Hong Kong property outlook - and Data Base

[drbubb]

Is Hong Kong having a Property Bubble?

(Here's how this question was answered elsewhere)

 

The articles I have seen about HK are not well informed

Each year that goes by, more debt is repaid

 

Property prices are high, but the amount of Equity in this place is high too. Some of it is leaking out to places with a REAL bubble: places like London. But I think the "stall" in privces here, just means the market gets a little bit more resilient every month, as more debt is paid down

Of course, a jump in interest rates here could push prices down. But we are not seeing that. And instead the market goes sideways, some new properties get bought, and the bigger picture is debt is reducing, year-by-year, month-by-month. Incomes rise somewhat. Rents may rise too. And the debt slowly reduces, so long as the number of new flats does not increase the aggregate debt.

 

I would like to see some actual figures on these dynamics. But I do not see the action here that I would expect to see in a true bubble: High debt, much speculative excess, widely bullish assumptions. These are missing in HK, despite what the foreign pundits may be writing about HK, while they mostly ignore a true bubble in London and some other places.

[drbubb]

SOME TIPS - from AsiaX.

 

OTP :

we have been hearing about how rates would rise "soon" for a long time.

Someone who bought carefully a year or two ago, may be ahead by 5-10%, while also enjoying the fact that a nice little chunk of the debt has been repaid.

And this is why buyers go on buying, despite all the Bearish "hum" in the background

J-- (2 hrs ago)

And indeed you are correct. I am eyeing a flat in Shatin, 20% cheaper than other flats. If you look out there are cheaper flats that can be had (as always). Unless there is a major crash, it still makes sense to buy, if the price is right.

 

OTP:

Why cheaper? There is usually a reason. And a 20% discount is large.

My suggestions now would be:

+ Buy only properties under $4-5 Million, unless it is for "own use", and ideal for your requirements

+ Try to get something that will benefit from future transport developments, where the transport upgrades are not yet fully priced in

+ Do not favor HK Island over the rest of HK, unless you have a very good reason of your own (schools or whatever)

+ Spend plenty of time with "boots on ground" to really get to know the area, and the advantages (or disadvantages) of living there. Look for signs of gentrification, and places where gentrification might improved the neighborhood. (I like new areas on the edge of old areas; or old areas that will benefit from new transportation links)

[drbubb]

Some Valuations (along Tung Chung Line) are testing the bottom of an important Price Channel

 

=

 

Index values FALLING along TC Line - has declined more than Bank Valuations

 

Perhaps banks had moved valuations BEFORE the Index Falls.

 

Area==== : TKO-CHt: TK*TsW : TKT-CPk: TY-TVrd: TC-CrCs: TktLb30 : Tkt-IsHV : PrspG*KC
Tower/ Fl. : Tw3-30C: Tw3-25C: Tw3-30C: Tw3-30C: T3-30C : Tw3-30C: Tw3-30C : Tw3-28C

========

Oct-10/31 : $7.810M: $6.090M : $11.64M: $8.720M : $4.120M: $7.000M : $9.680M : $6.430M

Nov-11/30 : $7.540M: $6.070M : $11.52M: $8,720M : $4.060M: $7.000M : $9,680M : $6.370M

Dec-12/31 : $7.540M: $6.070M : $11.46M: $8,460M : $4.040M: $6.960M : $9,630M : $6.370M

'14.-01/31 : $7.430M: $6.040M : $11.46M: $8,460M : $4.040M: $6.960M : $9,630M : $6.370M

Feb.- 2/28 : $7.390M: $6.040M : $11.41M: $8,410M : $3.970M: $6.930M : $9,590M : $6.340M

Mar - 3/31 : $7.310M: $6.020M : $11.41M: $8,370M : $3.950M: $6.930M : $9,590M : $6.340M

Apr - 4/30 : $7.310M: $6.020M : $11.41M: $8,330M : $3.950M: $6.930M : $9,590M : $6.340M

=======

BANK VALUATIONS : TY-TVrd: TKT-CPk: TC-CrCs: CL-Index

Specific Flats ===== :: Tw3-30C: Tw3-30C: T3-30C : end Mo.

PEAK was October -- :: $8,720M: $11.64M: $4.120M: 119.50

----- Sq.feet, Gross -- :: 0,951 sf : 0,943 sf : 0,680 sf :

----- Per Sq.Foot ----- :: $ 9,169 : $12,344 : $ 6,059 :

Per CL-Index ---------- :: $ 9,077 : $11,958 : $ 6,137 :

.and November 2014 :: $8,720M: $11.52M: $4.060M: 120.39

At end April 2014 ---- :: $8,330M: $11.41M: $3.950M: 118.40

----- Per Sq.Foot,bank :: $ 8,759 : $12,100 : $ 5,809 :

----- Per Sq.Foot CCLI :: $ 8,517 : $11,148 : $ 5,660 :

Premium, BankValues $ 0,242 : $00,952 : $ 0,149 :

=================

Change, % Fall, BankVal :: - 4.47% : - 1.98% :: - 4.13% :: NotAppl

Change, % Fall, CL Index :: - 6.17% : - 6.77% :: - 7.77% :: - 0.92%

Less change, BankValues : +1.70% : +4.79% :: +3.64% ::

The Bank Values on specific flats (Tower 3, 30th Floor) are now ABOVE average CL Indices.

And maybe that is justified by a higher than Average floor (?), and/or better views.

 

=

[drbubb]

The SPIN continues...

Headline in today's Standard:

"Secondary flat sales jump to 10-month high"

"... a 50 percent rise from a week ago," says Midland.

THESE facts sound Bullish to me.

Excerpt:

"The deals at Mei Foo Sun Chuen involved price cuts of up to 6 percent. One 666-square foot flat there was offloaded for HK$5.98 million after the asking price was reduced from HK$6.38." (that's a 6.3% price cut.)

When you first read that, it might sound mildly Bearish - but look into the detail:

+ HK$5.98 million / 666 sf = $8,978 psf

+ Centaline reports $6,508 psf-Gross and

+ $8,729 psf-Net for Mei Foo Sun Chuen

So it seems the lucky seller got a 2.9% premium to market, when the Buyer raised his bid to that level. And THAT sounds Bullish to me.

