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Hong Kong Property thread / http://tinyurl.com/hk-prop


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#261 Steve Netwriter

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Posted 27 August 2008 - 03:53 AM

DrBubb,
The only housing market I've been watching in very great detail is the NZ one.
I think the very first sign of the bull market ending was when the number of properties for sale increased. I think that occurred well before the media reports changed, and well before prices changed.
I can't think of another sign that marked the change better.

A rising stock of properties for sale indicates either more coming on to the market for sale, or fewer sales, or a combination.
If I saw that happen after taking seasonal variations into account, I would be worried the market was about to turn down.

I haven't been following this thread, and am unbiased. I don't know what the factors are for HK. But whatever they are, I think the above is a warning signal if it occurs.
It took from about July 2007 (when the housing stock started rising) to say Feb 2008 for prices to start reflecting the change in sentiment.

Fiat: What starts becoming worth less eventually becomes worthless.

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#262 DrBubb

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Posted 27 August 2008 - 11:22 PM

QUOTE (Steve Netwriter @ Aug 27 2008, 04:53 AM) <{POST_SNAPBACK}>
DrBubb,
The only housing market I've been watching in very great detail is the NZ one.
I think the very first sign of the bull market ending was when the number of properties for sale increased.
...I think the above is a warning signal if it occurs.
It took from about July 2007 (when the housing stock started rising) to say Feb 2008 for prices to start reflecting the change in sentiment.


Yes. Buying has dried up in HK Property.
But at the same time, there are very few NEW properties for sale, and the speculative excess is being
worked off in recent weeks. Important to me, is the fact that the banks that got burned in the 1997-2003 meltdown,
have been prudent and conservative in their lending. These are hugely important differences with the US and UK,
I dont know about NZ.

I am hanging my hat on those differences, because they help confirm that we are at the wrong
point in the cycle, to have an 18 year cyclical peak- that was 11 years ago- in 1997. I reckon we are now seeing
the mid-cycle correction.

Finally, the Chinese stock market (presented by FXI) seems to have checked in to a GIP ... update


... and China stocks could be set to move higher from here- maybe even back to last October's record levels.
No guarantees, of course.
The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#263 Steve Netwriter

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Posted 27 August 2008 - 11:46 PM

QUOTE (DrBubb @ Aug 28 2008, 12:22 PM) <{POST_SNAPBACK}>
Yes. Buying has dried up in HK Property.
But at the same time, there are very few NEW properties for sale...


NZ is very similar to the US & UK. In some ways potentially worse than the US !!!
You may find this interesting:

---------------

A very interesting comparison between the US and here in NZ.

NZ vs US house prices


Panel 1
NZ vs US house prices
Are we more indebted?
Are we more expensive?
Will our prices fall as much?

Panel 2
NZ households more indebted
Debt 162% of disposable income
Vs 130% in United States
Interest in NZ 14.4% of income
Vs 14.1% in America

Panel 3
NZ affordability worse
6.3 times income
Vs 3.6% in US
US prices down 20.3% since mid 06
NZ prices down 3.4% since Nov 07
We have much further to fall

---------------

It does sound different. Here there is still a large number of 'just built places' sitting empty waiting for someone to love them biggrin.gif
And plenty of empty sections (plots/land), also dropping in price.

Fiat: What starts becoming worth less eventually becomes worthless.

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#264 DrBubb

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Posted 27 August 2008 - 11:58 PM

Hey, Steve, that's great stuff.

Can you copy it over on the new thread I have just started on NZ property?:
http://www.greenener...?showtopic=4111
The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#265 surfdude

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Posted 28 August 2008 - 04:21 AM


I am back in HK after 6 weeks in Colombia, Canada and NY and catching up on the property news. I read Wednesday's property section in the post and was similarly shocked to read the analysts forecasts for the next 15 months on page 1 with a drop of 30%. There predictions are like a drunk throwing darts at a dartboard - not very consistent.

I had a look at LB2 on Tuesday and was not overly impressed. I felt the typical 3BR were smaller than at CC. and that was in unfurnished apartments! What you get for a huge premium are marginally higher ceilings in some rooms and top end appliances in the kitchen. Yes, the duplex and top floor flats are impressive and so is the price. The agent told me that a 1700 foot flat on 19th floor sold for 11,800 sq ft. to a mainlander. That brings the price close to 20 million about what the house of LB sold for initially. personally, I got the feeling the place is set up to impress (bankers or self important types?) and not a mixed area for families. I don't think it will have the community feel of CC and will be more cold and business like - maybe that is what they want. They have to share Coastal Skylines Club house - is that going to factored into the management fees?

