home sales are now at a 25-year low. Bloomberg's Sree Vidya Bhaktavatsalam reports...

VIDEO at link

==

(To which I responded):

 

30% - 40% from the Peak (Sept. 2016) is possible.

 

But I don't think it will all happen in 2016 .

Based on the cycle, I think it will take 3-5 years to 2019-2021

 

Look at the different points in the Cycle between HK & the USA:

 

I think trading-the-Cycle will work better in an undervalued City like Philadelphia.

Rather than say NY City

[leviathan]

 

Saw this picture on another forum. It looks uncannily like the Hong Kong Property chart until the last two years. I think HK has missed out on the last two years of the mania that you normally get in an 18 year property cycle and Vancouver certainly has had I suspect because of property cooling measures aimed at protecting the banks from a subsequent crisis. I think we can guess what is coming next for Vancouver - less clear what it means for HK?

 

My own FWIW is I there is a significant chance HK property prices will reverse higher shortly given the bounce in developer shares which seem to have broken through the falling trend line to the upside. Will property prices follow or is the downside momentum too strong without the removal of the cooling measures? Will HK follow London's 2009 lead and reverse higher when all experts are calling for further falls. Is the current property policy a vote winner or will it get unpicked in the elections coming in 2017?

 

Lev

[drbubb]

stranger things than that have happened.

personally, i dont expect more than a small bounce

[drbubb]

For those who thought HK Property would always be Prime, a blue chip Safe Haven...
take a look at this article from today's SCMP:

New foreign real estate investors may turn their attention away from Hong Kong to other developed markets such as Singapore in a bid to remove uncertainties that include political influence from China, says UBS Asset Management

That’s a major reversal of a few years ago, when Hong Kong and Singapore were both classed as safe havens Asian, which helped them to attract investment from abroad, according to William Hughes, global head of real estate research and strategy at UBS Asset Management.

“Now, Hong Kong is a bit different than Singapore,” he said.
China’s rising political influence in Hong Kong has eroded the city’s independent, he said.
One consequence is heightened uncertainly, which means the city’s property market would become more domestic driven as foreign investors pull out.

“This is the separation in Hong Kong and Singapore recently. Singapore has a high level of foreign investment and Hong Kong is becoming more towards domestic investment,” he said.

. . .

 

Previously, Hong Kong property prices were driven up by an influx of capital, which compressed yields to 2 to 4 per cent a year, compared with 5 to 6 per cent in US and Europe, he said.

If foreign investment tapers off, he said the weakened demand could help to stabilise property prices and improve investment yield.

Hong Kong home prices have fallen 13 per cent since its peak in September.

==
> http://www.scmp.com/property/hong-kong-china/article/1937061/singapore-looking-sweet-foreign-investors-turn-away-hong

Before the downturn is over, probably in the 2019-2020 window, the confidence in HK may be further shaken.
BTW, I reckon that Singapore is still in a cyclical downtrend

[drbubb]

Charted: Hong Kong’s housing market suddenly has echoes of the SARS era

.

Prices are plummeting too. Centaline Property’s Centa-city Leading (CCL) Index, which tracks used-home prices in Hong Kong, has dropped 13% from September’s historical peak to its lowest level since 2014.

 

 

That’s not to say things are cheap—Hong Kong remains the world’s least affordable housing market, when based on income of local residents, thanks to buyers from mainland China, who continue to see Hong Kong property as a safer bet than stock markets, yuan, and property at home.

But this flow of money has been slowing, following Beijing’s crackdown on corruption and overseas investment—and it may never come back. Analysts at CLSA predict Hong Kong’s housing prices will drop another one-fifth in 2017.

 

There is no sign of a recovery in Hong Kong’s home prices this year, and the “best expectation” is that the CCL Index will fall to 120 points in the second quarter, down another 6% from the current position, said Wong Leung Sing, senior associate research director at Centaline.

The Hong Kong government—despite a weak economy both locally and in mainland China—appears to have no intention of relaxing certain policies to boost sales, Wong said. One example is the transaction tax, implemented at the end of 2012 in order to curb speculation. Under it, home buyers must pay up to 8.5% of a home’s value if they’re Hong Kong residents, and up to 15% if they’re not.

 

Sales of small and medium units are worse than those for luxury homes, because the economic slowdown hit the middle class harder than the super rich, Wong added.

==

> more: http://qz.com/656772/hong-kongs-home-market-wont-recover-anytime-soon-charted/

 

[drbubb]

DAIWA research

 

RECEIVED by email:

 

attached is a link which you may or may not have seen in the past.