Do not believe the raw reporting in the press. They seem bent on an agenda of Bearish Spin. So run some numbers. and check their statements. You may keep finding as I do, that most sales transactions are neutral, and some are even bullish. The Exception might be on the "expensive" flats, priced above $10 Million, or $20 Million.

If that's the "lowest" sales with the biggest "discount", what happened in the other cases? Are buyers now paying the full undiscounted (above market) asking prices demanded by Sellers?

If so, then maybe a new Bullish trend is developing. It would be interesting to know the full facts, seem from both sides. But we are not getting that in the press.

[drbubb]

MORE on SPIN in the media - from AX

 

P:

How would you have written the news item if you don't a spin?

Or you're just imagining the spin? It looks like a simple what/when/where/why item to me.

 

OTP:

To reduce spin:

+ I would compare prices achieved with indices, and mention that "some prices being paid are actually above the apparent market values" per Centaline index figures

+ Explain that: Discounts to asking prices may occur when buyers are also raising their bids, as a part of a normal back-and-forth negotiation process. (Sometimes I get the idea that some reporters have never negotiated a purchase or sale of a property based on the nonsense they write. Do they think sellers start out Asking the lowest price they are willing to sell at?)

+ Observe that: Discounts to asking prices seem to be narrowing as buyers creep back into the market, and realise that their "lowball bids" are no longer being accepted, and only desperate sellers have agreed big cuts (I reckon this is becoming more apparent as this year goes on)

+ The weakness in the market seems to be limited to more expensive properties, and meantime, the lower priced end of the market is hitting new record highs in some parts of the SAR

I believe that ALL of these points are true, but you NEVER see them in news articles - Perhaps when such comments start showing up, it will be a sign of a dramatic change in sentiment. I have done some careful observation to be able to spot these realities, and I think this is the sort of factual "color" that people want to discover when they visit chatboards - since they may not read it or hear it anywhere else.

[Traineeinvestor]

I'm inclined to believe it's as likely to be sloppy journalism as deliberate spin. They overhype when the market is going up just as much as they do when it's going down - at the end of the day its the most sensationalist stories which attract readers (sadly).

[drbubb]

You may be right.

 

But I have seen where I live (The Long Beach) that the banks are systematically undervaluing the secondhand properties (so only 2-3 flats have been sold since Nov.2013), while overvaluing the New Properties (permitting 100's of flats to be sold in the same time frame.)

 

I am obviously biased - but I think this favoring of the banks may be illegal. But what to do?

[drbubb]

HEAVY HIGH END HONG KONG / Comments from AX

 

Posted by p. (43 mins ago)

 

Imperial Cullinan near MTR Olympic station yesterday recorded its fifth loss- making deal since February when a mainlander disposed of his flat for a loss of HK$1.06 million.

As bearish sentiment grips the local luxury home market, a 1,383-square-foot flat - pledged for loans six times - was sold for HK$22 million. Measuring 1,067 sq ft net, the three-room unit owner earlier sought HK$23.5 million.

What's the spin in this one?

Posted by J.-01 (28 mins ago)

 

A 4.5% discount on the advertised price? That's pretty much within the "normal" state of affairs.

I guess Imperial Cullinan was over-hyped when it was put on the market, and some rich egocentric mainlanders thought they would be able to buy some status through a flat. Also, new flats are always more expensive than second hand ones. Of course if you buy a new one and sell it shortly after you will lose money. Everybody knows that.

Can you find me a flat sold at a loss in Ma On Shan? No? Why? Because people buy in Ma On Shan to live, and not to buy status by buying over-hyped new flats in over-hyped new fashionable buildings?

Posted by OTP (16 mins ago)

 

P.,
If you are familiar with my postings here, you may know that I have always said that Imperial Cullinan was sold at very high prices, way over the prices of The Long Beach next door to it. This was achieved by SHKP properties through an interesting method : they had a showroom in Shenzhen, and BUSED potential buyers into Kowloon to see it. (I used to see the people from the buses walking around the area around IC when I went for my morning jogs back in those days.) Consequently they had many buyers from China, who may not have been aware that a very nice property, at much lower prices was right next door. Now with the slowdown in China some of those (reckless?) buyers may be selling. Does it surprise anyone that the GAP between IC and TLB is narrower in the secondary market.

P.,
Do you ADD anything to what you cut-and-paste from the press?
If so, you may find it would make sense to post press excerpts, together with comments and clarifications of your own, which is what I personally like to do. That way, readers here may get a more informed view than they can get from browsing the news.

BTW,
The WSJ has a headline: "Now on Sale, Hong Kong Homes"
They also comment on how HK's "once sizzling property has turned so frosty that developers have resorted to discounts and other incentives."
This will be no surprise to anyone in HK, who has been reading about discounts on new properties for many, many months... And those HK readers may be aware of the "tricks" that are being played in how those discounts are being reported and manipulated.

Included in the article is a bar chart showing how annual prices changes shrank:
From +26% in 2012, to +8% in 2013, and to -0.5% so far this year in 2014.

There is also a reference to how "a so-called double stamp duty of 17% (sic) on property purchases" for non-residents has helped to kill demand in China.

They haven't done a very good job at recognizing the two-tier nature of the market. With the expensive luxury end hit-hardest, while the lower end remains in generally good health, with prices mostly stable. In fact, there's this curious sentence in the article:
"Even luxury condos are being discounted"
??? What ? - the sentence should read:
"The more expensive luxury condos are being most heavily discounted, because that is where the new taxes have hurt demand most."

I am disappointed that the WSJ would publish an article with so little new information for a well-informed HK based reader.

Another article: "Vintage Apartments are back in favor - Buyers, Renters Turn to Older Buildings with more space, cheaper rents Instead of New High-end Tower" - by Chester Yung is also in today's WSJ. It is more informative.

Yung writes:
"Many of these buildings are in prime neighborhoods, and boast more space and better layouts... They offer far lower prices. These apartments are getting scarcer." For every 10 deluxe newer high rises, there is just one of these vintage units for sale. The ratio was about 7-to-1, a decade ago.