There are alot of agents hovering around citygate. Can't blame them if they can bag a 2.5% commission.

#266 DrBubb

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Posted 09 September 2008 - 02:30 AM

QUOTE (surfdude @ Aug 28 2008, 05:21 AM) <{POST_SNAPBACK}>
I had a look at LB2 on Tuesday and was not overly impressed. I felt the typical 3BR were smaller than at CC. and that was in unfurnished apartments! What you get for a huge premium are marginally higher ceilings in some rooms and top end appliances in the kitchen. Yes, the duplex and top floor flats are impressive and so is the price.


I am hoping that the strong buying at LBD will spill over into CC and CS, after the selling process is done.
Certainly, there is now a clear value-for-money argument for CC.

The views are better too

The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#267 surfdude

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Posted 09 September 2008 - 07:30 AM

QUOTE (DrBubb @ Sep 9 2008, 10:30 AM) <{POST_SNAPBACK}>
I am hoping that the strong buying at LBD will spill over into CC and CS, after the selling process is done.
Certainly, there is now a clear value-for-money argument for CC.

The views are better too


For someone living in Tung Chung it is clear that CC offers good value for money but many people still feel Tung Chung is way out there. Personally I think the TC MTR line is the best to ride (not as crowded as Tsuen wan of island line) and you get into central in less than 30 minutes.

I have just finished watching the Youtube video on Harrison's 18 year property cycle. Very informative and clear. Thanks for doing a great job DrBubb.

I have also read the thread. I have been wondering where HK is on this cycle and where is it heading. I think we are still in the recovery phase. To be followed by a dip and then the explosive phase?

I looked at the residential price index on Midland but it only goes back to 1991. Does anyone know where we can find an index that goes back earlier? It would be interesting to see how Harrison's cycle plays out historically in HK.

#268 DrBubb

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Posted 09 September 2008 - 08:59 AM

QUOTE (surfdude @ Sep 9 2008, 08:30 AM) <{POST_SNAPBACK}>
For someone living in Tung Chung it is clear that CC offers good value for money but many people still feel Tung Chung is way out there. Personally I think the TC MTR line is the best to ride (not as crowded as Tsuen wan of island line) and you get into central in less than 30 minutes.

I have just finished watching the Youtube video on Harrison's 18 year property cycle. Very informative and clear. Thanks for doing a great job DrBubb.

I have also read the thread. I have been wondering where HK is on this cycle and where is it heading. I think we are still in the recovery phase. To be followed by a dip and then the explosive phase?

I looked at the residential price index on Midland but it only goes back to 1991. Does anyone know where we can find an index that goes back earlier? It would be interesting to see how Harrison's cycle plays out historically in HK.


Some good questions.
Certainly, you could be right- we are only 5 years off the 2003 low, and so the mid-cycle correction may still lie ahead,
after another rally in late 2008 or early 2009. That was my view for a long time. But the longer this drags on, and the more
bearish sentiment gets, the more likely it is that THIS IS IT, we are in the mid-cycle correction already, which has become
my preferred view with the latest increase in bearish sentiment.

(I will copy this to the HK cycle thread)

The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#269 DrBubb

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Posted 10 September 2008 - 02:27 AM

SUMMER IS OVER - and it is time for some Bad News Headlines (in SCMP)
=====

= 1/
Mainland Investors dump HK Assets - Sandy Li and Peggy Sito
Incomplete transactions are forfeited or units sold at a loss amid global credit slowdown

Buyers from the mainland are finding it hard to get credit as their wealth ecaporates in the continuing slide in Chinese stock indices.

How widespread?
The main projects seem to be: Grand Waterfront in To Kwa Wan, One SilverSea and the Long Beach, TKT, and Central Peak Towers, in Tin Shui Wai, where mainland buyers were bussed to the projects. (For example, HK properties bussed 400 mainlanders to the LB launch, where 10% bought units.) The most dramatic impact was on those who bought in Q4.2007, and then saw the stock market melt down by over 50%. The articles says:"HK's mass housing market has dropped 5-10%, and analysts expect another 20pc decline."

