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Cooling Measures... for Hot Small flats

  1. #201

    Join Date
    May 2013
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    318

    Why confused?
    Are these words from 2010 not crystal clear?:
    "My own cycle work on Long Term cycles suggests the final top in HK property may not come until 2015-2017."


    The MATH is the same Now as it was 5 years ago, and even 8-10 years ago, when I first started writing about it.

    Many people expected a dip in 2010-2012, and we got one.
    It was more like 10%, depending on the index. Not the 20-30% that some, including me, had expected for a few months at the time. Of course, I adjusted my thinking fairly soon, when rates did not rise much, and HK property held.

    The dip we saw in 2008-2009 was the "MId-cycle" dip that the 18-year cycle calls for (though it came a bit early off a 2003 low.) Expecting a rise in rates, which was widely predicted at that time, would push down HK property, and correct some of that big rally from the 2009 Low, was a wrong forecast that was shared by many. - That forecast of many was not coming from the 18 year cycle at all. It was based on other thinking which proved to be wrong eventually. So what?

    The 18 Year cycle has worked well in many markets, including Hong Kong. Why try and twist my words, to make that seem untrue?
    ====
    Here's a summary of how forecasters were adjusting their predictions back in 2010 when we first got a whiff of higher rates:

    TOM HOLLAND's WARNING - for Business in Asia - SCMP's Monitor
    Don't get in the Way, it's a stampede for the exits

    + If Europe's banks sustain big losses on their US$2.8 Trillion of PIIGS govt. debt in the event of a sovereign default, they will be forced to cutback on their lending to other parts of the world, including Asia,
    + In 2008, developed world banks reduced their exposure to Asia by almost US$300 Bn, with devastating impact
    + Europe a big customer: Asian cores supplied 42% of the EU's total import demand, 2/3rds of which is electronic gadgetry. HK is especially vulnerable, with 12% of goods shipped thru HK.
    + Asia's FX reserves will cushion the blow, but company profits (and jobs!) will be hit
    ...Meantime...
    HK Property agents are changing their forecast to "No Growth":

    Forecaster-- : - Old - : New Forecast
    Credit Suisse : + 10% : -5-7% in 2 mos.
    JonesLangLS: Higher : Sideways
    Knight Frank. : Higher : Sideways
    Midland Rlty. : Higher : Lower
    UBS, Nomura : Had big increases, that they did not revise

    Last edited by OffThePeak; 10-03-2015 at 03:30 PM.

  2. #202

    Join Date
    Oct 2014
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    298

    Oh okay, my mistake. It was between 2015-2017 and now 2016-2018. Understandable.


  3. #203

    Join Date
    May 2013
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    318

    Here's my suggestion, Mobtrio:

    Make loads of forecasts, mostly accurate over 8-10 years on various forums, explaining how an 18 year property cycle works in some detail:
    And write with clarity over years how that 18 year cycle "should" peak in 2015-17 - including these dates in many forecasts starting in 2006 or earlier.

    Come back in 8-10 years, and I will troll through everything that you wrote for a brief prediction that went wrong, and post on your thread exactly the language that you have posted on this popular thread I have started here.

    (I deleted the rest, when you edited your comment)

    What threw me (in my 2010 prediction) was the Mid-cycle dip usually comes about 5-7 years into the 14 year upswing rally, and I expected a double dip (on a brief rise in interest rates) so that the Mid-cycle correction might look like a double bottom, or would be substantially retraced- with the second dip ending in 2011. That's what my "dip" idea was based upon. Clearly, we did not get that... perhaps because we did not get a spike in interest rates in 2010-11. Had we seen a jump in rates, we might have seen a second dip, retracing much of the rally from end-2008.

    If we count 6-7 years from the end 2008 Low, as the duration of the second upleg, that would take us to end 2015-2016 as the expected Long Cycle peak.

    The cycle does not have that much precision, so take this merely as a rough guide.

    Here's a Video where the Cycle is explained:
    Introduction to Fred Harrison's 18 Years Cycle
    https://www.youtube.com/watch?v=_C-Nd_MStxU
    Description dated : Jul 24, 2008
    Is there a property crash every 18 years? Fred Harrison thinks so. In his book: Boom Bust, House Prices, Banking and the Depression of 2010, Harrison describes a cycle of 18 years. If he is right, we are headed towards a Depression by 2010, and it will be many years before those who bought at the peak will be back to even. This is the introduction to the cycle. Other videos look into historical prices in more detail.

    Last edited by OffThePeak; 10-03-2015 at 03:48 PM.

  4. #204

    Join Date
    May 2013
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    318

    This chart might help to clarify the Long Cycle I have been writing about


    Note: the mid-cycle low seems to have arrived a bit "early" with reference to the 2003 LOW.
    That was one reason that I expected the dip starting in late 2009 to develop into a larger correction. and maybe even a Double Dip. It did not happen that way, and it took a few months to realize the Mid-cycle Low was already in place.