"Prices of older buildings have held up rather well, rents of these older buildings are also as much as one-third cheaper." (But they may lack clubhouses.)

Even Yung seems to have missed that CHEAPER older buildings, with flats priced at under $4-5 million, have done even better than the "vintage" Midlevels buildings (like Realty Garden, built in 1971) that he is writing about.

[drbubb]

// anyone from AX who would like to post here:

Please sent a PM-message to OTP at AX, and ask for a password //

 

Ed-at-AX goes on defending in his flawed sources:

 

(OTP):

Ed, you ask:
"Who would pay them off to write spin?"

Are you joking?
All of the Press look after the interests of their advertisers.
Doesn't AsiaXpat do the same? Perhaps you are under less pressure to do so.

As for "the US tightening" - it may happen eventually - But I see more talk than action, just look at the level of short term rates in the US, and mortgage rates in HK. Not much sign THERE yet.

I can agree: WHEN mortgage rates in HK jump by 1, 2, 3% or more, there will be some significant impact on the HK market. Meantime, incomes are mostly moving higher, and so are rents in some areas.

With CCLI just reported an hour ago at 118.12, I see more signs of a "sideways" market than the "bearish" one we keep reading about in the press.

Go back and read:
"(29 July 2013):
I have been saying for a long time, that HK's Property Developers would take the brunt of this correction, especially in the early stages of the present correction. And I still believe that will be true.

THIS ARTICLE suggests that price cuts for new properties are coming - The premium over secondhand was just too large to be sustained."
>source: http://hongkong.asiaxpat.com/forums/hong-kong-property/threads/151878/hk-developers-game:-cut-prices?/

Compare that with the many predictions for a 10-20% drop that you could read in the Press at that time.

 

(Ed):

So how exactly would that work?

Which advertisers in the WSJ or Bloomberg would have so much influence that they could get them to post lies about the HK property market?

I doubt the WSJ has a single advertiser coming out of the HK market - this market would be insignificant to them as a global brand - I hardly think any advertiser in HK would have the clout to corrupt the WSJ editorial (not saying they cannot be corrupted but I think you'd have to be a pretty big player to get that done)

And what about the two investment bank analysts who have indicated developers have discounted prices? Why would they lie?

Are they being bribed? What is the upside for them in lying about discounting?

Sorry I don't buy this --- this is a mickey mouse issue for such global organizations -- I do not believe investment banks and global media would be participating in some vast conspiracy to talk down the HK market

 

(OTP):

Ed,
My comment is about spin. Are you not aware that many developers advertise in various Newspapers. I have documented the spin in various place on this thread and elsewhere. If you cannot see it, you are pretty blind IMHO. You have never made a detailed rebuttal of any of my detailed comments.

 

Why do the WSJ and Bloomberg get sucked in?:

Their reporters are not close to the market (just read their articles, and you can see they are out of date). So I reckon they are basing their reports on what they read in local HK press sources, which are influenced heavily by their friends in property agencies, and by the reliance of local papers on ad revenues from the developers. If you rely on "spun" material, you will wind up writing spin too. In addition to that, they seem to think their readers will care more about areas like Midlevels, which ARE clearly falling, rather that the more stable low-priced properties in areas like TKT, which may not get much investment from English-speaking readers of the WSJ or Bloomberg.

 

As for the accuracy of the bears, many people have "called them out" for their inaccuracy. How can you go on ascerting that such nonsense is a useful forecast for future trends, I do not know.

The "conspiracy" is pretty simple:
+ Newspapers "spin" transactions in a bearish way, but the market moves sideways. I think they are heavily influenced by agents, who clearly want to talk the market lower, since they can do more business at lower prices, and/or with sellers who are worried about a falling market.

+ Banks under-value the secondhand market, while accepting inflated values of new properties to help their developer clients - This is glaringly obvious if you look at what is happening at The Long Beach in Olympic. (I am pretty sure the press will not touch this story, since it would anger Hang Lung, a powerful HK company.)

[drbubb]

Hong Kong's Property Index ; Making Sense of its movements, using trendlines

 

 

I posted back in Feb. 2011:
"+ I try to analyze property markets within an 18 year cycle, which I have described elsewhere on this thread, and also on YouTube. It basically consists of 14 years up, and 4 years down - though these time frames can "morph" somewhat depend on the general economy and longer cycles.

+ I think HK is on its way into a Long Cycle top, which I am expecting in the 2015-17 time frame.
You will note that: 1997 (most recent peak) plus 18 years is 2015 and 2003 (most recent low) plus 14 years is 2017. From these two calculations come my expected peak.

+ Between now and 2015-17, theres is time for a decent correction, before a final "blowoff rally" into a peak around the time the Macau bridge may be finished, and when new MTR lines may be completed. These works may be give rise to excessive confidence and a final Long Cycle peak. (I am just guessing on this, but I would be monitoring how these projects effect confidence.

+ The "correction" that I am expecting might come from a jump in interest rates, as bond holders and others react to rising inflation, and force Central banks to lift interest rates. I think you will agree that a rise in HK mortgage rates to 2.5 - 3.0% (from present 1%) might bring at least a 10-15% correction in HK property prices. And it could be more than that, if rates go higher"

No reason to change any of that.
But we could see a premature peak, caused by those "cooling measures"

==

> see- post#4 : http://www.greenenergyinvestors.com/index.php?showtopic=13789&page=1

 

/ BTW: people from AX who may want to post here, can get a Free password by:

Sending a Personal Message to OTP on AX /

[drbubb]

"OTP" is still complaining (on AX) about the "absurd lack of parity" at TLB.

To whom does one complain about "unfair" practices?? (he wonders)

=======

 

"Chen Yongjie: Owners' attitude is softened."
Yet:
"LOTUS MANSION Taikoo Shing broke the new highest record."

I'm not buying the "softening" argument, especially when it is asserted along with a report of Record Prices (!!)
I still see this as agents trying to Talk the Market down (softening Owner's prices ideas)
But I don't think it is working well at all.
I ran into an agent friend today, and we spoke about my own building.