Nevetheless, the research report on the HK property segment is pretty good based on all the data used to compare HK real estate over time.

http://asiaresearch.daiwacm.com/eg/cgi-bin/files/thehongkongpropertytoolkit_130916.pdf

[Erewhon888]

http://www.bloomberg.com/news/articles/2016-05-11/hayman-s-bass-says-hong-kong-property-market-is-in-free-fall

 

 

Kyle Bass, the hedge-fund manager who’s wagering on a slowdown in China’s economy, said Hong Kong’s property market is in “free fall” and the credit expansion in Southeast Asian emerging markets will unravel.

“Hong Kong’s in a worse position than it was in prior to the ’97 crisis today,” Bass said at the SkyBridge Alternatives Conference in Las Vegas on Wednesday. He said credit in Asian emerging markets has grown “recklessly,” citing Malaysia and Thailand.

Hong Kong property prices have declined and sales are hovering near a 25-year low as the city grapples with the repercussions of a slowing Chinese economy. Home prices have dropped about 13 percent from a peak in September, according to data compiled by Centaline Property Agency Ltd.

 

[drbubb]

"

While the hard landing that Bass and his fellow panelists are predicting for China has yet to crystallise, Hong Kong home prices have already been dropping fast this year.

The city, which had seen housing prices rise by more than 150 percent over the seven years ending in 2015, saw the home market begin to decline last year.

This year prices have continued to drop with top-line developer Swire Properties offering 4.25 to 5 percent discounts, and up to 7.5 percent cash rebates to buyers of its Alassio project in Hong Kong’s Mid-Levels area, bringing the price of homes in the project down to 20 percent below a neighboring development in the prime location, according to the South China Morning Post.

Other top developers such as Sun Hung Kai Properties, Wheelock Properties and Kerry Properties are also said to be slashing prices in the city.

Home prices citywide have now dropped 13 percent since September, according to a recent agency report. Last week, Goldman Sachs real estate analyst Justin Kwok said in a note to investors that rising interest rates and other factors would contribute to a further 20 percent drop in housing prices."

==

> http://www.mingtiandi.com/real-estate/finance-real-estate/hk-housing-in-free-fall-and-worse-than-97-says-kyle-bass/

[drbubb]

Goldman Cuts Hong Kong Property Seeing 20% Drop in Home Prices ...

www.bloomberg.com/.../goldman-cuts-hong-kong-property-seeing...

May 4, 2016

Hong Kong property stocks were downgraded by Goldman Sachs ... at the SkyBridge Alternatives Conference ...

 

"Goldman's forecast is not the most bearish"

[drbubb]

GETTING OUT OF DODGE

 

 

(comment on a thread about the Philippines):

"I believe that the investment return numbers will have to look pretty good before investing in Philippines. I do not believe that 8-9% gross yields would be good enough. For example, certain cities in the US property market are realizing much higher yields with less risk"

 

RESPONSE:

My own experience is this:

+ Hong Kong property prices are down 12% since the sale of my flat closed in Sept. 2016

+ The Philippines condos I have purchased, are up: 10%, 5%, and 5% (approx.) since purchase

+ Two houses in Philadelphia are generating 11%+ pre-tax returns, which showing approx. capital gains of 30% and 10% (per Zillow valuations)

In hindsight "getting out of Dodge" (Hong Kong property) was a smart move*. And I am looking at Makati, Philippines as a place to have a similar standard of living as Hong Kong, but at a much lower cost. The biggest surprise so far has been the rapid gains in Philly. I want to buy more there, and prices have moved up so fast, I am being cautious now.
=== ===

*Did you see the articles on HONG KONG on pg. A5 of yesterday's SCMP?

+ City's GDP growth at slowest in 5 years
GDP grew at just a 0.8% rate in Q1-2016, and the official forecast of 1.5 percent looks like "an uphill task". Visitor arrivals in March were down more than 10% year-on-year

+ Harvard professor, Niall Ferguson, sees HK as being stuck between two poor choices:
: Economic suicide, by trying to go independent (as falling on its face), or
: Playing Beijing's game, which would mean the abandonment of historical freedoms

Do people reading this, still truly believe that HK will always been seen as "the safe choice"? The risks are increasing imho, and the 2-3% net yields, and ongoing capital losses in HK, do not look "safe" at all to me. But i realize that if you buy into conventional thinking, you may be comfortable brushing aside the realities that I keep pointing out.

Why do you think conventional thinkers perform so poorly? They cannot foresee "out of the box" risks, which my cycles help me to anticipate.

