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Hong Kong property outlook - and Data Base


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"OTP's" HK HOUSING TACTICS...

 

(1) OTP:

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".

 

(2) G.-

I feel its the false drumbeat.. how many new properties like Citypoint are there in the market?? (priced at or below secondary market)..no wonder there is interest..why did not other small apartments - Coho, diva, summa sell in a similar fashion??

now its back to scaremongering by agents to push the sales up.. buy now.. prices will go up.. blah blah.. there will be a few people who will fall into the trap.. (the ones who have too much cash on hand) that does not change anything.. some 15K per annum of new flats.. amid a slowing mainland demand, and a slowing HK economy.. pheww good luck getting in now.. putting all your savings into a tiny shoe box..

 

(3) OTP:

G.,
I share your concerns, to some extent.
My question to you:
How long does Rally need to go on before you would say it is not "a false dawn"?

My partner would say: Three Years from the time of purchase (since before then she has to pay a stiff capital tax) - and I do not see it lasting that long (from now). But She no longer has to wait three years, she has another 17 months to go, and then she can sell without paying a Capital Gains tax.

So far, her $2.7 Million investment, has just received a Bank Valuation of $3.08 Million. And along the way, she is earning a nice 4.25% gross yield, which is about 3.5% after the (low) management cost.

There have been some moments where she said she regretted the investment (I "found" it for her, so I am the first to hear this kind of comment.) But I am not hearing that now. And she realises there is a decent chance she will walk away with a both capital gain, and a nice yield on her investment. Even so, she is still looking for a New or Newer property to buy, since she gritted her teeth a bought a 37 year old building early last year.

If luck is really on her side, she may find one of those heavily discounted "New" properties to buy at under $4-4.5 million, and the sale of this old property will leave her needing just $1 million or so extra to make that next purchase (after she sells this one.)

For day one, there was an "insurance" angle to her purchase, since she did not want to see property prices rise, and leave her high-and-dry, and unable to afford a property she would consider living in. We now have a short list of newer properties that she would consider at $4-4.5 Million. And there are new properties in the NT being launched at those sorts of prices all the time.

Of course, this is all just a hedge for her/and me, since we live in a nice property, that we really love living in. Her fear is that it the market rose, I would sell it - And I still may do that. So I am happy that she is feeling secure with her own investment, and she may allow me to sell the Larger one, without complaining too much.

(Sorry for all this detail. If anyone posts a "yawn", I shall shorten it. But I thought some might like to hear the day-to-day thought process of an investor in the HK market, who is keen to stay in a "powerful position of not minding much" whatever the market does. If you over invest, or under-invest, you will feel stress. Getting the balance right - For You! - is the key thing.)

 

(4) G.-

thanks for explaining your rationale.. your investment makes sense totally.. old under appreciated apartment.. and you are investing it as an hedge and with excess cash..
as I said HK property is currently for people with excess cash.. or for someone who sees living here 10years+ is in the same apartment..
if you are looking at <5 years and have to spend all your savings for downpayment then it does not make sense.. too risky.. too little value .. since its an expat forum many will fall under this bucket.. guess most expats are currently investing back home - aus, canada, US, london, india etc etc..

 

(5) OTP:

Yeah, G.
But it depends on how long the expat is here, and where they want to live.

I first came to HK in 1980 (yes, a long time ago), and stayed for only 3-4 years. Economically, it might have made sense for me to buy back then, especially if i could have plowed my Housing Allowance into paying down debt. But I didn't know enough, or have enough confidence to do that. Nor would make bank employer have made it easy for me to do so. Probably, many expats fit into that type of scenario.

But if you are here for a longer stay, like 5-10 years or more. It may makes sense to consider that type of investment.

But repeating what my partner did in Jan.2013 may not be easy now. There aren't so many "cheap" flats now, since that sector has gone up. And personally, I would not be so eager to buy the same flat for $3 million plus, knowing that I had to hold it for 3 more years, until 2017 to avoid the large capital tax.

My cyclical work, which I first did in 2006, showed a possible peak in 2015-17, and I still think that is the most likely case; followed by 3-5 years of falling prices. If this is accurate, it is just too risky to invest now, unless you plan to hold for 7-10 years or longer.