We spoke about the bizarre phenomenon where there have been about 300 sales in the "New" Towers, only something like 3 secondhand sales in the "Old" Towers at The Long Beach.

It is weird especially because prices of the New Properties are about 10-15% higher than the "old" properties - Buyers are paying up, to buy the higher priced, but near identical flats. In fact they were completed at the exactly same time in 2004. The developer has held back sales on 5 "new" towers until late 2013, and is very slowly launching in packages of about 20-40 flats a time, those that are left.

Why so few sales of secondhand?
The problem is that bank valuations are too low - about 12-15% lower than the prices the Developer has set for the "New" Towers. Propective buyers do not want to pay much more than the Bank Valuations, and very very few owners are willing to contempate what they call: "ridiculously low" Bank valuations. So almost no transactions are getting done.

The developer likes the "stalemate", since it has been selling 2-5 "new" properties a week, even while the secondary market stagnates. They are able to do that, because the banks accept the developers "discounted" price as being a fair Bank Valuation - but only in the "new" Towers. In effect, the Bank Valuations are "rigged" to benefit the developer. And no one seems to care - apart from the prospective sellers in the secondhand market, who suffer in silence so far.

With a 3-4% commission on "new" properties, agents are able to talk Buyers into paying the Developers (higher) prices. But they are much less successful in talking Owners down to the much lower bank valuations. Only about three (desperate?) Owners have caved in since November.

I suspect there are many other Buildings and Owners stuck in the same bind. But the stalemate, and the way it benefits the Developers was never so clear as it is at The Long Beach.

[drbubb]

HONG KONG Property : The Waiting Game (again)

 

Property agents in HK are complaining about "Dark Days"

 

There were some hopes that tinkering with the Double Stamp Duty ("cooling measure") might UN-freeze the market.

But that is not happening, as per an article in the Property section of today's SCMP:

 

"Only 176 new units have been sold so far this month. It is the lowest since about 80 deals were recorded in June" (soon after the new taxes were imposed.

 

"Assuming a supply of 15,000 new flats a year... the average number of transactions per month should be 1,250."

 

By giving buyers more time to sell (and not pay the double tax), some though transactions would pick up. This has not happened. Buyers and Sellers have very different expectations. And Buyers are not rushing in to pay the (higher) prices sought by sellers in the secondhand market; they are waiting for the developers to bring their new projects to market, and are hoping for big discounts.

 

It seems that no one wants to be first (among the developers) to test the market's appetite for new properties.

 

Cheung Kong began pre-sale activity for its City Point project in Tseun Wan, with 1,717 flats to sell, giving it an (unpriced) "soft launch" three weeks ago.

 

The market is waiting with baited breath to see what happens. In past times like this, SHKP would jump in with somewhat cheap prices on one of their flagship projects, and then quickly raise them when the buyers appeared. CK has plenty of experience, so the other developers now seem content to let them take the lead.

 

CK also has a big project at LOHAS Park, and so maybe that one will be their lead play. We should know soon.

[drbubb]

(2-3 weeks ago, at the time of the "soft launch")

City Point pricing won't undercut secondary market, property agents say

Demand for Tsuen Wan project should hold up pricing for Cheung Kong and partner, agents say
More than 1,700 units to be offered
=

 

Guessing how Cheung Kong will price City Point, the housing estate in Tsuen Wan it plans to launch with Nan Fung soon, has been a popular game recently for property agents such as Eva Tse.

"The project has more than 1,700 units. The developer will probably offer a big price range for various potential buyers.

 

But I believe they will not undercut secondary home prices," said Tse, assistant sales director of Centaline Property Agency's Tsuen Wan and Belvedere branch.

"This is the first large-scale residential launch in Tsuen Wan since the launch of Vision City [by Sino Land] in 2006. There are quite a large number of families in the district who want to upgrade their living areas. They are eyeing the project," she said.

"The developer can find buying support if the price is at par with the secondary market."

Tse guessed the selling price would compare with nearby Chelsea Court in Yeung Uk Road, where transaction prices ranged from HK$8,500 to HK$11,000 per square foot.

But the price range could be wider, depending on the flats' views. Agents said some two-bedroom units of the development facing a cemetery will be priced at HK$8,000 to HK$8,500 per square foot, comparable to adjacent Riviera Gardens, which was built more than 30 years ago.

 

 

Many of the four-bedroom flats have a sea view and may cost more than HK$10,000 per square foot, Tse estimated.

City Point, at the Tsuen Wan West MTR station, will have 1,717 two- to four-bedroom units. Cheung Kong said it would launch the first batch shortly but gave no details.

 

The developer plans to sell 800 flats at the project this year. Under the Residential Properties (First-hand Sales) Ordinance, the first batch of units released by the developer is required to be at least 20 per cent of the total.

Bocom International analyst Alfred Lau said that given its strong financial position, Cheung Kong is unlikely to undercut the prices in the secondary market to speed up sales.

==

> more: http://www.scmp.com/property/hong-kong-china/article/1505769/city-point-pricing-wont-undercut-secondary-market-property

[drbubb]

( 2 hours ago )

 

Cheung Kong offering 15.75pc discount on City Point flats

South China Morning Post ‎- 2 hours ago

Cheung Kong will release flats at discounts of up to 15.75 per cent at City Point in Tsuen Wan, the first housing estate to go on sale after the ...

. . .

The discounted prices are up to 24 per cent lower than the HK$12,000 per sq ft achieved in recent secondary-market transactions in the area.

Prices for the first batch of 350 units at the joint project with Nan Fung Development will be as low as HK$9,062 per square foot.

The cheapest flat being released for sale is a 483 sq ft unit with a balcony, priced at HK$4.5 million.

Justin Chiu, an executive director at Cheung Kong, said the City Point prices were attractive.

“We will offer the first batch of units at lower prices to attract market attention, and our clients can buy their homes at a happy price,” he said.

==
> http://www.scmp.com/property/hong-kong-china/article/1517792/cheung-kong-offering-1575pc-discount-city-point-flats

> Price List: http://s3pictures.gohome.com.hk/images/newdevelopment_photo/pricelist/1514.pdf


THIS NEWS delayed it:

Urns queer pitch for mega-project / Friday, May 16, 2014

The sales brochure of a large-scale Tsuen Wan project will have to be amended after a Town Planning Board decision to rezone a nearby plot.