[drbubb]

THREE Hong Kong Estates

...and the gap remaining above the 2008 High in Property prices

 

Sorrento - at Kowloon station

 

$13,734 to $12,000 : would be a drop of -12.6%
This comes after a 160% Rise, from $7,300 (in 2009) to $19,000

 

Metro HV - near Olympic station, one station from Kowloon Station

 

$8,836 to $4,900 : would be a drop of -44.5%
This comes after a 184% Rise, from $3,800 (in 2009) to $10,800

 

Caribbean Coast - in Tung Chung, about 40 minutes journey from Kowloon station

 

$6,146 to $3,300 : would be a drop of -46.3%
This comes after a 204% Rise, from $2,500 (in 2009) to $7,600

Sorrento can get there easily (to the old 2008 high), but probably not the others.
These charts show how the cheaper properties have outperformed - so much for the idea of buying only the most prime locations! (that expensive agents foisted on people)

[leviathan]

 

Saw this picture on another forum. It looks uncannily like the Hong Kong Property chart until the last two years. I think HK has missed out on the last two years of the mania that you normally get in an 18 year property cycle and Vancouver certainly has had I suspect because of property cooling measures aimed at protecting the banks from a subsequent crisis. I think we can guess what is coming next for Vancouver - less clear what it means for HK?

 

My own FWIW is I there is a significant chance HK property prices will reverse higher shortly given the bounce in developer shares which seem to have broken through the falling trend line to the upside. Will property prices follow or is the downside momentum too strong without the removal of the cooling measures? Will HK follow London's 2009 lead and reverse higher when all experts are calling for further falls. Is the current property policy a vote winner or will it get unpicked in the elections coming in 2017?

 

Lev

 

BUMP - I posted this 4 months ago since when Centadata has ticked up from 120 region to 130 region a 7-8% bounce. In HK I note developer shares continue to rise and some property analysts have turned bullish in the light of delays in US IR rises. Has the bargain phase for HK property passed as per London in 2008 and will property prices now start to take off to the upside again as they did in London from 2009 onwards for 5-6 years? Odds improving by the day methinks...

• Like This

• Quote
• MultiQuote

[drbubb]

I still think this is nothing but a Bounce UPWARDS, after the first big drop

 

My Hang Lung shares went back into profit, and I sold over half at above $26 -

and think they will go back and retest the Lows before many months

[leviathan]

I think we agree to differ on this Dr B - there could be contagion from other high RE markets like London/Vancouver as they turn down or paradoxically HK could benefit as capital looks for a safer place to hide.

 

Here is Vancouver opting for property cooling measures a little after the event IMO

 

http://www.knightfrankblog.com/global-briefing/news-headlines/vancouver-announces-15-tax-for-non-resident-buyers/

 

We saw in London that it was government support that boosted the London market from 2012 onwards - HTB and FLS policies aimed at ensuring re-election in 2015 lifted property prices dramatically upwards. Election coming in 2017 in HK will the current property controls and cooling measures survive or will they be rolled back with insiders frontrunning this - we'll see

[drbubb]

Hong Kong Property is still 9% off its peak

 

(From the Property thread on AX):

 

DC :

I asked yesterday an agent about prices in my and neighbouring buildings, and they are back to stupid level. Thank God I didn't sell my flat. I would now have the choice between buying it back to about the same level I would have sold it for, or rent and hope the prices will drop some time in the future.

Yes, the centaline shows a decline, but the prices are up there, where they were 6 months ago. The decline was short lived, even though one had good purchasing opportunities for a couple of weeks.

OTP, nobody gets it right all the time, but I think this time you didn't get it as right as you were claiming a few weeks ago.

 

OTP:

Have I missed something?

My records show:
CCLI Peak : 146.92
CCLI now - : 133.41
Change -- : - 9.2%

I have said that the market would not go straight down, and would have some rallies.

In fact, I bet on a really myself, buying Hang Lung stock - a bit early, as it turned out. I bought over HK$1 million worth of HK10 shares, and watched the price fall further. But I have now managed to exit now with profits, including a nice dividend. So as of this week, I am back out of HK stocks again (apart from holdings of Value Gold, a etf investing in Gold).

Currently, I am OUT OF HK PROPERTY INVESTMENTS, waiting with cash..,

and some nice profitable investments in Philadelphia property (yielding 11% pretax BEFORE capital gains), and in Philippines condos.

As for your own HK property, I would suggest you speak more to that agent, and ask him what you can actually get if you sell your property. The CCLI Index suggests the market is still 9% below the Peak.

