Like Tree75Likes

HK Property Down 11% YOY

Closed Thread
Page 7 of 9 FirstFirst ... 4 5 6 7 8 9 LastLast
  1. #61

    Join Date
    Dec 2010
    Posts
    1,523
    Quote Originally Posted by freeier:
    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.
    So far the "correction" is only meaningful when compared to the peak. If we take a look at the last 10 years index average, the current standing is still 50% higher than the 10 year index average. Take note that transaction volume for 2022 is significantly lower than 2021.

    https://www.midland.com.hk/en/market-insight

    I actually dont know what I am saying anymore. I have the funds to buy but I am lacking confidence! lol

  2. #62

    Join Date
    Nov 2005
    Location
    Cramped island
    Posts
    5,585
    Quote Originally Posted by ndt:
    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..
    As a laymen, you can say that.

    But financially this is wholly untrue. A corporate, subsidiary or not, will not be run using cash. Even if running with cash, there is a cost to the whole financing element. In general corporates, say SHK, has a substantial leverage portfolio, borrowing at maybe 30-50%. As the cost of borrowing shoots up, the cost of holding such empty units explodes. Now 1-m hibor is >4.5%.. so if this sustain for the next 2 years, any money that is used to hold an empty property will be costing the developer close to 10% of the house value. Unless they see very clear sky in the next 2-3 years, otherwise my guess is most might want to quietly get out of their empty inventory. The term 'holding power' does not mean alot when actual cost is high and does not clear the corporate hurdle rates anymore.

  3. #63

    Join Date
    Nov 2005
    Location
    Cramped island
    Posts
    5,585
    Quote Originally Posted by D.YU:
    So far the "correction" is only meaningful when compared to the peak. If we take a look at the last 10 years index average, the current standing is still 50% higher than the 10 year index average. Take note that transaction volume for 2022 is significantly lower than 2021.

    I actually dont know what I am saying anymore. I have the funds to buy but I am lacking confidence! lol
    I would prefer to compare value of housing versus average income of family... if more than 60/70% of family cannot afford to buy a house with their income, then the value must be too high...

    Anyway HK is really a market that claims to be capitalistic but distorted by all the subsidized medical and housing and watever nots.. Sometimes I find it really a wonder how the government can create so many ways to distort markets (e.g. consumer voucher, transport subsidy, quarantine hotel subsidy, etc.etc.etc)

  4. #64

    Join Date
    May 2021
    Posts
    1,733
    Quote Originally Posted by freeier:
    As a laymen, you can say that.

    But financially this is wholly untrue. A corporate, subsidiary or not, will not be run using cash. Even if running with cash, there is a cost to the whole financing element. In general corporates, say SHK, has a substantial leverage portfolio, borrowing at maybe 30-50%. As the cost of borrowing shoots up, the cost of holding such empty units explodes. Now 1-m hibor is >4.5%.. so if this sustain for the next 2 years, any money that is used to hold an empty property will be costing the developer close to 10% of the house value. Unless they see very clear sky in the next 2-3 years
    And yet this is where the key is, less likely FED will be able to hold high rates for 2-3 years and more likely they will start reducing once inflation subsides and/or economy seems going into deep recession, HK cartel has been manipulating the market by holding on to property either by delaying the project release and/or various other means in the past and this time is not going to be different unless there is a very strong signal inflation and rates will stay higher for over 2-3 yrs..

  5. #65

    Join Date
    Dec 2010
    Posts
    1,523
    Quote Originally Posted by freeier:
    I would prefer to compare value of housing versus average income of family... if more than 60/70% of family cannot afford to buy a house with their income, then the value must be too high...

    Anyway HK is really a market that claims to be capitalistic but distorted by all the subsidized medical and housing and watever nots.. Sometimes I find it really a wonder how the government can create so many ways to distort markets (e.g. consumer voucher, transport subsidy, quarantine hotel subsidy, etc.etc.etc)
    Affordability based on income statistics has never been aligned with RE in HK. Not sure how much more I need to elaborate on this.

