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HK Island vs Kowloon - where to live ??

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  1. #21
    Mat
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    Quote Originally Posted by gilleshk
    .

    It means that someone that buys now ........not overextend themselves in case of a serious downturn.

    .
    That is the key.

    That the market crash when you have bought at a relatively high price is NOT an issue if you do not sell and do NOT NEED to sll.
    Ppl buying high with limited funds are taking a big risk. Ppl buying high but without needs of those funds are NOT taking that big a risk. Ppl sitting and waiting are taking a risk too btw, that it goes higher.

    There is NO right time or wrong time to buy.
    There is just the time you are ready to buy (having done your PERSONAL analysis (ie buying is linked to multpile reason: market price of course but alos, change in family, decision to finally settle down in H.... knowing that you do not need that cash....)
    gilleshk and climber07 like this.

  2. #22
    Mat
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    Quote Originally Posted by TheBrit
    If it were sensible, everyone would be doing it. Your ideas of constant price appreciation rely on the greater fool theory, and eventually we run out of fools. Hong Kong property is overpriced on every metric, and anyone buying at these prices is setting themselves up for a very big fall. Interest rates won't stay at 1.5%, probably not even for all of 2011.
    Interests rate are below 1.5 so far (I am not saying they will not rise, just correcting a "typo")

  3. #23

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    Quote Originally Posted by Mat
    Interests rate are below 1.5 so far (I am not saying they will not rise, just correcting a "typo")
    I was responding to the figure JDJ used to illustrate his example, which was 1.5%.

  4. #24

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    Quote Originally Posted by TheBrit
    I was responding to the figure JDJ used to illustrate his example, which was 1.5%.
    I actually used "an assumed 1.5% pa interest rate which is quite a bit higher than many current mortgage offerings". Plus I estimated a HK$2 million deposit, not the HK$3 million that was taken up by other people for some reason (I assumed a 60% mortgage if possible).

    Incidentally, Mrs Doe Jr took me to task on this deposit figure saying that even at HK$2 million it was a more substantial amount than I had implied. She said that saving 10% of a million dollar annual salary would yield HK$2 million only after 20 years, which is quite correct and admittedly looks quite formidable. So on that score I surely messed up. My only response would be to look for a cheaper flat and start on the property ladder at some stage, and also investigate some investment opportunities to build up the capital quicker.

    Yet all of this is now academic (if TheBrit will allow me to be so categorical) since the OP does not consider that her situation allows her to buy at the moment. In doing so she revealingly states: "unfortunately for now it will have to be renting." She therefore seems to prefer buying to renting if possible, which is an interesting contribution from the very originator of this thread. She may wish to correct me if I have drawn the wrong conclusion.

    And regarding Hung Hom (pronounced "Hong Hum" by many locals, just so you know), I lived there in a serviced apartment for 8 months last year. It was very convenient for Kowloon Tong, but less so for Hong Kong side. The reason we were there was partly because I was waiting for the property bubble to burst ... and so I took special note of gilleshk's memorable admonition: "Anyone that claims to know we're in a bubble and that it will burst at some point is an idiot."

    Lesson learnt: When it comes to your own home, don't try to time the market. And when it comes to investing, don't try to time the market.

    Apologies once again to TheBrit.
    Last edited by John Doe Jr; 04-01-2011 at 07:26 PM.

  5. #25

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    Quote Originally Posted by John Doe Jr
    Yet all of this is now academic (if TheBrit will allow me to be so categorical) since the OP does not consider that her situation allows her to buy at the moment. In doing so she revealingly states: "unfortunately for now it will have to be renting." She therefore seems to prefer buying to renting if possible, which is an interesting contribution from the very originator of this thread. She may wish to correct me if I have drawn the wrong conclusion..
    I don't think it is very contentious to state most people would prefer to buy than rent. I am in this category too, however everything has it's both a value and a price. Foe me, the price of buying is far higher than the value at the moment.

    People like Mat say there is no right or wrong time to enter the market - well I would say that is rubbish. If the average house price are 40x average earnings when the long term average is 5x earnings do you think it is a great time to buy? How about 80x? 500x? 5 million times?

    My point is that assets can be overpriced to the point that there is no rational investment case. Tech stocks on price/eyeball multiples anyone? 10 billion dollar companies that went bust 12 months later having never generated a profit?

    Plenty of people denied that there was a Tech bubble too. Some people lost their savings, some lost their houses and others lost the shirts off their backs. Some people thought the market would keep rising forever.