My experience is that agents will talk the market up or down, to try and make their job easier. If he thinks you might be a buyer, he will try to tell you how strong the market is. So perhaps he gave you his market chatter,

Once he finds out you might be a Seller, watch him change his tune. It is enlightening and fun to watch them flip-flop. Go back and tell him you might be a seller, and see if he still thinks the market is back at the Top. Let's us know what happens

[Traineeinvestor]

I'm not sure which areas are experiencing the biggest declines, but I just checked the mortgage valuations for my properties (in Mid-Levels) against the all time highs, and found the biggest decline was about 4%. A check of recent sales (as reported) suggests that the mortgage valuations are fairly close to market. However, the real estate agents' windows are full of notices for units which have been discounted by much bigger amounts - presumably they increased the original asking price to fantasy levels and then discounted to more realistic levels in an attempt to lure in buyers.

 

Rents aren't moving much (yet).

[drbubb]

Hong Kong Land Prices Baffle Tycoon With 50 Years Experience

September 7, 2016

Lui Che Woo.

Photographer: Calvin Sit/Bloomberg

This Hedge Fund Made 2,100% From World's Most Extreme Market Mania

• Lui’s development arm outbid in 16 land tenders this year
• Home prices are rebounding after slumping earlier in year

After more than 50 years as a Hong Kong developer, octogenarian billionaire Lui Che-Woo says he’s having trouble reading the city’s property market these days.

“I can’t see clearly what’s happening in Hong Kong’s property market,” 87-year-old Lui said in an interview, after failing to win any land bid this year. “Recently land prices have surged so much. I really don’t know what’s happening right now. I need time to think quietly for a while before figuring out the situation we are in.”

K Wah International Holdings, Lui’s listed property arm, has submitted 16 tender bids in land auctions so far in 2016, while failing to win any. Large Hong Kong developers have been reluctant to make high bids on land after home prices fell and sales slowed earlier this year, opening the way for smaller local companies and mainland Chinese firms.

 

“It’s a shame that we have also tried hard to bid for land in Hong Kong, but failed,” Lui said. “It’s been a headache.”

The uncertainty in the property market, despite a recent rally, has made developers cautious while bidding for land. K Wah International has been outbid at this year’s land auctions by developers from mainland China and unlisted Hong Kong firms, including a company controlled by Angela Leong, an executive director of SJM Holdings Ltd., which competes with Lui’s Galaxy Entertainment Group Ltd. in Macau’s casino market.

Chinese developer Minmetals Land Ltd. last month outbid Hong Kong giants Sun Hung Kai and Sino Land Co. with an HK$4 billion ($515 million) offer for land in the territory’s Kowloon district. The price worked out to about HK$7,058 per square foot of saleable area, almost twice the valuations some industry experts had placed on the site.

There have been signs of a property rebound in Hong Kong, where prices have fallen from their all-time high in September. After slumping as much 13 percent between September and March, home prices have risen in recent months and transaction volumes rose in August to the highest in 14 months. Prices are still 7.3 percent below last year’s peak, according to Centaline Property Agency Ltd.

 

Hot Demand

On the weekend, China Overseas Land & Investment Ltd.’s 300 unit One Kai Tak project sold out within a day, even though they were reserved for Hong Kong residents only. Sun Hung Kai Properties Ltd. raised prices at its Grand Yoho project as much as 16 percent, the Hong Kong Economic Times reported Wednesday, after the first stage of 228 apartments sold out on the weekend, according to the Ming Pao newspaper.

Start your day with what’s moving markets.

Get our markets daily newsletter.

In 1955, Lui founded K Wah Group, whose construction materials have been used in a quarter of all Hong Kong buildings, according to the company’s website. He moved into property development with his first residential project in 1962. Lui, who has a net worth of $7.7 billion, according to the Bloomberg Billionaires Index, transferred shares valued at $1 billion to charitable foundations last September and set up a prize for those who have made contributions to human welfare.

==

> http://www.bloomberg.com/news/articles/2016-09-07/hong-kong-land-prices-baffle-developer-with-50-years-experience

[leviathan]

Centaline this week hits all time high at 144.09

 

http://www.tradingeconomics.com/hong-kong/housing-index

 

This is not unexpected to me see earlier posts - it seems like the surplus Chinese money has been avoiding Vancouver and London and heading in HK's direction instead.

 

Main cloud on the horizon is another rise in US IRs in December but assuming this is 0.25% only the market may shrug off this rise as volume of Chinese money exiting the country continues at pace.

 

Given its a new all time high for Centaline I suppose this could reverse quickly here but if this doesn't happen do people have any targets for where the top may come or indeed when?

