Hong Kong property outlook - and Data Base

[drbubb]

"...restricting capital to what can be sourced locally is clearly a very bad idea

- it stops capital poor areas lifting themselves out of poverty, increases the risks and effects of a local economic downturn"

 

I will give you a link to one of Catherine's Videos.

The current system drains wealth from across the land, and concentrates it in places like Wall Street.

 

Are you really defending the current system?

We are lucky enough to live in a place that benefits, but that's really not a great justification

=== ===

 

Yee Gads! These are tiny!

Kennedy Town... 40 flats.

Sizes ranging from 210 to 268 sq ft

"80-90% of the buyers were Investors"

Who wants to live in these tiny flats?

Midland Reality says Rents might go to HK$80 psf

List prices are around HK$26,500 psf, before an 8% discount,

and a 7% discount to offset double stamp tax

==

CALC: $80 x 210 = $16,800 ... x268 = $21,440

$80 x 12 / (26500 x .93) = $960 / $24,645 = Gross Yield : 3.9%

A big Ho-hum to that !

I reckon the Mgmt fee must be high, given the small # of Flats.

And the Agents estimate may noty be achieved

[Traineeinvestor]

For all its many and serious flaws, I'd rather have the current banking system than any of the alternatives that have been put forward - those that are not advocating one step backwards are advocating three. Anything that advocates restricting where and how money can be exchanged will end badly - just has it always has in the past. There are much better ways of regulating the financial system.

 

I think the property in Kennedy Town was Eight South Lane?

It's good for access to shops, restaurants and transport (very close to the new MTR station) but there is no outlook from most floors and the limited outlook (if any) from the high floors will almost certainly be built out at some point in the future (during the process of which residents will have the pleasure of living next to a building site for a couple of years.

I simply cannot fathom the investor intrest in this property.

[drbubb]

 

I think the property in Kennedy Town was Eight South Lane?

 

It's good for access to shops, restaurants and transport (very close to the new MTR station) but there is no outlook from most floors and the limited outlook (if any) from the high floors will almost certainly be built out at some point in the future (during the process of which residents will have the pleasure of living next to a building site for a couple of years.

 

I simply cannot fathom the investor intrest in this property.

 

Yes. That's it.

The Standard mentions the proximity to the MTR.

I think these small projects are something to avoid.

I think you can get a nice 10-20 year old building much cheaper,

and the Management fee will not "eat you alive".

 

I appreciate very much the clubhouse and other facilities at the Long Beach.

Spreading the cost over 1,500+ flats is a good thing too

[Traineeinvestor]

Apologies - it was One South Lane (but the comments still apply).

 

Eight South Lane is still to be launched.

 

Agree with your comments on larger and older developments being preferred.

[drbubb]

Here's Eight South

 

 

Looks nice, but Oh-that-Management-Fee ! must be something to astound

 

Same with One South, I suppose

 

 

Slotted in here somewhere, near 6 South.

I'll stay put where I am, at something like 60% of the price PSF

[Traineeinvestor]

A picture says a thousand words - both One South Lane and Eight South Lane are sandwiched between much older buildings - not only are there no views but there is limited natural light and limited privacy to go with the prospect of redevelopment of adjacent buildings.

 

I do not understand the attraction at all.

[drbubb]

Yeah.

There's no "fresh blue sky", as the Image for 8 South Lane shows, anywhere near that building

 

Remmy, on AX says:

"I can tell you there is much better value in the secondary property market than these newly launched, mini-apartments. .... Having said that, do I think right now is a great time to buy property in HK? The answer is no. I consider some property in HK overvalued (both the high end speculative stuff with nominal yields and more of a "prestige value", the stuff marketed at mainlanders, and some of these mini apartments coming up."

 

So maybe Mainlanders are buying for investment, without know much beyond the proximity to a new MTR station.