The 1,717 unit City Point - a much- awaited project developed by Cheung Kong, Nan Fung and MTR Corp - had its brochures printed on April 24. But last Friday, the board announced that a nearby site will be earmarked for a public columbarium.
==
> http://www.thestandard.com.hk/news_detail.asp?we_cat=21&art_id=145454&sid=42276670&con_type=1&d_str=20140516&fc=8

[drbubb]

"Less Pressure on prices... " - says Bloomberg article

With prices-after-Discount being between: $7,634 to $12,071 psf, Net (ie around $10,000, Net)

 

Cheung Kong Holdings Ltd., the Hong Kong builder controlled by Asia’s richest man, is offering as much as 16 percent discount at its latest residential project in the city as developers are set to accelerate sales this year.

 

City Point, the company’s biggest Hong Kong housing project in two years, will sell 350 of a total 1,717 units in the first batch, the company said today. After discounts, the flats in the estate developed jointly with Nan Fung Development Ltd. located in Tsuen Wan district, range from HK$7,634 ($984) per square foot to HK$12,071 per square foot.

 

Developers including Cheung Kong and Sun Hung Kai Properties Ltd. are competing for buyers in the world’s most-expensive housing market as the government’s curbing measures cooled both prices and transaction volume. Prices, which Barclays Plc forecasts will drop at least 30 percent by 2016, are also under pressure from increasing supply in the coming years.

 

“Cheung Kong is sitting on the most available-for-sale units so its strategy is very important for the market,” said Alfred Lau, an analyst at Bocom International Holdings Co. in Hong Kong. The discount at City Point “is not a severe price cut so it seems they’re not going for volume, which puts less pressure on the pricing.”

 

Sales Target

Cheung Kong will sell a total of 800 units at City Point this year, Executive Director Justin Chiu told reporters today in Hong Kong, adding that the company is confident it can reach its sales target in Hong Kong this year.

==

> http://www.bloomberg.com/news/2014-05-22/cheung-kong-offers-discount-on-hong-kong-project-as-supply-rises.html

 

I have been examining this project, and think it will sell well (at this prices).

If buyers respond very well, then there is some possibility it could "ignite" the market.

(I am thinking this way because of the recent strength in HK Builders' shares.)

[drbubb]

DESPITE ALL THE TALK about price cuts, and selling pressure over the last 1-2 years.

Take a look at prices in Riviera Garden, a 30year+ building near CK's new project: City Point:

RIVIERA :

Does this chart bear any similarity to what you would EXPECT to find, after reading all the posts from the Bears on AX ???

The Bears have been wrong a long time, and I do not think anyone should rule out a period of "surprising strength" - But I am not promising that, just identifying it as a possibility, given what I am seeing in the market now, and ignoring the heavy spin in many news articles.

WANT TO get a better sense of the Real market?

Go along to the show flat, and see how people are reacting to the launch and how many people show up. You do not need to buy. Many people who visit will also be "window shoppers."

[drbubb]

City Point : in the first batch:

+ 180 will have three bedrooms

+ 114 have two bedrooms, and

+ 56 are four-bedroom units

 

Prices: between: HK$5.3 mn - $13.09 million

 

Per Sf: HK$9,062 - $14,328 psf, Net : BEFORE discounts*

 

(Calculation: mean: HK$11,695 > after 15.75 discount = $9,853 psf)

 

Compare - Nearby--- : Price psf, Net. = Psf, Gross

Vision City (7 yrs old): HK$12,866 psf :

Indi - Home ( ?? yrs. ): HK$10,410 psf

Chelsea Ct ( ?? yrs. ): HK$ 9,660 psf

=========

 

*Note the discounts assume:

===

+ Basic: 4 %

+ Cash: 5 %

+ Early: 3 % - if closing is prior to June 30th

+ DSD : 3.75% - to cover the Double Stamp Duty

= Total: 15.75%

 

So, the buyer must close quickly, and pay cash, and "buy" a flat he cannot move into straight away,

 

As an example:

2 BR on 7th floor in Bl. 7 / Cost: HK$4.5 million / 483 sq.ft = $9,317 psf, AFTER Discount

[drbubb]

You Heard it HERE first !:

 

"I have been examining this project, and think it will sell well (at this price).

If buyers respond very well, then there is some possibility it could "ignite" the market."

(I am thinking this way because of the recent strength in HK Builders' shares.)

- 22 May, OTP

A Headline in Today's SCMP, Property section:

"SALES: City Point project seen as turning point for sector"

"Analysts expect the primart market to pick up further if Cheung Kong reaps strong sales from the project, triggering a turning point for the housing sector... The initial response was strong."

(The CCLI Index dropped 0.25 per cent last week to 118.56... has fallen 0.4 per cent so far this year.)

[drbubb]

591 City Point flats in Tsuen Wan snapped up in a day

 

South China Morning Post-5 hours ago

Property sales throughout the city are likely to be boosted after the entire first batch of flats at Cheung Kong's City Point in Tsuen Wan sold in a day...

... real estate agents involved in the transactions say.

The developer sold the 591 flats in the 1,717-unit project in under seven hours, the agents said. The second batch, of 354 flats, would be released this week, Cheung Kong said last night.

"It attracted upgraders back to the property market as the asking prices were reasonable and the government has recently extended the qualifying period for exemption from double stamp duty," Midland Realty chief executive Sammy Po Siu-ming said. "Upgraders have not been active since the government announced cooling measures in February last year."

More than 13,500 people registered to buy flats at City Point last week, the highest for a new project in 12 years.

Last year, the government doubled the stamp duty payable on property purchases, but with an exemption for permanent residents who sign a provisional contract to buy a flat within six months of selling the only flat they owned. It recently proposed widening the exemption.

Cheung Kong executive director Justin Chiu Kwok-hung said: "The amendment helps upgraders to buy flats. We found we had mostly upgraders buying at this project."