 

==

> AX: http://hongkong.asiaxpat.com/forums/hong-kong-property/threads/154159/the-state-of-the-hong-kong-property-market-%2812%29/

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AUSTIN WATCH - per today's SCMP, pg.B1


SHKP sale boosts market sentiment:


"The developers last week released a price list for the first batch of 139 Grand Austin units at an average HK$26,244 per square foot. Buyers can have a discount as much as 19.5 per cent. This compares with the average of HK$22,871 per square foot at The Austin, the phase one development which was launched in October last year. Buyers of The Austin were given a maximum discount of 20.5 per cent."


Running some Numbers:


Property ----- : Timing : ListPrice : MaxDisc : PostDisc : Difference

The Austin--- : Oct.13 : $22,871 : -20.5% - : $18,182 : = = =

Grand Austin : Jun.14 : $26,244 : -19.5% - : $21,126 : +16.2%

=====

This looks like a price RISE to me !

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Downsizing Cuts Kowloon Rents - SCMP, pg. P1


Colliers says office rents in Kowloon are expected to fall up to 8.8pc this year as companies seek to cut costs by leasing smaller spaces


+ Weakness in the global economy is driving some co's to downsize their offices

+ There are more co's trying to get out of their leases, by assigning to a new tenant

+ Co's involved in shipping, toys, and sourcing are looking for smaller offices

+ Some functions have been moved to the mainland

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(Posts from AX):
O:
Secondhand properties must be start to look cheap, especially where banks have over-discounted bank valuations.

I think it is possible that banks may soon be pushing them higher. In my building they have cut some valuations by 10% from last years high, and this is NOT justified by sales. It has killed the secondary market since only a very, very desperate owner would sell so cheaply.

G:
I think govt should close the loophole of developers subsidising DSD, BSD etc. As seen still 50% are investors in the new projects.. This keeps the price at a high level.. if the BSD, DSD discounts are removed guess there will be fewer investors.. a concept of tax always dissuade purchasers

Agree of the valuation part ..major deterrent in buying.. why would buyer pay a million more than the bank valuation.. more importantly how can he finance that ..i hope instead of valuations going up.. with more people moving to primary market secondary prices come down..

O:
Are they really subsidizing DSD, BSD?

I dont think that happens much anymore.
Everyone gets the same "discount" to an artificially inflated price.

The funny thing is;
Hundreds of Buyers (at the Long Beach) have been happy to pay inflated prices to the Developer, because the banks "bless" those values - $1 million over second hand, in some cases - by using the Developer's "discounted" prices as the bank valuation. What a Rude shock today's buyers are going to have in 3-5 years or whatever, when they find all the flats in TLB are valued the same way by the banks, and the $1 million premium disappears !

Why ever would a rise in buyers REDUCE prices? Surely, you have heard of Supply and Demand

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Also, fewer investors means fewer properties available for lease which means higher rents than would otherwise be the case (unless he believes that for every investor who does not buy there will be a matching end user buying which is IMHO very very unlikely).

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The Drive for "cheap" property - takes people to the extreme end of Lantau


300 Buyers compete per flat in Lantau scheme


More than 10,000 buyers are competing for 34 subsidised flats -

that's 300 buyers per flat


+ Former public rental units

+ Priced between HK$640,000 and HK$900,000

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(article): " month-on-month gains of 0.3 per cent in April and 1 per cent in May "

 

Rents also pick up steam in resurgent mass housing in Hong Kong

Strong demand from businesses and mainland students amid a tight supply of flats is likely to turn up the heat in the leasing sector

PUBLISHED : Wednesday, 25 June, 2014, 1:31am
  • rng_2797_31088757.jpg?itok=dFwuYE9b
Taikoo Shing in Quarry Bay has recorded a significant increase in rents.

Home seekers troubled by recent rises in the mass-residential sector now have an old foe to contend with: a resurgent rental market.

 

The recent gains in rents at 50 major housing estates in Hong Kong have come despite prices heading the other way for luxury properties, suggesting a polarisation is occurring in the city's rental market.