 

Here's a comparison with TKT:

 

I don't know the Management Fee, and that is an important matter. Let me make some rough guesses and come up with a comparison of two different flats - this new one, versus an old flat that my partner owns:
.
FLAT>>> 1 south : Orig.TKT : Now TKT :
Category : ====== : ====== : ======= :
Price ---- : $6.605K : $2.700K : $3.300K :
Size, Net : 268 sq ft : 325 sq ft : 325 sq ft :
Per Sq Ft : $ 24,645 : $08,307 : $ 10,154 :
Rent/sqft : $80.0/sf : $29.54/sf : $30.77/sf :
Rent/ mo.: $21,440 : $09,600 : $10,000 :
Rent/ yr. : $257.3K : $115.2K : $120.0K :
MgmtFee : $4.00psf : $1.25psf : $1.25 psf :
NetIncome $244.4K : $110.4K : $115.2K :
Gross Yld : 3.90 % : : 4.27 % :: 3.64 % ::
Net Yield=: 3.70 % : : 4.09 % :: 3.49 % ::
.
BTW, Both flats are just a short walk from MTR stations.
TKT/Olympic is two stops from HK station (IFC).
Why should someone pay more than 2X as much for a smaller flat,
the same distance from Central? I doubt the $80 psf.
Meanwhile, the $9,600-10,000 Rental in TKT is a known existing level.

[drbubb]

Nothing Much left...
"Sub-HK$ 3M flats in rapid decline" -SCMP Headline
.
Buyers have to settle for either "ageing properties or tiny flats in old districts"

"Nearly impossible to buy a new flat with this budget, except the tiny apartments
at Cheung Kong's Mont Vert in Tai Po." (and I am not recommending those)

"... would likely be in properties that are more than 20 years old in Yuen Long,
Tuen Mun, or in Tsuen Wan.'"

Wealth Property, a realtor focused on mass homes in Tsuen Wan, Kwai Chung,
and Sha Tin, said the number of flats at this budget have fallen significantly
because most owners have raised their asking prices.

[drbubb]

Rents hit record high at 50 major HK estates - SCMP

Further increase is likely after 2.1pc gain amid strong demand

+ Rose 2.1% m-on-m, to HK$26.43 psf

+ Leasing transactions active, at 1,082 flats, but down 12% from July (1,225)

+ Higher prices resulted in fewer flats beiung released for rental

+ At Taikoo Shing, only 100 flats available, down from "normal" 200 flats

[Traineeinvestor]

What wasn't explained is why rents are increasing again?

Is it simply increased end user demand > increased supply?

Is there something else/more contributing to the increase?

[drbubb]

Probably, it is reduced supply.

People who previously had rented (because they could not sell),

are going to try to sell again, and prefer to offer up an empty flat.

 

The rising price trend came suddenly, and this may be a reaction

[drbubb]

Want to know what the geniuses at Citigroup Private Banking -

are thinking about HK Real Estate these days?

(This from today's Advert Insert on Private Banking, pg.6):

"While the prices of small-to-medium sized flats have surged,

units in luxury housing projects in Hong Kong are expected to enjoy

strengthening demand, riding on the positive economic conditions backed

by stable to buoyant developments in the stock market, steady rates,

and low unemployment."

(They go on to mention London, as a "popular" place for investment properties.)

==

- How's that, for soberly assessing the risks in the present environment?

Is this supposed to be an AD for their expertise? Who thinks that?

[Traineeinvestor]

I doubt if anyone thinks much of the entire PB insert - on the whole it was rubbish.

Most (if not all) of the articles were shallow sound bites or statements of fact with no meaningful attempt at either explanation or prediction. The typical research stuff that the private banks offer their clients is much more substantive than anything that appeared in the article - some of it is actually pretty good.

This is prettly much a case of the messenger (SCMP and the journalists) who should be shot rather than the banks

[drbubb]

I agree.

But you have to wonder who inside the bank signs off on such rubbish,

and thinks it might attract customers

[drbubb]

RENTS keep rising in Hong Kong

The latest chart in today's PROPERTY section of the SCMP shows

Month ---- : Rent------- : x12mos : TaikSh : Yield ? / CCLI-- :

Sep. 2012 : $23.00 psf : 276.00 : 11,485 : 2.40 % / 110.14 :

Aug. 2014 : $24.75 psf : 297.00 : 12,612 : 2.35 % / 126.94 :

CHANGE%: + 7.61%-- : ===== : +9.81% : ===== +15.25% :

(The Yield is purely an estimate, assuming that TkSh prices reflect HK as a whole)

That's up +7.6%% in two years.

Rents could rise further in Sept. from what I am hearing

[drbubb]

I keep a record of bank valuations for specific flats in some different parts of HK,

and I thought I would share the latest data

.

Bank Valuations : Apr. 2013 Peak vs. Now

.