The cheapest flat was HK$5.35 million. But if a buyer is eligible for all the discounts on offer, that price drops to about HK$4.51 million. Midland estimated about 80 per cent of its clients were buying the flats to live in, with the rest being investors.

Peter Wong, a director at Hong Kong Property Services, said: "The strong sales will encourage more people to look at flats in the short run."

With many buyers waiting for the second batch of City Point flats, Po believed activity in Tsuen Wan's secondary market would remain slow in the short run.

"But the sale has proven housing demand is very strong," he said. "Forthcoming projects will benefit from the good news. The sales of second-hand flats in other districts should increase, but for small flats only.

==

> http://www.scmp.com/property/hong-kong-china/article/1522913/591-city-point-flats-tsuen-wan-snapped-day

[drbubb]

CK ROSE prices by almost 10% in the new batch at City Point (so some agents have calculated)

Why would any developers with fewer flats (that the 1,700+ that CK had to sell at City Point) think about cutting prices, when almost 13,000 reservations went unsatisfied at City Point?

We will find out on Thursday how many people stepped up to pay CK's higher prices at CP

My GF and I visited the show flat for City Point yesterday, and we could see why people were buying, but we were not much impressed with the layouts and views. The bedrooms are (nearly?) all too small for a tall guy like me - at 6'2".

We have a friend called "Charlie" who is about 5'3" tall, and when we see a BR that does not easily accommodate a bed over 6 feet long, we call it a "Charlie flat." I joked with her that City Point was the first development by CK where they had sold all 591 flats in the first batch "to a guy called Charlie."

We were told by the agents that nearly all the buyers were from Hong Kong, and many lived already in the Tsuen Wan area - and were "upgrading" to newer and larger flats. For an expat who works in Central, or has many friends on HK Island, TW seems a long long way. He agreed, and said they saw very few, almost none of the buyers were expats.

There's more coming from various developers, per this article from the Standard:

Plenty of offers ahead
The battle for homebuyers will continue at new projects in the forseeable future with flats set to remain competitively priced, especially in the New Territories.

> http://www.thestandard.com.hk/news_detail.asp?we_cat=16&art_id=145849&sid=42350743&con_type=1&d_str=20140529&fc=7

I think some of the pricing pressure may have eased, now that so many buyers have enthusiastically "shown their hand" at City Point.

EXCERPT:
"Meanwhile, "the developers are strongly determined to sell the units in the New Territories," he added, and more discounts are expected for large- scale projects with more than 1,000 units, such as the upcoming Hemera, the third phase of Lohas Park in Tseung Kwan O, providing 1,648 units.

Big projects are expected in Tai Po this year as well. Phase one of Cheung Kong's Mont Vert, and Mayfair by the Sea by Sino Land will offer 1,350 and 1,091 flats, respectively.

 

The more aggressive pricing in the New Territories is also reflected in the conservative bids for sites recently, Vincent Cheung added. He urged caution, however, saying offers of low prices may be a gimmick and buyers should be careful.

On the other hand, "prices for projects in Kowloon and Hong Kong Island will not be too low," Cheung said. "

HEMERA - at LOHAS Park could be the next "Hot" property with sizeable discounts. It is "on top of the station" at LOHAS Park, and there are over 1,000 flats to sell.

I thought that CK might launch quickly, after the success at CP. The agent I met yesterday said that was unlikely. He said that more detailed info was due out in August, and thought the actual launch might be November.

By then, the plans for unscrambling the Train lines in the north of HK Island should be announced, and that might provide a spur for buying properties at LOHAS.

[drbubb]

ONE OF THE REASONS - that CK could offer attractive Price "Discounts" at City Point was...

 

Tseun Wan has OUTPERFORMED the rest of HK, over the past 2-3 years,

and so CK may have had a potential windfall at City Point, that they have been willing to share with buyers

in order to get a rapid and successful sale of the first 591 flats

 

Riviera Gardens - near City Point :

 

 

/ the outperformance shows up in the Locationality Ratios -

note how RivieraTW rose from 47.47x at 12/2011 to 53.62x at 5/2014 - that's +13% outperformance

 

 

Hong Kong's "To-CL INDEX" RATIOS : A "Locational Measure"

==

Hong Kong's Property Index ; Making Sense of its movements, using trendlines

 

: update

 

I posted back in Feb. 2011:
"+ I try to analyze property markets within an 18 year cycle, which I have described elsewhere on this thread, and also on YouTube. It basically consists of 14 years up, and 4 years down - though these time frames can "morph" somewhat depend on the general economy and longer cycles.

+ I think HK is on its way into a Long Cycle top, which I am expecting in the 2015-17 time frame.
You will note that: 1997 (most recent peak) plus 18 years is 2015 and 2003 (most recent low) plus 14 years is 2017. From these two calculations come my expected peak.

+ Between now and 2015-17, theres is time for a decent correction, before a final "blowoff rally" into a peak around the time the Macau bridge may be finished, and when new MTR lines may be completed. These works may be give rise to excessive confidence and a final Long Cycle peak. (I am just guessing on this, but I would be monitoring how these projects effect confidence.

+ The "correction" that I am expecting might come from a jump in interest rates, as bond holders and others react to rising inflation, and force Central banks to lift interest rates. I think you will agree that a rise in HK mortgage rates to 2.5 - 3.0% (from present 1%) might bring at least a 10-15% correction in HK property prices. And it could be more than that, if rates go higher"

No reason to change any of that.
But we could see a premature peak, caused by those "cooling measures"

==

> see- post#4 : http://www.greenenergyinvestors.com/index.php?showtopic=13789&page=1

 

/ BTW: people from AX who may want to post here, can get a Free password by:

Sending a Personal Message to OTP on AX /

MONITORING Specific LOCATIONS/projects : and comparing them to the INDEX, using Ratios

Location-: 5/25/14: Ratio- : End.'13: Ratio-- / End.'12: Ratio-- / End.'11: Ratio-- / Aver.
========