 

The average rent at the 50 estates tracked by Ricacorp Properties has grown for the past two months, with month-on-month gains of 0.3 per cent in April and 1 per cent in May, after declining 0.29 per cent during the first quarter.

 

"Rents began to fall gradually since the end of last year. But the trend has changed since April and the rental growth was more obvious in May. [it was] the highest in 10 months," said Patrick Chow Moon-kit, Ricacorp's head of research.

 

According to Centaline Property Agency, a flat of about 500 square feet at the Beaumount in Tseung Kwan O was let out for HK$9,500 a month in March. A similar flat fetched HK$11,000 a month recently.

Taikoo Shing in Quarry Bay has also recorded a significant increase in rents.

Patrick Tsang, a director at Centaline, said rents at the housing estate had risen from HK$29 to HK$30 per square foot in January to HK$32 this month.

"The demand is strong. Some tenants sold their flats and then rented because they were pessimistic on the market outlook. We have also seen some tenants looking for a new flat to rent because the landlords have raised their rent. Corporate clients are active in the leasing market, too," he added.

 

However, of the 12,698 units at Taikoo Shing, only 22 were available for immediate leasing, Centaline said. This compares with an average of 75 flats before the government imposed cooling measures on the market in February last year.

"After property sales turned active in recent months, the number of flats available for rent has been decreasing. The tight supply of flats and strong demand have driven up the rents," Chow said.

Ricacorp found that rent rises were the strongest in the New Territories. Based on those estates that were among the 50 tracked by the agency, the average rent in the area in- creased 1.3 per cent last month. Demand was particularly strong at City One Shatin and Tai Po Centre.

 

For the overall mass-residential market, Chow expects rents to climb a further 3 per cent by September, aided by the absence of completions of any housing estates over the next three months.

"Summer is also a peak season for the mass-residential leasing market as many mainland students have to rent a flat before the school year begins. The demand during summer holidays will increase by 10 to 20 per cent, compared with April. It will be a landlords' market," Chow said.

He believes flats at housing estates along railway lines in the New Territories will see higher rental growth.

==

> http://www.scmp.com/property/hong-kong-china/article/1539674/rents-also-pick-steam-resurgent-mass-housing-hong-kong

 

=== ===

 

Remember, buying property, even older low Cap properties you rent out, helps to protect you from further rent increases. Those old property under $3-4 Million are now trading near record highs.
Expect further price increases in the secondary market, if/when Rents rise more
Meantime: "Luxury Rents have dropped 10% this year.
And are expected to drop a further 5-10% by year end." - says SCMP
(Note: many so-called "Luxury" properties are not near MTR stations. Too bad.)
>>> Started new threads on HK RENTS
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Supply tight for used flats - HK Standard

. . .

The supply of secondhand homes is falling as would-be vendors hold out in the hope that the selling price will soar in the coming weeks.

Property agents say it is not uncommon for several homebuyers to zero in on an apartment with vendors unwilling to negotiate cheaper prices.


Midland Realty chief senior sales manager for Tsing Yi district Roy Fan Chi-chung said speculative vendors are deciding not to sell their secondhand homes at the moment in a bid for more gains.


"The property market is bullish, pricing is aggressive ... yet homebuyers can afford it. Positive speculation is forcing vendors to hold on to their properties," he said.


For instance, a low-floor flat in Ming Kung Mansion, Tai Koo Shing, sold for HK$9.65 million, or HK$13,746 per sellable square foot, up 5 percent on the average price in the area. The buyer did not even bother to look at the flat prior to the purchase.


Another record-breaking deal was made for an upper-floor flat at Amoy Gardens, Ngau Tau Kok. The apartment of 255 sellable sq ft went for HK$3.57 million, a record-high price per square foot, according to data from real estate agency Ricacorp Properties.


In the sizzling primary market, more than 500 units from new projects were sold last weekend.


Data from 50 large housing estates showed the number of secondhand properties for sale slipped an average of 8.5 percent for the month to June 21. The five estates with the biggest drop in flats for sale are all in the New Territorie


s, in Tsing Yi, Tuen Mun and Sham Tseng.


And with rents rising also, more owners are opting to lease their flats instead of selling.

==



I would put it differently.