The stressed projects typically had 6 month or 12 month completion dates, and it is those later ones under pressure now. "They stand to lose hk$500,000 or more", if they walkaway from 10% deposits. Other buyers are selling out at losses of up to 5%. At Grand Waterfront, 70% (!) of buyers took the 382-day deferred scheme. Now about 30 units are being offered at a discount in the secondary market.

Some units in Central Peak Towers are being offered for rent at 25% discounts, HK$9 psf, versus where they were several months ago.

= 2/
Beijing Travel Curbs add to Macau Misery - Sandy Li

The gist is: foreigners have been about 50% of demand for luxury properties in Macau (and maybe 20% of overall property deals), and with travel restrictions now to Macau (it is no longer possible for mainland visitors to travel from HK to Macau on a single visa), demand from foreign buyers (not just mainland chinese) is falling fast, with transactions down over 30%.

Pricing example: Prices at upmarket La Cite, popular amongst mainlanders, had declined 30% to HK$2,800 from HK$4,000 in January and One Central Macau had also fallen 25pc to HK$6,000 psf (says Ronald Cheung Yat-fei of Midland.) Home buyers have now adopted a "wait-and-see" attitude. It is "not easy to close any deal now."

(Then. once you get past the front page gloom, a slight more upbeat message is being sounded):

= 3/
RENTS: the page2 charts, shows an uptick (to fresh highs) in Rents for homes - 50 housing estates

= 4/
HK Developers prepare to launch 12 projects amid signs of recovery - Yvonne Liu
"Buoyed by signs of recovery in demand for quality flats" ...
The signs are: "encouraging sales" at Le Bleu Deux in Tung Chung, and Soho 38 in Central.
"LBD sold 400 units within two weeks at prices that were 20-30% above the secondary market"

Amongst the 12, some projects I will be watching are:
+ The Cullinan (SHKP) at Kowloon Station,
+ Nan Fung's Tai Kok Tsui project

However, Midland says prices in the secondary market remain weak, down 0.6%, the 11th week of decline
The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#270 surfdude

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Posted 12 September 2008 - 06:25 AM

I have been reading past postings on the CC site re: the property cycle in Hong Kong. MacauVillager has some good insights into HK property. HK follows an anti-cycle to US and UK and he attributes this to US interest rate cuts when they are in recession which is favorable to HK with the cheap money and low rates it provides (thanks to the peg). He looks at the fundamentals but comes to the same conclusion (as the 18 cycle if we are in the mini-recession phase) that after this consolidation phase we are in for 3 -5 years of good growth (explosive phase).

The 18 year cycle fits well with the narrative of the US and UK. Is this the case with HK? Or is it on a shorter cycle. In the current cycle the bottom was in 2003, when was the previous bottom? Was the low after the "Tiananmen incident", the mini-recession in the previous cycle?

#271 DrBubb

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Posted 12 September 2008 - 06:34 AM

QUOTE (surfdude @ Sep 12 2008, 06:25 AM) <{POST_SNAPBACK}>
The 18 year cycle fits well with the narrative of the US and UK. Is this the case with HK? Or is it on a shorter cycle. In the current cycle the bottom was in 2003, when was the previous bottom? Was the low after the "Tiananmen incident", the mini-recession in the previous cycle?


Good questions.

I dont have the HK property index data before these charts:
Midland's data

Centaline's data


What I do have is Stock price data.

Here is the Main bellwether : Henderson Land (HK:12) ... update

Same chart (HK:12), on a log scale ... update


And here's another:
Cheung Kong (HK:1), on a logarhymic scale ... update : 1 year

== ==

HONG KONG's 18 YEAR CYCLE !

I had to do a bit of digging to find this - but I finally found it!
It is very clear, here on this chart, which is Cheung Kong's stock price, expressed in US$- traded in the US.