Index----- : 119.07 : ====== / 119.07 : ======/ 115.78 : ======/ $96.68 : ======/ '11-13 :
ParkAveO : 11,594 : 97.37x : 12,325 : 103.5x / 11,161 : 96.40x / 10,147 : 105.0x / 101.7x : stable ?
TaikooShg : 11,149 : 93.63x : 10,936 : 91.85x / 11,665 : 100.8x / $9,877 : 102.2x / 98.28x
RobinPlac : 13,747 : 115.4x : 14,407 : 121.0x / 14,985 : 129.4x / 14,091 : 145.7x / 132.0x : falling
TreguntML : 19,240 : 161.6x : 19,180 : 161.1x / 19,609 : 169.4x / 17,513 : 181.1x / 170.5x
DynastyML: 25,072 : 210.6x : 23,181 : 194.7x / 23,883 : 206.3x / 21,639 : 223.8x / 208.3x
ZenithWC. : 12,362 : 103.8x : 12,715 : 106.8x / 14,002 : 120.9x / 11,798 : 122.0x / 116.7x
Sorrento-- : 15,379 : 129.2x : 17,849 : 149.9x / 16,316 : 140.9x / 13,258 : 137.1x / 142.6x
MeiFo0SC : $7,870 : 66.10x : $ 7,870 : 66.10x / $6,346 : 54.81x / $ 6,088 : 62.97x / 61.29x :

ParkC-Tko : $7,756 : 65.14x : $ 7,796 : 65.47x / $7,536 : 65.09x / $ 6,031 : 62.38x / 64.31x
RivieraTW: $6,384 : 53.62x : $ 6,467 : 54.31x / $5,791 : 50.02x / $ 4,589 : 47.47x / 50.69x : rising
Prk.Island : $6,328 : 53.15x : $ 6,529 : 54.83x / $6,585 : 56.88x / $ 5,645 : 58.39x / 56.70x
CariCoast : $5,603 : 47.06x : $ 5,768 : 48.44x / $6,053 : 52.28x / $ 4,610 : 47.68x / 49.47x : falling
Kingswood: $4,483 : 37.65x : $ 4,502 : 37.81x / $4,282 : 36.98x / $ 4,035 : 41.74x / 38.84x

=========

Park Avenue and Taikoo Shing seem to hover at "around 100x" times the Index

=======

> Index---- : http://hk.centadata.com/cci/cci_e.htm

> History-- : http://202.72.14.52/p2/cci/SearchHistory.aspx

> Pk.Island http://hk.centadata.com/tfs_centadata/Pih2Sln/TransactionHistory.aspx?type=1&code=WDPPWBPXPB&cuntcode=WDPPWBPXPBPPWA&fun=PastTran&ci=en-us

> AX-newP : http://hongkong.asiaxpat.com/forums/hong-kong-property/threads/153580/new-homes-for-sale-2014/

 

[drbubb]

Can we Extrapolate ? / POSTS from AsiaXpat

P.-:

You're extrapolating what's happening in Tsuen Wan to the whole of HK?

OTP:

Sure - and that's a sensible thing to do.

TW-CityPoint is not some LuxuryPocket highly dependent on Expats and Mainlanders buying trophy properties (er, ah: "funny money")

It is closely tied in with HK's middle class and professional sectors that are now driving the Property market in Hong Kong.

The ripples of City Point's success are already showing up, and even the mainstream media like SCMP has had to acknowledge it.

Next Step may be:

A RISE in Bank Valuations.

That's what is needed to sustain a rally in the Secondary market.

I cannot promise it, but I now expect it

==

> AX : http://hongkong.asiaxpat.com/forums/hong-kong-property/threads/151878/hk-developers-game:-cut-prices?/

(more):

OTP:

I really don't think you are paying attention enough to what the market is telling us now, P.

Doing some checking, as I always do the the beginning of a new Month:

I have found that banks have started to push up bank valuations again. Not by much, maybe just $100k or so for flats prices at $7-10 Million.

I expect that they are doing this, because they were not getting enough business at their previous "ridiculously low" valuations. (That is, banks like BofC may have been getting nearly ALL the lending business where their valuations were higher, such as the Olympic Station area.)

I know some said that I was being silly in complaining about low bank valuations, but I think this "market driven response" is confirming what I was saying. Let's see if this move up in Bank Valuations will "get some legs".

[Traineeinvestor]

This is speculation - Hong Kong banks have very high deposit levels and I am seeing anecdotal evidence that demand for RMB denominated products AND IPO margin loans have declined. It would be logical for banks to increase HKD mortgage lending as a means of putting some of the otherwise unprofitable deposits to work. It doesn't show up in the HKMA stats (yet) so I can't offer any verifiable support for this idea, but it sounds reasonable.

[drbubb]

The year is almost half over, so if they are below budget,

they may need to start ramping up this low valuations.

 

Here's some of the Monthly Data that I keep:

 

Tung Chung / TKO Line Valuations

 

Tower 3 / 30th Fl. / Flat C (or similar) in various locations


.
Bank Valuations (T3-30C, ex.TK: T3-25C) ... update-HSBC : http://www.bochk.com/web/personal/mortgage/free_property_valuation.xml?section=personal&level_2=mortgage&fldr_id=417&pfid=30845&lang=en'>update-BkofChina

.
Area=== : TKO-CHt: TK*TsW : TKT-CPk: TY-TVrd: TC-CrCs: TktLb30 : CosmoE : Tkt-IsHV : PrspG-KC
"Top"- Est : $7.770M: $6.200M : $12.55M: $9.250M : $4.440M: $7.750M : $2.930M : $10.33E
===
Apr- 04/14: $7.470M: $6.070M : $12.30M: $8.900M : $4.310M: $7.670M : $2.900M : $10.20E
Apr- 04/30: $7.470M: $6.040M : $12.18M: $8.900M : $4.270M: $7.520M : $2.900M : $10.03M
May-05/31: $7.470M: $5.960M : $12.06M: $8.900M : $4.270M: $7.450M : $2.870M : $9.930M
Jun- 06/30: $7.770M: $6.020M : $12.18M: $8.720M : $4.270M: $7.520M : $2.900M : $10.03M
July-07/31: $7.770M: $6.080M : $12.00M: $8.630M : $4.270M: $7.440M : $2.930M : $9.880M
Aug-08/31: $7.890M: $6.080M : $12.00M: $8.720M : $4.270M: $7.440M : $2.930M : $9.880M : $6.470M