  6. #66

    Join Date
    Dec 2012
    Posts
    598
    Quote Originally Posted by freeier:
    I would prefer to compare value of housing versus average income of family... if more than 60/70% of family cannot afford to buy a house with their income, then the value must be too high...

    Anyway HK is really a market that claims to be capitalistic but distorted by all the subsidized medical and housing and watever nots.. Sometimes I find it really a wonder how the government can create so many ways to distort markets (e.g. consumer voucher, transport subsidy, quarantine hotel subsidy, etc.etc.etc)
    Although I appreciate your analysis on house prices vs. income ratio - I can tell you that it doesn't work like this in real life.

    If you go to any major city in the world, you can say this ratio is completely useless as it only tackles a small portion of the wider equation. Many who own homes or see these as asset havens, instead of putting all their money in the bank. The rich and wealthy diversify and accumulate many different asset classes. Unfortunately housing is one of the bigger asset classes people tend to lean to. Even the middle class have "investment properties" which they rent out and hope they can retire off of.

    So to simply say "High House Price vs. Income" is not correct, and has never been the correct measurement. People just do it to get clicks.

  7. #67

    Join Date
    Dec 2012
    Posts
    598
    Quote Originally Posted by freeier:
    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.

    I can tell you based on real facts that many (if not all) of the property owners do this. Honestly, what is another 20K - 30K a month to them? They bought the property at the bottom and regardless of the drop, they have still made a fortune.

    For them, it's about finding the right tenant and not needing to waste time dealing with annoying ones. They have zero pressure and are living comfortable.

    They aren't waiting "rent check by rent check" to live their life.

  8. #68

    Join Date
    Jun 2011
    Posts
    1,693

    I think the people in a squeeze are owning the newer developments, basically sold in the past 8-9 years. For a few reasons:

    1. They could through the developer borrow up to around 85%, so they are highly leveraged
    2. The new properties are sold at a premium price, as the building now is 5+ years old, the resell value starts to decline, as its no longer new. So not only is property market falling, their flat is falling faster than the market.
    3. People jumping on these deals are usually younger, meaning their financial stability is not as high as for people close to retirement. Its been tough times for some job wise these past years, there are probably people unemployed or who had to take significant salary cuts holding these flats.

    shri and Gollygordon like this.

  9. #69

    Join Date
    Nov 2005
    Location
    Cramped island
    Posts
    5,585
    Quote Originally Posted by ndt:
    And yet this is where the key is, less likely FED will be able to hold high rates for 2-3 years and more likely they will start reducing once inflation subsides and/or economy seems going into deep recession, HK cartel has been manipulating the market by holding on to property either by delaying the project release and/or various other means in the past and this time is not going to be different unless there is a very strong signal inflation and rates will stay higher for over 2-3 yrs..
    Well, we are creatures of short memory.. so we think rates of 1% and 2% are normal.. but it was just not so long ago that normal interest rates are in the tune of 3-5%.. so it really depends on how much the Fed can tolerate inflation, which will continue to kick in with low rates. Something we don't have crystal ball to tell but can only speculate now.

    Fed is between a rock and a hard surface.. which way they choose will just determine the speed of what happens.. what will happen eventually will be similar...
    ndt likes this.

  10. #70

    Join Date
    Nov 2005
    Location
    Cramped island
    Posts
    5,585
    Quote Originally Posted by D.YU:
    Affordability based on income statistics has never been aligned with RE in HK. Not sure how much more I need to elaborate on this.
    For short term it doesn't.. but on longer term it has to go back to certain trend and norm. Ins and outs of cash flows and earnings and cost of accommodation has to play some parts.. even if not fully, on valuation of real estates.

    This is not dis-similar to guys during the BTC 30-40-60k period shouting that value investment is dead and we should stick to speculative meme stocks and BTC.. just a matter of timing.. no doubt, the timing cycle can be so long that everyone forgets the fundamental of value and hype on speculation.. But i still have faith and trust in value eventually.. See how the credit fueled cycle will end i guess.

Closed Thread
Page 7 of 9 FirstFirst ... 4 5 6 7 8 9 LastLast