    Plenty of people denied that there was a American housing bubble too. Some people lost their savings, tens of thousands lost their houses and others lost the shirts off their backs. Some people thought the market would keep rising forever.

    Plenty of people denied that there was a 90's Hong Kong housing bubble too. Some people lost their savings, tens of thousands lost their houses and others lost the shirts off their backs. Some people thought the market would keep rising forever.

    If we agree that things can be ridiculously overpriced then that is half the argument won. To be honest, I don't think it is even feasible to claim something is always a good investment regardless of the price but certainly some people seem to be claiming that it is so.

    The other (much trickier) argument is - given that things can be overpriced - are Hong Kong real estate prices currently overpriced?

    I am happy to have this discussion, but not if people won't even accept there can be a price level where cars, chocolate biscuits, gold, equities, milk, bonds or property have no rational or credible economic valuation. $5000 HKD for a packet of chocolate biscuits Sir?

    On bubble formation - would love to see any rational discussion for claiming we're not in a bubble rather than bandying forth idiot comments (thanks for quoting that JDJ, I have gilles on ignore to improve the Geoexpat signal to noise ratio).

    Quote Originally Posted by John Doe Jr
    Lesson learnt: When it comes to your own home, don't try to time the market. And when it comes to investing, don't try to time the market.
    When you say "timing the market" I would say "investing at a point that makes economic sense". I prefer to own assets with real economic returns, and not rely on the Greater Fool theory.

  6. #26

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    Quote Originally Posted by TheBrit
    When you say "timing the market" I would say "investing at a point that makes economic sense". I prefer to own assets with real economic returns, and not rely on the Greater Fool theory.
    Okay, here's a question about bubbles with which you would seem to have some familiarity:

    SJM Holdings (HK:0880) is currently trading at a P/E of 72 - and it went up 3% today. Do you think that this stock is in bubble territory having tripled in price over the last 12 months?

    (Sorry to the OP for hijacking this discussion, but I've been very keen for some time to hear TheBrit's wisdom on this issue given his prior positive words about (and am I right in understanding his continued holdings in?) this particular "investment").

    And depending on your response, would you recommend I buy shares in this company tomorrow when the stock market opens?

  7. #27

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    There we have a typical post from the man with a crystal ball where a perfectly valid point of view is described as rubbish simply because it's different than his...

    What he fails to understand is that there is no point in arguing whether it's a bubble or not unless you can foresee the future, his posts always seem to imply that he can but I'm afraid that most reasonable beings realize that it's just not possible. There is no doubt that the potential is there and there could be a crash however it could also flatten, suffer minor dips and keep on growing later as seen in markets like Vancouver. We just don't know...

    I prefer not to buy at the moment since I don't like the idea of sinking that much money in one place and I prefer to have flexibility. I currently make significantly more money in investing the value of a downpayment than what I pay in rent so I don't find the idea of buying real estate appealing however if there were a 40-50% downturn, I might consider it since the downpayment would be significantly lower and the upside potential bigger in the long term. It probably won't happen but I am quite happy to have the freedom that renting allows me.

    The excellent point that Mat made is that there is a risk either way. If you sit on your hands, you might simply get priced out of the market, have to look at less desirable locations or buy smaller. If one is ready to buy without overextending themselves and is living in the flat, the price could drop by 50% and it wouldn't make any difference unless something really bad happens. If you live your life in constant fear of extreme misfortune, you're not likely to get a lot done...


  8. #28

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    Quote Originally Posted by John Doe Jr
    Okay, here's a question about bubbles with which you would seem to have some familiarity:

    SJM Holdings (HK:0880) is currently trading at a P/E of 72 - and it went up 3% today. Do you think that this stock is in bubble territory having tripled in price over the last 12 months?

    (Sorry to the OP for hijacking this discussion, but I've been very keen for some time to hear TheBrit's wisdom on this issue given his prior positive words about (and am I right in understanding his continued holdings in?) this particular "investment").

    And depending on your response, would you recommend I buy shares in this company tomorrow when the stock market opens?
    You haven't asked but i'll give you my opinion. I would not touch that stock with a 10 foot pole... Low dividends, very high growth in recent times, high P/E, Galaxy at 33, Wynn is only at 45 and Sands 68. The upside potential is limited and the downside is significant.

    The forecast appears positive for gaming at the moment but I would see SJM as too high a risk at the moment... I feel there are far better and safer stocks out there.