Cheung Kong in US$ (CHEUY) ... update / compare: US-CTX


Here's what I see:

+ An important low in 1983 (US$0.16 in Oct.1983)
+ 4 years up to a mid-cycle peak ($1.75 in Sept. 1987) - that's over 10x !
+ A quick mid-cycle correction ($0.75 in Dec.1987, that's only 3 months down)
.. This quick cycle was driven by the 1987 crash. An alternative low, my preferred one,
.. after an A-B-C move might be July 1989 at $0.87.
+ 8 years up to a Cycle peak (US$12.60 in Aug.1997 - that's 79x up in 14 years !)
+ 13 months down to a A-low* at $3.73 on 1 Sept.1998 : -70% from 1997's peak
+ A B-wave rally to $15.42, 14 Feb. 2000 (CHEUY high, but not in some other builders, like HK:12)
+ A minor low in 2001 at $8.20 on 19 Oct. (when the 18 year cycle "wanted" a low) : -46.8%
+ A lower low - C-wave - at $5.20 on 24 April 2003, thanks to SARS : -66.3% down from 1997's peak

*Note: the correction from the 1997 peak is much clearer in the chart of Henderson (HK:12)

Henderson /HK:12 chart for 1996-2004 : update 2001-2008


The next mid-cycle peak was due in 2007/8, counting 7 years up from the 'expected' 2001 low.
And I reckon that we have seen it.
The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#272 surfdude

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Posted 12 September 2008 - 07:56 AM

Looking at the Henderson and CKH graphs there is steady growth and then a spike in 1994 (the explosive phase?) but I don't see anything to indicate a correction in 1989 just the dip before upwards regular growth resuming - this possibly was the mini-recession (brought on by political uncertaintly). The previous bottom must have come before all of this (1982-3?).

BTW, I can't see the chart of the 3 top HK developers.

#273 DrBubb

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Posted 12 September 2008 - 08:05 AM

QUOTE (surfdude @ Sep 12 2008, 08:56 AM) <{POST_SNAPBACK}>
...I can't see the chart of the 3 top HK developers.


I didn't post it. I found a better chart in CHEUY,
and am revising my comments based on what it shows.
The prior cycle low is now nailed as Oct. 1983

The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#274 DrBubb

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Posted 15 September 2008 - 10:24 PM

China Watch:
September 12 – Bloomberg (Kevin Hamlin and Nipa Piboontanasawat): “China’s industrial production grew at the slowest pace in six years on weaker export demand and factory shutdowns for the Olympics, increasing the likelihood the government will stimulate the economy. Output rose 12.8% in August from a year earlier… after gaining 14.7% in July.”


September 10 – Bloomberg (Nipa Piboontanasawat and Li Yanping): “China’s inflation weakened to the slowest pace since June 2007 and export growth cooled, adding to speculation the government will cut taxes and ease loan restrictions to spur the world's fourth-largest economy. Consumer prices rose 4.9% in August from a year earlier, less than economists estimated, after gaining 6.3% in July… Exports rose 21.1% in August, down from July’s 26.9% gain, the Customs Bureau said.”

September 10 – Bloomberg (Li Yanping): “Foreign direct investment in China climbed 41.6% in the first eight months from a year earlier, adding to the flood of cash that could stoke a rebound in inflation in the world’s fastest-growing major economy. Spending by overseas companies increased to $67.7 billion…”

September 12 – Bloomberg (Nipa Piboontanasawat): “China’s retail sales grew at close to the fastest pace in at least nine years as rising incomes encouraged consumer spending. Retail sales rose 23.2% in August from a year earlier to 876.8 billion yuan ($128bn)…”

/see: http://www.prudentbe...in?art_id=10111
The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#275 DrBubb

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Posted 16 September 2008 - 05:01 AM

COPING
Lehman Hong Kong operations restricted by regulators

By Chris Oliver
Last update: 12:45 a.m. EDT Sept. 16, 2008

HONG KONG (MarketWatch) -- Hong Kong Exchanges and Clearing Ltd., operator of the local stock and warrants markets, said it has suspended a Lehman Brothers' unit from trading in the city's stock and options markets. The market operator said Lehman Brothers Securities Asia Ltd's right to access the local order matching system had been suspended until further notice. Separately, the Securities & Futures Commission, the local securities regulator, said Tuesday it has imposed restrictions on four Lehman units. Under the restrictions, Lehman's asset management unit will be allowed to continue normal activities, but is barred from paying out on any of its funds, according to a Dow Jones Newswire report. Lehman's securities unit will be allowed to deliver securities purchased in the last two days upon cash payment from clients. Lehman Brothers, which filed for Chapter 11 bankruptcy protection Monday, said Tuesday it had suspended all operations in Hong Kong apart from its asset management arm
The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#276 surfdude

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Posted 17 September 2008 - 07:20 AM

On Page A3 of today's SCMP,

Amid Gloom, Flat owners cut their asking prices

-Owners of flats in the 10 biggest private housing estates cut asking prices by an avg. of 3.2%.