Area ========= : Apr. 2013 : End-Sep'14 (/ Nsf = per SF ) : Change %

Tseung Kwan O : $ 7.470 M : $ 8.400 M ( / 691 = 12,156 ) : +12.45 %

Taikoo Shing ---- : $ 6.070 M : $ 6.790 M ( / 489 = 13,885 ) : +11.86%

Tai Kok Tsui, CP : $ 12.30 M : $ 12.60 M ( / 659 = 19,119 ) : + 2.44 %

TKT, LongBeach : $ 7.670 M : $ 7.500 M ( / 555 = 13,514 ) : - 2.22 %

TKT, Cosmopol.- : $ 2.900 M : $ 3.300 M ( / 326 = 10,123 ) : +13.79%

Tsing Yi ----------- : $ 8.900 M : $ 9.290 M ( / 765 = 12,144 ) : + 4.38 %

Tung Chung ----- : $ 4.130 M : $ 4.250 M ( / 570 = 07,459 ) : + 2.91 %

=====

I find the underperformance of TKT to be surprising.

I think the bank valuations may under-rate properties there.

(Of course the small, cheap, older flat in TKT has outperformed),

it is the newer flats in Central Park, and Long Beach, that surprises me.

[drbubb]

The Rush into small flats

"Developers Squeeze out Tiny Flats" - SCMP headline

"Small is beautiful as builders rush to tap into the lucrative market after soaring rents

and home prices force shift from bigger luxury projects"

+ Many Launches: Cheung Kong (165.sf, MtV.1), Henderson (High Pl.,166.sf), CK(177.sf,MtV.2)

+ Rising rents are forcing people into tiny flats

+ Flats below 430.sf rose by 6%, from $4.9mn, to $5.2mn, in 5 mos to August

+ As more and more small flats are built, it is become less easy to rent larger flats

+ The new trend is a reversal of an earlier trend of selling large flats (1,000sf+) to mainlander buyers

+ Developers have decided that small flats can earn more, and carry less risk

+ It is also easier for buyers to get mortgages on small flats - often up to 90%

SHKP will be launching many more tiny flats at Nam Cheong, starting from 165.sf living space

+ Planned to be 3,400 units

+ The 165sf. excludes kitchens, balconies, utilities, partition walls,

+ So studios will be 300 sf, and 1-BR flats about 400 sf

+ SHKP has also applied to convert four projects in NE NT to smaller units

One person households will account for up to 18% of the HK population in 10 years,

compared with 15.2% in 1981. And 2-person households are expected to rise from :

25% (2011) to 29% (2012)

[drbubb]

2,000+ "cheap" flats to be sold before year-end

 

... But you cannot buy one (unless you are part of HK's "sandwich class")

 

Prices --- : $2 -3 Million for most of them

Discount : About 30% below market

 

There are caps on income and wealth levels of buyers.

 

It will be interesting to see if such a large sale has any impact on "free" market prices.

[drbubb]

Small and medium flats continue to sell like hotcakes - The Standard

Type A (under 431sf) and Type B (431-752sf) have made up 76 per cent of flats sold up to August 31st

Overall price index: +5.9%

Type A flats : + 6.9%

Type B flats : + 5.8%

Developers now plan to up 10,000 flats on the market in Q4.

And A&B flats are estimated to account for 58% of flats sold.

Some are saying the newly-weds have been major buyers of small flats,

and the census dept recorded 55,300 marriages last year, so demand is expected to remain high from those planning to wed. And meanwhile, and estimate 100,000 couples who married in the last 5 years have still not bought a flat.

Flats prices are not expected to fall because of the cost structure.

Where Land costs may be a minimum of $4,000 psf, construction costs are rising,

so developers will need $10,000 - $20,000 psf to make a reasonable profit.

[drbubb]

Fresh highs for small, medium-sized flat prices - SCMP

"Demand strong for housing in N.T. but appreciation is slowing"

.

+ A fresh high, for the sixth consecutive month, but analysts believe the rise is slowing

+ Ratings and Valuations Dept. index reached 265.8 in Sept, 1.8% above Aug. +8.45% in 9 mos.

( Note: Centaline's index was : ???, up from ??? 12/31/13 : +x.xx%)

xx

above: prices at Caribbean Coast, Tung Chung

+ Ave. price of large flats (753-1,075sf) is HK$14,286 psf on HK Island : $12-14 mn?

+ Ave. price of small flats (430sf) in the N.T. rose from $3.35mn ($7,791 psf) in Jan. to $3.78 ($8,791 psf)

+ Midland says the average price in the whole of HK is HK$9,643 per SALEABLE sf

+ The major supply is coming from: NT-8,804 units, Kowloon-1,945, HKisland-1,435

.