Sep-09/30: $7.810M: $6.120M : $12.00M: $8.720M : $4.200M: $7.440M : $3.080M : $9.880M : $6.430M

Oct-10/31 : $7.810M: $6.090M : $11.64M: $8.720M : $4.120M: $7.000M : $3.080M : $9.680M : $6.430M

Nov-11/30 : $7.540M: $6.070M : $11.52M: $8,720M : $4.060M: $7.000M : $3.080M : $9,680M : $6.370M

Dec-12/31 : $7.540M: $6.070M : $11.46M: $8,460M : $4.040M: $6.960M : $3.060M : $9,630M : $6.370M

(2014):

'14.- 1/31 : $7.430M: $6.040M : $11.46M: $8.460M : $4.040M: $6.960M : $3.060M : $9.630M : $6.370M

Feb- 2/28 : $7.390M: $6.040M : $11.41M: $8.410M : $3.970M: $6.930M : $3.050M : $9.590M : $6.340M

Mar- 3/31 : $7.310M: $6.020M : $11.41M: $8.370M : $3.950M: $6.930M : $3.050M : $9.590M : $6.340M

Apr- 4/30 : $7.310M: $6.020M : $11.41M: $8.330M : $3.950M: $6.930M : $3.050M : $9.590M : $6.340M

May 5/31 : $7.420M: $6.060M : $11.52M: $8.420M : $3.980M: $7.000M : $3.080M : $9.689M : $6.340M

Area==== : TKO-CHt: TK*TsW : TKT-CPk: TY-TVrd: TC-CrCs: TktLb30 : TktTm13 : Tkt-IsHV : PrspG*KC

Tower/ Fl. : Tw3-30C: Tw3-25C: Tw3-30C: Tw3-30C: T3-30C : Tw3-30C: TG13fl.5 : Tw3-30C : Tw3-28C :

========
Gross S.F.- : 0,899 sf : 0,585 sf : 0,943 sf : 0,951 sf : 0,680 sf : 0,742 sf : 0,425 sf : 0,945 sf : 0,719 sf
Net Sq Ft -- : 0,691 sf : 0,489 sf : 0,659 sf : 0,765 sf : 0,570 sf : 0,555 sf : 0,326 sf : 0,717 sf : 0,590 sf
Dec. 2013- : $10,753 : $12,352 : $17,390 : $11,059 : $07,087 : $12,541 : $09,386 : $13,431 : $10,797
Pct:TKT-CPk : 61.8 % : : 71.0 % : 100.0 % : : 63.6 % : : 40.7 % :: 72.1 % : : 54.0 % : : 77.2 % : : 62.1 % :

CL-119.07- : 90.30 x : 103.74x : 146.05 x : 92.88 x : 59.52 x :: 105.32 x : 78.83 x : 112.80 x : 90.68 x :

(Ratio-To-CL)

 

===
(below needs updating):
from=4/30=: - 0.00% : - 1.32 % : - 0.99% : - 0.00 % : - 0.00 % : - 0.93 % : - 0.97% : - 1.03 % : - 1.00% :
from "TOP" : - 3.86% : - 3.87 % : - 3.90% : - 3.78 % : - 3.82 % : - 3.87 % : - 3.90% : - 2.05 % : - 3.87% :

[drbubb]

Ricacorp is now predicting a 5% RISE in HK Home prices !

Patient sellers have Beat back the Bearish spin

 

(As posted on AX thread: "HK's Unholy Trinity: Manipulation?" )

 

THEY FAILED - they could not break the market.

... So NOW the Trinity may start working together to push it back up again.
I pity those sad landlords who fell for the Bear Story and sold their flats at prices below $10 Million and below "fair value"

I expect the Luxury sector will go one seeing some softness, because of the High transaction costs.

Here you go, Punter (and others)
Will you believe it when you hear from the SCMP,
what I have been telling clearly for many months?:

RECORDS BROKEN ON SMALL FLATS

Shortage in the secondary market drives up some prices to record levels while a growing number of luxury homes are sold at a loss

Prices of small flats in the second-hand market have rebounded recently, with some units even changing hands at record highs.

This contrasts with the growing number of luxury homes being sold at a loss, as that segment has been hit hardest by the property market cooling measures the government imposed 15 months ago.

The rebound has prompted Patrick Chow Moon-kit, head of research at Ricacorp Properties, to revise upwards his forecast for home prices this year, from a drop of as much as 15 per cent to an increase of 5 per cent.

Agents expect the sell-out on Saturday of the first batch of 591 flats at Cheung Kong's City Point in Tsuen Wan to encourage more home seekers to buy flats.

"A 355 square foot flat at Serenity Park in Tai Po sold for a record HK$3.55 million last week. It surpassed the previous peak of HK$3.4 million in early 2014," said Anthony Man, a district manager at Centaline Property Agency.
. . .
Agents said many owners of mass residential housing units were willing to cut their asking prices by only 1 per cent to 2 per cent since April, rather than 3 per cent to 5 per cent previously.

By contrast, Chow said: "The demand for luxury flats remains weak..."
. . .

Analysts believe the rebound is mainly because of the shortage of small flats available for sale in the secondary market. There are about 50 flats at Kingswood Villas available for sale, compared with 200 to 300 flats before the measures were imposed.

"Many flat owners are reluctant to sell their flats because of the special stamp duty. They have to pay a special stamp duty of up to 20 per cent if they resell quickly. They would have to sacrifice a significant amount from their profit to pay the tax if they sold their flats," said David Chan, a director at Ricacorp.

Eddie Hui Chi-man, a professor of real estate at Polytechnic University, said: "Many flat owners don't think property prices will drop sharply in the short run. They would rather keep the flat for leasing, which offers a yield of 3 per cent."
. . .
==
> MORE: http://www.scmp.com/property/hong-kong-china/article/1524465/records-fall-prices-small-flats-rebound

If you think it is Truth Now...
Remember you read it here weeks ago.
I don't pretend to always get it right, but I think clearly (for myself) and do my homework. And there are some others here who do the same.