  9. #29

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    Quote Originally Posted by John Doe Jr
    Okay, here's a question about bubbles with which you would seem to have some familiarity:

    SJM Holdings (HK:0880) is currently trading at a P/E of 72 - and it went up 3% today. Do you think that this stock is in bubble territory having tripled in price over the last 12 months?

    (Sorry to the OP for hijacking this discussion, but I've been very keen for some time to hear TheBrit's wisdom on this issue given his prior positive words about (and am I right in understanding his continued holdings in?) this particular "investment").

    And depending on your response, would you recommend I buy shares in this company tomorrow when the stock market opens?
    Well, markets are generally forwards looking rather than backwards looking. The most common ways to value stocks are discounted future cash flow analysis or shortcuts like EV/EBIDTA and price/forward earnings. I am not interested in what cash flows accrued to the PREVIOUS owners of this stock, I am interested in what cash flows accrue to the CURRENT owners of the stock. I don't care if Kodak made $Xbn in the last decade selling photo film that has been superseded by digital cameras... I care about the future, not the past.

    Additionally, casino stocks are generally valued on EV/EBITDA basis, to allow for differences in the capital structure of the companies.

    Industry factors (the surge in Mainland visitors, the expansion of the working capital of "junkets") and company specific factors (a restructuring of the operating fees from subsidiaries) have all led to a large increase in earnings for SJM).

    On a forward earnings basis, SJM is on about 18x 2011 EPS estimates. It is on about 13x EV/EBITDA. I would say these are not yet bubble territory, but I would tend to be more of a seller than a buyer here. There might be more upside, but the risk/reward isn't as compelling as it was when I brought it at 4 HKD. One good reason that valuation is the key to investing.

    OK, I have answered your questions - will you answer mine? Are there prices at which any asset makes no economic sense? If SJM goes to 100 times future earnings or 30x EV/EBITDA for an earnings yield of 1% I would have no hesitation in saying it is completely overvalued rather than looking pretty overvalued.
    Last edited by TheBrit; 04-01-2011 at 09:31 PM.

  10. #30
    Mat
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    Quote Originally Posted by TheBrit
    I don't think it is very contentious to state most people would prefer to buy than rent. I am in this category too, however everything has it's both a value and a price. Foe me, the price of buying is far higher than the value at the moment.

    People like Mat say there is no right or wrong time to enter the market - well I would say that is rubbish. If the average house price are 40x average earnings when the long term average is 5x earnings do you think it is a great time to buy? How about 80x? 500x? 5 million times?

    My point is that assets can be overpriced to the point that there is no rational investment case. Tech stocks on price/eyeball multiples anyone? 10 billion dollar companies that went bust 12 months later having never generated a profit?

    Plenty of people denied that there was a Tech bubble too. Some people lost their savings, some lost their houses and others lost the shirts off their backs. Some people thought the market would keep rising forever.

    Plenty of people denied that there was a American housing bubble too. Some people lost their savings, tens of thousands lost their houses and others lost the shirts off their backs. Some people thought the market would keep rising forever.

    Plenty of people denied that there was a 90's Hong Kong housing bubble too. Some people lost their savings, tens of thousands lost their houses and others lost the shirts off their backs. Some people thought the market would keep rising forever.

    If we agree that things can be ridiculously overpriced then that is half the argument won. To be honest, I don't think it is even feasible to claim something is always a good investment regardless of the price but certainly some people seem to be claiming that it is so.

    The other (much trickier) argument is - given that things can be overpriced - are Hong Kong real estate prices currently overpriced?

    I am happy to have this discussion, but not if people won't even accept there can be a price level where cars, chocolate biscuits, gold, equities, milk, bonds or property have no rational or credible economic valuation. $5000 HKD for a packet of chocolate biscuits Sir?

    On bubble formation - would love to see any rational discussion for claiming we're not in a bubble rather than bandying forth idiot comments (thanks for quoting that JDJ, I have gilles on ignore to improve the Geoexpat signal to noise ratio).



    When you say "timing the market" I would say "investing at a point that makes economic sense". I prefer to own assets with real economic returns, and not rely on the Greater Fool theory.
    The wrong time to enter the market will be depending on when you exit it......

    Many ppl bought in 97, prices fell, ppl said they were crazy to have bought. Some are now selling over the price they bought 13 years ago.

    you might argue 13 years is a long time of course but this will, once again be relative to everyone's position.

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