The "Slowing" of prices could be temporary, resulting from "caution" relating to Occupy Central

 

[Traineeinvestor]

One way to find a bargain on HK property: http://www.bloomberg.com/news/2014-11-11/-haunted-apartments-go-for-cheap-in-hong-kong.html

[drbubb]

The Shoes of the Fisherman, hardly any room for them

 

 

HONG KONG — There are breathtaking views of Victoria Harbor from a 23rd-floor apartment that recently sold for $722,000 in the new Le Riviera building. The high-end German appliances and marble countertops evoke European luxury. In the entrance of the building, colorful wire mesh sculptures by Spanish artists hang from the ceiling.

There is just one catch. The apartment is only 275 square feet, with a bedroom just large enough to accommodate a double bed.

“If we don’t buy now, we might not be able to afford it later,” said Frank Wu, 60, the new owner of this so-called microflat in Shau Kei Wan, a former fishing village on the northeastern edge of Hong Kong Island.

Real estate in Hong Kong defies logic. The city is one of the most expensive places in the world to live and it has smashed one real estate record after another for years. As property costs continue to soar, even once improbable living spaces are now getting snapped up at astronomical prices.

 

At Le Riviera, three-quarters of the units sold so far have been microflats like the one Mr. Wu purchased. And Hong Kong developers are putting smaller and smaller units on the market — one recently built 165-square-foot apartments.

 

 

Mr. Wu, a retired structural engineer who lives in the Mid-Levels, a more expensive part of Hong Kong Island, bought his microapartment as an investment. He already has a potential tenant, a Canadian woman whose family lives in the neighborhood, and said he planned to charge about 16,000 Hong Kong dollars, or more than $2,000 per month.

 

( Note: $2,000 x 12 = $24,000 / $722k = 3.32% / or: 16k x12 = 192k / hkd 5.6 Mn =

that's 5600k / 275 = HKD 20,350 pssf *)

 

Many middle-income families now populate areas away from Hong Kong’s center, in neighborhoods like Kowloon East, where the commute is longer but prices are cheaper. In Tseung Kwan O, a neighborhood to the northeast in the New Territories, new properties have recently sold for as little as 10,000 Hong Kong dollars, or $1,290, per square foot, about half that of the units at Le Riviera. Even in these neighborhoods, though, prices have been lifted by the overall market.

==
> http://www.nytimes.com/2014/11/19/realestate/hong-kongs-tiny-apartments.html?_r=0

 

 

*I would never pay HKD 20k pssf for THAT neighborhood, esp. since the view is not gteed.

This just shows the madness of people who think they MUST live on HK Island

[drbubb]

Express Train Update - The XRL Station is rising now (at last)

 

[drbubb]

Rate Cut spurs RUSH on Projects

- that's a headline from today's SCMP Property section.

It is a reference to how the rate cut in China is triggering property buying

in places like Shenzhen, where some expensive properties in Qianhai sold fast

The 1-year lending rate fell by 40 b.p. to 5.6%

"Over the weekend, we have seen upgraders and first time buyers rushing to the

market, to hunt for new launches."

I am waiting to see if it will have th knock-on impact of more buying in HK.

My own property received two calls from Property Agents over the weekend.

Both had mainland buyers interested.

WE did not show it, however.

[drbubb]

Macau Property - What's Up?

Actually, it's down.

Today's SCMP says that Macau property prices have fallen by 10% or so "as gaming revenues slump."

No doubt, the dependence of the Macau economy on casinos is very large indeed.

 

While Macau is falling HK property is up. At what point might there be an Arbitrage opportunity?

== ==

Other:

+ Macau is facing increased competition from nearby Henquin Island in Zhuhai

+ After property prices soared by 50 percent from 2011, agents are predicting a 10 percent fall this year, and anotehr 5 percent next year

+ Gaming revenue is said to be 70 PER CENT of Macau's economy

+ Cooling measures were introduced in April 2011, and transactions fell by 30 percent from 16,910 in 2012 to 12,000 last year - down maybe another 40 percent to 7,000 this year

+ The announcement of a drop in revenues has put further pressure on prices

+ China's crackdown on corruption has hit the casino business

+ Speculators are eyeing Hengqin, where prices are just 50% of Macau's

+ The border gate will soon start operating 24 hours a day

+ Stated price levels:

: Macau : 100,024 patacas per Sq.M.

: Henquin: 40,000 yuan per Sq.M (= HK$50,400)