Landlords who might sell, are angry and p/ss3d off about bank valuations that are too low, and are taking their flats off the market, because Buyers and Agents are not coming up with realistic prices. The way to change that is for banks to beginning pushing values up higher to more sensible levels. This would increase transactions, and give the banks more business too.

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STRATEGIES and Psychology of Selling and Buying


Many sellers might be "Resizers" or "Migrators"


+ Resellers - may want something bigger or smaller, possibly New - but they may be reluctant to Buy, unless they can sell their existing properties (at a price that makes some sense)


+ Migrators - might be thinking of moving someplace else: retiring to Malaysia or the UK or wherever


Another (smaller) category might be "Peak Sellers" - who want to sellout and take their profit. These have the problem of rising rents. Ever month that goes by after the sale they may be: $20,000 - $50,000 "worse off", with that margin being what they pay out in Rent - and rents are rising now. So I expect there will be few Peak Sellers in this current market.


We have considering being a Downsizer/Migrator. The idea over a year ago was to buy a smaller property (to hedge the rent risk), and a place in another country - where prices are far cheaper. We actually made both of those purchases, and have not yet sold out or main property yet. Now, my partner is not yet ready to leave HK. She has found a job she likes. So that idea of migrating may be on hold now. Her own purchase of a small flat is generating a positive monthly cash flow. And my foreign purchase is still under construction. So we have no rush to leave. In effect, we are being "paid to wait", so we don't mind waiting.


This is the type of position to aim for: One where you are relaxed about timing, and can respond to opportunity, if/when it comes.


If we had sold two years ago (and we came close, within $50-100K) we would now be stressed with rising rents. So I feel that I made the right decision in standing my ground on price.


I expect that many HK property owners are in situations like this - so they feel no urgency to sell. The urgency is now being felt by would-be Buyers as rents rise. Some may be regretting having missed "discounted properties" at the various projects that have sold out in recent months. Or they may regret that they were not more aggressive in the secondary market 2-3 months ago when sellers were more flexible.

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  • 2 weeks later...
Hongkongers, If not on the gravy train, you are over-paying


Jake Van Der Kamp exposed this in today's SCMP


The average Housing Authority flat rents for HK$1,200 per month

- that's one of "the lowest in the urban world"

... "In a City that is a byword for high-priced housing"


That amount:

+ Doesnt pay for the cost of repairs, or even

+ The cost of collecting rent

+ Leaves the HA with a deficit of HK$ 1.66 billion


Now the govt wants the HA to build 20,000 rental units a year


JVDC:

"The rents must go up."

"The HA did decide to raise rents by 10%... on $1,200 that means nothing."

"These rents can go much higher." (he calls for a 50% rise.)

- from todays SCMP

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(From AX):

 

"Hong Kong property watchers turn bullish as home prices hit record high" - Ed
(Hey, whodathunkit? One on the posts from the Top of this thread):
"The illiquidity (and high transaction costs) are hurting those who may want to upsize or downsize, and find the costs of doing so too be too great to move.
I don't think we can rule out a rally from here - maybe even to new highs - as unlikely as that may seem. But I am not promising that. nor really expecting it - But I do include this in my range of possible outcomes.
The rally in some of the HK Property stocks is something I am watching. If there is another leg up, then that "unlikely" rally becomes more probable IMO."
And we GOT more rally in HK Property shares,
which helps to show the value of this bellwether.
(... and it remains strong ):
Property Index

=========

“Transaction volume has picked up and take-up remains keen for new launches, so we expect developers should have room to gradually narrow discounts,” Alfred Lau, an analyst at Bocom International Holdings Co., wrote in a June 5 report. He also upgraded the property sector to outperform.

The Hang Seng Property Index, which tracks the shares of Hong Kong’s nine biggest developers, fell as much as 20 percent and is down 6 percent at 30,001.29 since the government’s 2013 tax increase as of yesterday’s market close.

The index rebounded after officials in May relaxed terms of refunding a double stamp duty introduced to discourage owning more than one home. Buyers have been given extra time to dispose of their existing dwelling after purchasing another one, the condition required for a refund.

