My narrative still stands regarding RE in HK is still over valued even at 10-15% adjustment. I have been window shopping on a DAILY basis for the last 6 months. I have been trying to map out a clearer image of the reality of the market. As I said, the overall market should be grim and down but asking prices and sold prices are still relatively high (not as significant as many experts have mentioned ie. over 15%).
One thing I am certain is majority of the landlords are greedy and not in a rush to sell. The asking price is quite ridiculous and some even above the peak $/sqft. This includes newer builds and 40+ year old complexes. Hell even HOS asking prices are barely down.
Given that banks generally require buyers to put down 30-50% deposits and almost all mortgages in Hong Kong are P+I for 20 year terms, most landlords have very high levels of equity. HKMA data supports this. For the same reason, even shoving interest rates up to 6-8% will not be an issue for many.
There will, of course, always be some who are affected by some combination of job loss, or other personal circumstances or who borrowed using second mortgages etc who struggle with rising interest costs. Likewise, there will be some who believe that the market will fall a lot further and wish to cut their losses. But they will be a minority.
One issue with HKMA data is it only shows aggregate information, there is no way to know how many landlords own multiple properties through various loopholes/relatives etc and 3rd/4th property is usually for speculation riding on sentiment, when interest rate goes up and rental payment is not sufficient enough to pay the installment, landlords usually prefers to take haircut and cut down losses on 2nd/3rd/4th property even though they have sufficient equity invested in the property.Given that banks generally require buyers to put down 30-50% deposits and almost all mortgages in Hong Kong are P+I for 20 year terms, most landlords have very high levels of equity. HKMA data supports this. For the same reason, even shoving interest rates up to 6-8% will not be an issue for many.
Anecdotally, i would divide such landlords in two cateogoris, first generation veterans who have almost paid up all properties or refinanced but could easily manage 6-8% interest but in last 7-8 yrs i have seen plenty of second generation wannabes who have leveraged on first/second property to put in enough equity in 2nd/3rd etc, this group will come under much pressure..
In fact i would go as far as to guess vetrans have stopped investing more in HK properties a while ago (dont go far, look in the mirror ) so market is full of more wannabes lately which HKMA data does not reflect accurately..
Perhaps There is this third category as well, Cartel's subsidiaries and internal sale type gangs which swallows primary pre-sales, artificially dries up supply and create more demand, This gang has much more holding power and immune to interest rates..
And also fourth category of mainland landlords owning multiple properties (Plenty in my estate), really hard to predict how they would see new environment and react depending on individual circumstances..
Last edited by ndt; 06-12-2022 at 11:19 AM.
Anecdotally, last year I was flat hunting (rent) for 40-50 year old flats. One of the flat is owned by 70+ year old couple. The LL had the audacity to tell me he bought the flat when it was NEW for around 200k. Yet, the mother fucker wont even budge a few hundred on the 24k rent. Literally his return on investment is astronomical already. Needless to say I was not interested in a signing a lease.
I can only imagine these types of landlords still make up a good chunk of the market. They have literally 0 debt on the flat and always aim to make top dollar even if it means having a vacant flat longer. I can only see $$ in these peoples' eyes.
I think the big key question on property is how interest rate will hold in the longer term. last few years of extremely low interest rate got many people thinking property prices will never fall.. and trainee said it right from an owner perspective. But remember, transactions are pulled off by the marginal seller/holder.. as long as enough people sees the need to sell their property to conserve CF or remain solvent, then property market correction is likely to continue.
in an illiquid market i would say that is quite nasty. but hk property market is so liquid and so much supply elsewhere.. if he chooses to forgo a few months of rental to stick to his price then that's his choice.. but i kind of suspect these guys prefer to rent to guys they want to rent to.. instead of strictly based on price.