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May 2017 - More Property Cooling Measures

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  1. #31
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  2. #32

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    The housing market is an effect of policy.

    "The government’s failure to cool the market means the city’s economic health is getting more intertwined with real estate. Soaring prices means more wealth is tied up in property, and citizens are less inclined to amass other types of savings, said Lam of Shanghai Commercial Bank"

  3. #33

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    Quote Originally Posted by East_coast:
    Soaring prices means more wealth is tied up in property, and citizens are less inclined to amass other types of savings, said Lam of Shanghai Commercial Bank"
    Well, they are also forced to invest in MPF funds.

  4. #34
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    That's what I gathered from the article as well. The main causes were macroeconomic conditions that had a large impact on Hong Kong. First, there was the chaos from the financial crisis, and then the flood of money due to monetary policies in the US and fiscal policies in China. Considering how many financial experts/analysts/institutions have been wrong about the market in the past 5 years and even people admitting on the forum how they've been wrong over and over again, I think it's not fair to say that we can solely blame the government.

    Take Terry Wong's case into account. He went to the bank and the HKMC to get a loan. Unfortunately, he does not qualify because he doesn't have the 20% down payment. The reason mortgages have been restricted is due to the fact that the government sees risks in the market. They're pretty much telling Terry Wong that he shouldn't get into buying property due to the downside risks, which is based on calculations done by experts. Terry Wong thinks he knows better. He believes that “With my parents’ money, I could be more financially flexible in the future.”, even though the government just told him that he's taking on major risk that could actually jeopardize his financial future and the savings of his parents. It's this kind of thinking that the developers exploit by offering their own mortgages to these individuals. Now, @East_coast comes around and tells us that instead of telling Terry Wong that he's an idiot, that we should give preference to people like him and penalize and blame others in order to supply more people like Terry Wong who "needed a place to live", even though at this stage it's possible for him to rent without any financial setback at very little risk. In actual fact, Terry Wong is already receiving preferential treatment, lower stamp duty, better mortgage term because he's a PR purchasing his first property, etc.

    Thus, at this stage, I think it's perfectly reasonable to wait it out a few years and to observe the impact of changes in macroeconomic conditions, higher rates of interest, crackdown on mainland money outflows, etc, while working to steadily increase the supply of private and public flats. I do agree though that looking into reforming the small house policy and dealing with empty flats should be tackled (even though vacancy rates in small flats is negligible), but these should be middle- to long-term policies that involve the consultation of all the stakeholders involved, and not reactionary measures that will just create new problems in the future. The reactionary macroeconomic policies taken post-GFC had to be done in order to stabilize the panicked market, but as we can see, reactionary policies do have major downside risks. In the current environment reactionary policies are unjustified.
    Last edited by civil_servant; 23-05-2017 at 10:17 AM.

  5. #35

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    Quote Originally Posted by civil_servant:
    @East_coast comes around and tells us that instead of telling Terry Wong that he's an idiot, that we should give preference to people like him and penalize and blame others in order to supply more people like Terry Wong who "needed a place to live", even though at this stage it's possible for him to rent without any financial setback at very little risk. In actual fact, Terry Wong is already receiving preferential treatment, lower stamp duty, better mortgage term because he's a PR purchasing his first property, etc.
    Where? This is just a dictionary fabrication.

    To follow-on from the Asset Inflation issues I would suggest the following pressures on inflation

    1) Downward for Products - The Internet
    - Allowing consumers to find deals driving unprecedented changes in consumer behavior
    - Allowing knowledge transfer at an unprecedented rate allowing innovation and savings

    2) Upward for Assets - Printing money
    - Money flows into easily purchasable assets
    -- Housing
    -- Equities

    So I agree global trends have allowed the successful printing of money without massive inflation of consumer products while allowing assets to inflate. It makes politicians and bankers look and feel good.

    Hong Kong is an extreme case because land supply has been restricted and is still being restricted. The HK have identified plots of land to satisfy demand until 2030. There is enough land they just don't release it.

  6. #36
    Quote Originally Posted by East_coast:
    So I agree global trends have allowed the successful printing of money without massive inflation of consumer products while allowing assets to inflate. It makes politicians and bankers look and feel good.
    No, it reduced unemployment, defended countries from short-sellers and predatory investors, lowered borrowing costs, and protected pensions.

    Quote Originally Posted by East_coast:
    Hong Kong is an extreme case because land supply has been restricted and is still being restricted. The HK have identified plots of land to satisfy demand until 2030. There is enough land they just don't release it.
    Great, let's just sell that entire supply to Cheung Kong, have a massive surplus for this year, followed by a huge party, all problems solved. As I said, town planning takes time. This isn't Sim City, you know.

  7. #37

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    Quote Originally Posted by civil_servant:
    No, it reduced unemployment, defended countries from short-sellers and predatory investors, lowered borrowing costs, and protected pensions.
    And also inflated assets while advances in technology have allowed consumer prices not to be affected.

    Quote Originally Posted by civil_servant:
    Great, let's just sell that entire supply to Cheung Kong, have a massive surplus for this year, followed by a huge party, all problems solved. As I said, town planning takes time. This isn't Sim City, you know.
    Oh dear. Why do you go to the extreme?

    I have suggested the metering out of land should be taken away from politicians and given to an independent technocratic function with long terms aims of lowering costs and achieving price stability.

  8. #38

    And the frenzy continues.

    “It provides a convenient way for buyers who cannot afford a 50 per cent down payment for a HK$10 million apartment. If prices rise over next the three years, property owners could sell the apartments and trade up for a bigger one.


    Caution sounded as developer’s financing schemes seen as enabling highly-leverged home buyers | South China Morning Post

  9. #39
    Quote Originally Posted by civil_servant:
    quoting the young man - you may think he's stupid but culturally, many chinese do not get married until they have a house.

    parents that have money also think about buying their sons a house too (daughter expected to be married off will expect their future husbands side to provide the house).

    as long as he can afford the repayments and factors in sufficient a buffer for rate rises and even periods of unemployment then from him and his family's perspective he is fine.

  10. #40
    Quote Originally Posted by aussie_oi_oi_oi:
    quoting the young man - you may think he's stupid but culturally, many chinese do not get married until they have a house.

    parents that have money also think about buying their sons a house too (daughter expected to be married off will expect their future husbands side to provide the house).

    as long as he can afford the repayments and factors in sufficient a buffer for rate rises and even periods of unemployment then from him and his family's perspective he is fine.
    I'm not disputing whether he can make his payments or not. The facepalm reaction is merely towards his belief that he'll be financially better off in the future given all the major downside risks in the market. At the end of 2015 until the spring of 2016, property prices went down 10% given bad financial news from the mainland and a downturn in the tourism sector. The unemployment rate ticked up by 0.1% during this time. Considering that this mini episode had such a large impact on real estate prices and the market has even gone higher since, it's not inconceivable that a larger downturn in the economy will have a much greater impact on property prices, during which the young man will not only have wiped out his parents savings, but he may even be underwater himself.

    Also, considering he needs to borrow money from his parents in order to complete the purchase, I'm not sure he has a buffer for periods of unemployment. You only have a buffer if you can complete the purchase and you have extra money left over.

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