- Someplaces such as Kornhill have fallen by 7-10%

- Jessy Ng of Ricacorp said flat owners are no longer optimistic about the economic outlook.

- Cenatline Holdings Chairman Shih Wing-Ching said HK property was facing a correction. He said the latest US financial crisis is more series than the Asian financial one in 97/98. However, he did not think prices would drop sharply because they had not increased as much as they had in 97. He expects prices to drop by an average of 8%.

In the property section,

- Sales activity for last month, 6402 transactions. The lowest since 2006


With the flurry of dire financial news, sentiment has soured and it seems the mini-recession/correction part of the cycle is going to be exacerbated by all this.


#277 surfdude

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Posted 18 September 2008 - 07:06 AM

HK stocks take a big hit this week, particularly the financial and property sectors. Here is the news from Bloomberg:

Property Slump

Property developers slid on concern credit turmoil will hurt growth in the city and erode demand. The Hang Seng Property Index, which tracks the city's six biggest developers by market value, fell 8.4 percent, headed for its worst decline since Sept. 12, 2001.

``I'm probably more concerned about the slowing property sector and what that means for loan growth and the net interest margins among Hong Kong banks,'' said Unifund's Wong.

Sun Hung Kai Properties Ltd., the city's biggest builder, fell 7.4 percent to HK$83.35, the most since Oct. 3, 2007. Billionaire Li Ka-shing's Cheung Kong Holdings Ltd. dropped 8.5 percent to HK$87.00, the most since Sept. 12, 2001. Henderson Land Development Co., the third largest, declined 11 percent to HK$34.00.

China Overseas Land & Investment Ltd., the Hong Kong-listed developer controlled by China's construction ministry, tumbled 12 percent to HK$7.25, the biggest decliner on the Hang Seng Index.

The value of new mortgages approved in Hong Kong rose 5.7 percent in July, the smallest gain in two years, the Hong Kong Monetary Authority said last month. Hong Kong's economy grew 4.2 percent in the second quarter, the slowest pace in almost five years, as exports and domestic consumption cooled.

To contact the reporters responsible for this story: Chan Tien Hin in Kuala Lumpur thchan@bloomberg.net.

Last Updated: September 18, 2008 02:14 EDT

#278 Haggis

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Posted 19 September 2008 - 09:01 AM

Anecdotal.

Sold a Happy Valley property in late February. The flat below went up for sale just as I completed our deal - they received an offer in June for 6.1% less, which was turned down and the agent now reckons they'd be lucky to fetch 15% less than our flat If they could even find a buyer. I know we did very well in hitting what turned out to be the absolute peak, but this is still a rather dramatic turn of events.

The upper end of the market is not doing well in volume or pricing. And I suspect the tenuous nature of a lot of bonuses and housing allowances is starting to work its way into peoples price expectations.

#279 DrBubb

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Posted 20 September 2008 - 12:41 AM

The BIG SCARE may not last too long (if rates stay down)

I think we may have seen a low in HK and China stock prices this week*.
If HSI sprints through 20,000 and 22,000, then confidence may soon return to the property market.

But watch those interest rates!

*(I predicted a Turn before it happened- see the cycles thread-
The low of 16,300 was almost exactly 50% of the 30,000 peak)
The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#280 surfdude

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Posted 23 September 2008 - 03:41 AM

I just read this on HK Digest at the Newsnow HK site.

WEN WEI PO

-- Expert forecast says China's fourth-quarter GDP growth may slow down to nine percent or less. Investments and exports will lose momentum.

-- Residential property values in Hong Kong will drop by 30 percent by the end of 2009 and office rental will go down the same percentage in 15 months, according to CLSA Asia Pacific Markets.

If these guys at CLSA are right we are in for a huge correction. This would throw the 18 year cycle - property model for HK out the window. However, these analysts could be wrong as they were with their new year predictions on property for 2008. Anyway, things look to drop in the short term.




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