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HK/UK Property - To sell or not to sell???

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  1. #31
    Original Post Deleted
    A jump from HKD3 million to HKD330 million ion loans in negative is equity is noteworthy but:

    1. HKD 330 million is still trivial in the context of HK's banking industry - average loan size is about HKD6.2 million
    2. the HKD330 million is the principle amount of the loans which are in negative equity - the unsecured portion (i.e. the amount by which the loan exceeds the value of the property) is only HKD 7 million
    3. just because a loan is in negative equity, does not mean there will be a default - most mortgage loans continue to be serviced even when the owner is in negative equity

    It's also worth remembering that during the period from the Asian Financial Crisis to SARs when property prices dropped 60-70%, no bank in HK defaulted on its obligations (one allegedly came close). This time around, the banks are better capitalised and the HKSAR govt has more ammunition to support prices should it become necessary.

    As to second mortgages from developers and their finance companies, all the big developers have very strong balance sheets. A quick look at a few of the larger ones (SHK, CKP, Henderson, Sino, NWD) suggests it is very unlikely that any of these players will become distressed unless things get much much worse than they are at the moment. At the extreme end of the sale, Sino Land's trivial amount of debt is less than it's cash on hand.

    All that being said, if we are at a turning point in the economic and property cycles, then it is still very early days so who knows what might happen.

    However, I find it very difficult to believe that the HK banking system is even remotely at risk at this time.
    shri likes this.

  2. #32

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    Original Post Deleted
    So the increase the LTV in an uncertain market to protect the banks? It's a stimulus to keep the property prices high.

  3. #33

    Sold at 5M!


  4. #34

    Thanks


  5. #35

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    Quote Originally Posted by traineeinvestor:
    A jump from HKD3 million to HKD330 million ion loans in negative is equity is noteworthy but:

    1. HKD 330 million is still trivial in the context of HK's banking industry - average loan size is about HKD6.2 million
    2. the HKD330 million is the principle amount of the loans which are in negative equity - the unsecured portion (i.e. the amount by which the loan exceeds the value of the property) is only HKD 7 million
    3. just because a loan is in negative equity, does not mean there will be a default - most mortgage loans continue to be serviced even when the owner is in negative equity

    It's also worth remembering that during the period from the Asian Financial Crisis to SARs when property prices dropped 60-70%, no bank in HK defaulted on its obligations (one allegedly came close). This time around, the banks are better capitalised and the HKSAR govt has more ammunition to support prices should it become necessary.

    As to second mortgages from developers and their finance companies, all the big developers have very strong balance sheets. A quick look at a few of the larger ones (SHK, CKP, Henderson, Sino, NWD) suggests it is very unlikely that any of these players will become distressed unless things get much much worse than they are at the moment. At the extreme end of the sale, Sino Land's trivial amount of debt is less than it's cash on hand.

    All that being said, if we are at a turning point in the economic and property cycles, then it is still very early days so who knows what might happen.

    However, I find it very difficult to believe that the HK banking system is even remotely at risk at this time.
    Which bank came close?

  6. #36
    Quote Originally Posted by Paxbritannia:
    Which bank came close?

    Allegedly came close. In the end they did not default.

    International Bank of Asia (IBA). I well remember the sight of armoured cars delivering cash to their branches several times a day when the bank run was on + standing in a very long queue with a friend of mine who was withdrawing a seven figure sum in cash and wanted an escort when he walked it down Queen's Road Central to HSBC (I would have bolted if anyone so much as pointed a paper clip at me).

    There's a mention of it on page 178:

    https://books.google.com.hk/books?id...20kong&f=false

  7. #37

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    Quote Originally Posted by honkkongjohn:
    Sold at 5M!
    Well done ... it is so hard to pull the trigger on these sort of sales!

  8. #38
    Quote Originally Posted by honkkongjohn:
    Sold at 5M!
    Well done. Always good to move on.

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