    Last edited by OffThePeak; 10-03-2015 at 04:23 PM.

  5. #205

    Join Date
    Oct 2014
    Posts
    298

    Huh, did I make something wrong? I said it is my mistake and I can understand the 1-2 years shift.

    (I deleted the rest, when you edited your comment)
    And where did I edit my post?

  6. #206

    Join Date
    May 2006
    Location
    Pampanga, Philippines
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    17,972

    offthepeak, you have focussed on the current cycle but how well does this 18 year cycle hold up in HK over say the past 90 years (5 cycles)? How many cycles can you go back?


  7. #207

    Join Date
    Jul 2009
    Posts
    1,366
    Quote Originally Posted by OffThePeak
    Ray wants to people WORDS in my mouth.
    I wish he could simply stick with what I say, then the discussion might go somewhere

    Ray:
    "To put it in simple terms, you are saying price rises are because of increasing rent levels and ample liquidity and the returns by from rent are in excess of the financing costs causing more investors to buy for rent."
    Nope.
    The point is this: People who buy property will look closely at both rates and property yields. If Rates are above Net Yields, then investors need to SUBSIDIZE their yields to pay interest. I would regard that as speculation: ie they are paying for a bet on future capital gains.
    Ray:
    "
    the fault with your argument is that it assumes that most property investors don't consider capital gains which is a load of bollocks..."

    Again. I never said that.
    Instead: Yield pick-up and Capital gains are both on the menu now. And it makes sense to buy when you EXPECT to get both. Betting only on the capital gain is dangerous, since this situation usually comes when the market is dangerously high. If prices then reverse to the downside after such point is reached, then investors would have BOTH: negative cash returns on any money they borrowed, and capital losses.

    I DO AGREE with those who say rents are too high, and the HK government should aim to get more SUPPLY into the property market. That seems to be a high priority now, but there were too many years where supply lagged demand, which is why Rents are so high now.
    This is what you wrote in post no. 184:

    In the case of HK's Property market, the price rise is driven by more than pure sentiment.
    I would say - repeating for the third time, since things don't sink in quickly with Ray:

    + Rising rents, and
    + Falling rates

    Can explain almost the whole of HK's price rise, since Rental Yields are still OVER interest rates

    (end quote)

    Zero mention about capital gains and stress on the "Can explain almost of HK's price rise...."
    Last edited by ray98; 10-03-2015 at 06:16 PM.

  8. #208

    Join Date
    Dec 2011
    Posts
    18

    To be perfectly clear, I am not advocating a Robinhood approach of taxing from the rich to give to the poor. What I am advocating is to make it difficult for people to benefit from non economically productive activities. Tax is only a means to an end, which is to generate economic growth in the long term. Property market does not drive economic growth, but rather a reflection of economic growth.

    Quote Originally Posted by East_coast
    I suggest it is populist to ask for tax on the rich.

    Then you say



    Can you explain where I have distorted the argument?

  9. #209

    Join Date
    Dec 2011
    Posts
    18

    Not to be rude jumping in the middle of your discussion, but I feel that rental yield or rather cap rate is the culprit. It is the notion of rising rental rates that is giving people a false sense of security to keep chasing prices while being completely blindsided about the eventual outcome.

    Quote Originally Posted by OffThePeak
    Ray wants to people WORDS in my mouth.
    I wish he could simply stick with what I say, then the discussion might go somewhere

    Ray:
    "To put it in simple terms, you are saying price rises are because of increasing rent levels and ample liquidity and the returns by from rent are in excess of the financing costs causing more investors to buy for rent."
    Nope.
    The point is this: People who buy property will look closely at both rates and property yields. If Rates are above Net Yields, then investors need to SUBSIDIZE their yields to pay interest. I would regard that as speculation: ie they are paying for a bet on future capital gains.
    Ray:
    "
    the fault with your argument is that it assumes that most property investors don't consider capital gains which is a load of bollocks..."

    Again. I never said that.
    Instead: Yield pick-up and Capital gains are both on the menu now. And it makes sense to buy when you EXPECT to get both. Betting only on the capital gain is dangerous, since this situation usually comes when the market is dangerously high. If prices then reverse to the downside after such point is reached, then investors would have BOTH: negative cash returns on any money they borrowed, and capital losses.

    I DO AGREE with those who say rents are too high, and the HK government should aim to get more SUPPLY into the property market. That seems to be a high priority now, but there were too many years where supply lagged demand, which is why Rents are so high now.

  10. #210

    Join Date
    May 2013
    Posts
    318

    It is not that easy getting required data, Hullexile,
    But I have a chart somewhere tracking it back to the 1970's

    Things like major wars do disrupt it, obviously.
    Fred Harrison says he has tracked in for hundreds of years in the UK.

    There's now some academic work on it too, I believe. Some of my work on shipping cycles is used in college courses, so that would not surprise me,


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