==

> http://www.businessweek.com/news/2014-07-08/hong-kong-buyers-queue-for-new-homes-after-prices-plunge

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  • 3 weeks later...

The issue of High Management fees is in Today's SCMP

Questions are being asked about the size of new developments
If too small, management fees will be too high.
So maybe the govt needs to think about minimum sizes for new projects

I have always been careful about one Tower and two Tower projects

Park Ivy with two Towers is an example. Park Summit next door has the same management fee, as is expected Park Ivy. At PS you get a better clubhouse and a swimming pool. In short, you get more for your money, because the management costs can be spread over a larger number of flats.

Of course, a large estate with about 1700 units like Long Beach is better still. You get much better facilities, and the cost is still reasonable

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BIG JUMP in vacant shops - as landlord are slow to cut rents

+ Causeway Bay : 81 in Dec., 128 shops now : + 56%
+ Tsim Sha Tsui : 44 in Dec., 93 shops now
+ Mong Kok --- : 21 in Dec., 48 shops now : + 129%
+ Central ------ : 47 in Dec., 76 shops now : + 62%

The Cw.Bay vacancies are the highest since the SARS crisis in 2003.
Rent cuts have not been large enough, and retailers are losing interest
Retail sales have dropped 4.1% in the year to May.
But Cw.Bay rents dropped only 1.6% in the last quarter
(per today's SCMP)

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  • 3 weeks later...

The AX revamp looks like a big fail

 

More ads, no faster to process pages. Hard to read now, and very few are posting.

No value for the customers, from what I see....

 

(The Market's pushing higher, so I posted this):

 

Secondary Market Prices Rising
Yes, it is finally happening, Dorothy.
Even the SCMP is writing about it, in an article entitled:
"BUYERS SHIFT to secondary Market"
"The performance of the secondary market improved last week, with homebuyers quickening their decisions."
There were 233 transactions at 50 housing estates, up 32 percent from the week earlier.
The bargains are gone, and the Sellers no longer respond to lowball bids:
"Previously, potential buyers hoped to get a bargain by asking for a price cut of HK$200,000. But most transactions are now only about HK$20,000 to HK$50,000 lower than the asking prices."
And Bank Valuations are rising too, up 1-1.5% in the estate where I live, since the end of July.

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"HK is an Engine for Wealth generation"


Long time readers may have seen me comment before that one reason that HK property prices may not come down much, is because "HK is an engine for wealth generation. And with small homes, and limited space (to put things people may buy) there are not many places to invest HK people's strong After-tax cash flow, apart from property." LGMV has made similar comments.


People may not have noticed a round-about confirmation of this in today's SCMP Property section. In an article entitled: "Rural Malls lure Global brands", the writer (Yvonne Liu) talks about how global brands are looking for shops in Regional malls, instead of paying the very high rents in "core" shopping areas. Another reason, other than saving on rent, is they are discovering that people in those areas actually have the spending power to pay for the (more expensive) global brands. As the article put it: "Many residents have repaid their entire mortgage loans."


If you have repaid your home loan, then HK is a pretty cheap place to live (compared with other major global cities), and the savings will just build and build.


Many potential buyers have been "tricked" by silly forecasts in the newspapers into waiting to buy. They were "promised" 20-30% lower prices, and these did not arrive. It is possible they will come back strongly into the secondary market, especially if banks stop trying to depress the market, with unrealistic bank valuations. I am already seeing signs of the Values being pushed higher.

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HSBC has increased its on-line valuations again - the second time (that I have noticed) that valuations have been increased in the last two months. Hardly surprising given what is going on in the market. They are still a bit below the all time highs of January 2013.

 

Any hopes of adding to the portfolio on a meaningful drop in prices are well and truly dead. (Of course the other side of the coin is being grateful that we didn't sell anything.)

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After today's big Rise in the Centaline Index (+1.8% or more Kowloon),

they are going to have to go up again

 

I got an urgent call from an estate agent from Ricacorp who says he has a client who wants to see my Flat tomorrow.

I asked him how much over the bank valuation his client might be willing to pay?

 

"I need at least $500,000 over the bank valuation*.

If he doesn't think that is the beginning of a conversation, I am not interested in showing my flat."