 

As a sterling investor locking in a profit through selling is quite tempting although I expect sterling to push a bit lower yet perhaps to c £1=$1.05 before bottoming out.

 

Lev

[drbubb]

"... made the "experts" who predicted significant falls in the HK property market this year and last year (and each of the several years before that in some cases), look pretty stupid.."

- Trainee Investors diary

 

 

I don't take that personally at all, since I was not expecting a short and quick collapse, as some were

I think the Rally from the Q1 -2016 Low may be over now, or soon over,

But higher valuations may give it some staying power

 

I have long predicted a peak in 2015-2017, followed by a 3-5 year Drop.

 

I think the peak was Sept 2015, and we may have seen something like a Double Top in some locations.

but probably a slightly lower Low in the Index (I haven't been following the index, so will double check)

 

So, if I am still right the Low may come in 2019-2021, with 2020 the most likely spot for a major low,

[Traineeinvestor]

Apologies - my comment was definitely not directed at you but at some of the permabears who persistently predict the imminent end of the financial universe for many years as the markets kept climbing.

 

A low in 2020/2021 combined with a removal of the double stamp duty would be very nice timing for me - two of my mortgages will be fully paid off around then giving me capacity to borrow and buy again.

 

HKSAR govt just raised the stamp duty rate to 15%

 

One effect is that people like me will never sell - they just made it too hard to buy back in.

[stagflation]

Apologies - my comment was definitely not directed at you but at some of the permabears who persistently predict the imminent end of the financial universe for many years as the markets kept climbing.

 

A low in 2020/2021 combined with a removal of the double stamp duty would be very nice timing for me - two of my mortgages will be fully paid off around then giving me capacity to borrow and buy again.

 

HKSAR govt just raised the stamp duty rate to 15%

 

One effect is that people like me will never sell - they just made it too hard to buy back in.

For sure for consumers who are net-short (living in HK, have real estate needs) like yourself, this will take away from supply in the secondary market. But a 30% upfront stamp duty on foreigners who purchase HK residential today....I guess hot money will flow either to commercial / industrial / carparks or an even more sensible decision is hot money flows from mainland simply avoid HK and move on elsewhere.

 

It will be interesting to see if Residential Developers will

 

a) Try and attract investors by rebating a 15-30% stamp duty and keep per sq ft prices artificially high

 

Only focus on first-time home owners and reduce per sq ft prices

 

All those queue formations at new sale launches and priority given to multiple purchase investors should disappear.

 

Any guesses/ predictions on whether hot money flows out of RMB shift into real estate elsewhere in the world?

Will there finally be a cooling off in rentals, if secondary market transactions come to a standstill?

[drbubb]

"... for consumers who are net-short (living in HK, have real estate needs) like yourself, this will take away from supply in the secondary market. But a 30% upfront stamp duty on foreigners who purchase HK residential today....I guess hot money will flow either to commercial / industrial / carparks or an even more sensible decision is hot money flows from mainland simply avoid HK and move on elsewhere... " - Stagflation

 

Another idea:

Buy HK Property developer shares when they are cheap...

And use the dividend to pay rent

 

HK-10 / Hang Lung Group ... 3-years : 1-year :

 

I bought over Hk$ 1.2 Million of Hang Lung shares, and cashed HKD 50,000 in dividends, and a capital gain, which allowed my to cover my first year of Rent

I sold out, and am awaiting a re-entry opportunity

 

> HL thread: http://www.greenenergyinvestors.com/index.php?showtopic=20302

[drbubb]

Hong Kong Rally Ending?

 

My view is that the share prices of HK Property Developers often provide an early warning of moves in the HK property market.

And one of the best bellwether stocks has been ::

 

HK-12, Henderson Land ... 5-years : 1-year /

 

This chart suggests that the rally up from the Q1-Low has ended or is ending soon.

 

My view is that the HK property market is likely to fall for 3-5 years from the peak, and thus into a 18-year cyclical Low of perhaps 2019-2021.

 

The last low was 2003, and it was delayed from the "ideal" window of 2001, because of SARS-related disruptions

[Traineeinvestor]

The buying opportunities in 2002-4 were fantastic. You could buy decent properties on the secondary market with 30% down, old rates of stamp duty and the mortgage payments (P+I) and rates would be less than the cost of renting. Even better, developers were offering second mortgages for 20-25% of the purchase price payment free for, in some cases, up to 4 years.

 

 

p.s. IIRC it was SARS not AIDS that marked the low point in the market.

[drbubb]

SARS?

yes, of course it was. (Correction made.)

Some think they are both "engineered" diseases, but they are very different.