 

When he was unable to give me an answer, I suggested he buy a cheaper flat on a lower floor, with a lesser view.

Obviously, the Tower will need some big sales, $200K or more over bank valuation, before someone will consider

more than that for the superior view.

 

*(BTW, my flat is right at the top of the building, and the view can see over and past neighboring buildings.

The bank valuations are based off the 98% of flats which have a lesser view, blocked by neighboring buildings.

My flat also has a ceiling which is more than 10% higher than lower floors.)

The agent seemed a little bit surprised (and maybe irritated) that I was aware at how much the Centaline index had pushed up.

As posted on AX:

" JUMPING Joe!
Centa-City Leading Index : at 125.66
+ 1.34 %, in a single week

With the strongest action in:
Kowloon : +1.86%

> http://hk.centadata.com/cci/cci_e.htm "

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  • 2 weeks later...

Big Jump in Bank Valuations in August

July- 07/31 : $7.880M: $6.360M : $11.99M: $8.630M : $4.030M: $7.140M : $9.880M : $6.660M
Aug- 08/31 : $8,200M: $6.680M : $12.60M: $9.200M : $4.180M: $7.500M : $10.38M : $6.860M
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
%-Change : + 4.06% : + 5.03% : + 5.09% : + 6.60% : + 3.72% : + 5.04% : + 5.06% : + 3.00% :
====

The "Freeze-Out", I have written about for some months may be thawing
Some of these Valuations are now getting near where Landlords are willing to sell - as I see in Tai Kok Tsui.

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More evidence of the HK property market continuing to strengthen:




In addition to continued strong demand from both end users and investors, the interesting things was that, once again, there was no mention of PRC investors suggesting that almost all of the demand was from local investors.
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And predictions that the increases in price will continue:
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SHKP Properties wants to switch to Small Flats


One of the Big two HK Property developers has applied for permission to switch their approvals from large family flats and house to small flats, like 350sf, costing $4 - 6 million.


This is what the market wants to buy now. And if they get all the approvals sought, they will build much smaller flats, but maybe 4-5 times as many.


The Impact on the future market is something to ponder, if you are thinking of buying a flat.

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Banker's complaining ... FT articles:

 

+ "Wall St squeezed middle stranded in 'few hundred thousand' bracket (FT, pg.1)

 

+ "Top rung more distant for Wall St bankers" (FT, pg.17)

=== ===

Promotions are becoming scarcer, for those in their 30's and 40's (at the middle levels)

 

This reflects "job cuts across the board" - headcount in trading areas has fallen by 30%, 50% on some desks

 

At Goldman Sachs the number promoted to "partner managing directors" may be near 2012's "historic low" of 72.

 

"People haven't made much money, and they haven't been able to retire."

Now they are staying until they are 52 or 55.

Only the good managers, and "really good politicians" are making it to the top rung.

=== ===

IMPACT?

Angry bankers are not "more moral"

Less luxury goods and luxury homes will be bought by these guys (and gals)

Luxury rents, on flats in places like HK, may stay under pressure

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At some stage all the banker bashing is going to come and haunt us all. As Bernstein (The Birth of Plenty) and Ferguson (The Ascent of Money) both pointed out, the availability of capital and the free movement of capital are both necessary ingredients for a growing economy and prosperity in general. By regulating and punishing the banks in excess, the banks are reacting very rationally by focusing on activities which carry lower regulatory and financial risk and which tie up lower amounts of regulatory capital. Among the areas getting squeezed - small business finance.

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Maybe you will be right...

 

Fortunately, people like Catherine Austin Fitts have another idea. Using EQUITY, sourced locally.

 

All equity holders have an interest which is basically aligned. Bankers may not, since they can grab collateral when times are tough,

squeezing out Equity.

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Sorry, but I have to very strongly disagree with that. Most people are not equiped to either evaluate equity investments (especially in illiquid investments) or to take on the risks. Many of the people who are, would not want to and 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, results in asset bubbles in areas with excess capital and would increase inequality.

 

Also, I hope the banks take collateral against most of their loans and sell the collateral in the event of default - too many unsecured loans puts depositors at risk and the failure to enforce collateral/repayment obligations introduces a huge moral risk.

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