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Hong Kong property outlook - and Data Base


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Cheung Kong has lowered its sales target for 2015

 

Last year, it was HK $40 billion, based on 3,900 units sold in HK : over $10mn /unit

For 2015, it is only HK$30 billion, based on 4,000 units : that's $7.5mn / unit

(The units may exclude units outside HK, while including revenues from China, etc.)

 

Justin Chiu Kwok-hung expects HK "home prices to gain no more than 10%"

 

Eight projects will be launched in HK, with La Lumiere in Hung Hom, expected later this month

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This article today caught my interest

 

Hang Seng looks set to cash in on bank rise - The Standard (pg.10, Business)

 

HK11 / Hang Seng Bank ... update

HK11_zps85e36e39.gif

 

HS Bank is considering selling its 10.9 percent stake in China's Industrial Bank,

but may first divest of half of its stake

 

HK:1398 / Industrial & Commercial Bank of China Ltd. (HKG) / ... update

hk1398_zpsb535fc82.gif

 

Industrial Bank's shares have soared 54 percent in the past year, giving the lender a

market value of US$43.8 billion

HS share x 10.9% = US$ 4.77bn = HKD37.4 billion

 

I wonder if it would put most of that cash into property lending in HK?

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A real Kick-Arse gain has just been reported by Centaline:

CCLI : 136.35 + 1.73% (from last week)
Mass : 138.01 + 2.22%

 

I think it is reflecting transaction I saw 1-2 weeks ago, after HSBC pushed up some

bank valuations in Kowloon etc., by 3%

 

HK12 / Henderson Land, a bellwether ... update

 

HK12_zps4d85c253.gif

 

 

Looking at Henderson Land share price movement and recent press speculation I wonder whether more property cooling measures are imminent. Will any further measures be targeted at smaller flats. I'm not sure what the purpose of property cooling is any more - is it aimed at protecting the banking system from the adverse effects of excessive lending or at looking as if you are tough on property speculators?

 

Right.

That occurred to me too !

I think the recent RUSH OF BUYING of property may be by people who want to buy BEFORE new cooling measures are imposed,

and the Henderson Land price came down because people are expecting something soon, and THAT will not help the HK-12 stock price.

 

If I am not mistaken, new measures were imposed on a Saturday just before or after CNY.

If they do that again, we might get them tomorrow, or next Friday

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POSSIBLE COOLING MEASURES ?

 

That sounds on the mark to me -assume it's more taxes aimed at smaller/lower value properties as this is where the demand is. Developers are much more focused on building smaller flats hence the share price fall at the same time that flat prices have been rising to get in before any tax rise.

- Lev

 

Yes, that sounds possible - maybe a minimum Stamp Duty of 3% (or so), to hit the bottom end

 

Or a DSD on everything held less than 3 years

 

My own preference would be a 1% extra added onto rates,

ie a 2.25% rate would go to 3.25%, with the money rebated when the property is sold.

 

Hong Kong should have raised rates years ago, but cannot because of the peg.

My suggestion would address that.

To me, it is such an obvious solution, that I dared not mention it, until I sold my flat (haha)

But I doubt the HK authorities will be clever enough to see the wisdom of such a move

=== ===

 

(Citigroup is also talking about "Cooling measure" ):

 

A housing bubble in Hong Kong won't topple its economy
International Business Times UK-6 Feb 2015
Citigroup, in a note this week, said Hong Kong could introduce further cooling measures

to prevent its housing market from overheating...

. . .

Chang noted that a crash in home prices will mainly hit Hong Kong's private consumption, and its construction and banking sectors.

Studies suggest that a percentage-point decline in home prices causes a 0.1 percentage-point fall in the city's private consumption growth, Chang noted, adding that the 70% price drop in the 1997 crash, amid the Asian financial crisis, lowered consumption growth by 7% to 8% over five years.

But as construction accounts for just about 4% of GDP, a collapse there will be "manageable" for the economy, Chang noted.

Banks, meanwhile, may be protected by low loan-to-value ratios averaging around 55% for last year's new mortgages, and by government attempts to rein in speculators, keeping delinquency ratios low, he added.

Citigroup, in a note this week, said Hong Kong could introduce further cooling measures to prevent its housing market from overheating as the US central bank increases interest rates at a slower-than-expected pace.

But Citi said it was still positive about the city's residential property market over the next year.

. . .

"While the impact is sizable, it also suggests that even a total collapse in house prices would be unlikely to lead to a slump in private consumption," he added.

Citi said: "Further tightening may cool the property market only for a short while.

"We expect the annual supply shortage of over 6,000 units to continue for the next three years. Families that do not buy a house would opt for a lease, which would drive up the rental rates – another support to physical home prices."

==

> http://www.ibtimes.co.uk/housing-bubble-hong-kong-wont-topple-its-economy-1486886

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  • 3 weeks later...

New property cooling measures will see higher down payments for Hong Kong buyers
Friday, 27 February, 2015

Hong Kong Monetary Authority Chief Executive Norman Chan Tak-lam today announced measures to cool the city's property market after the prices reached what he called an all-time high.

Speaking at a press conference on Friday afternoon, Chan said that residential properties under the HK$7 million mortgage ratio would be capped at 60 per cent having previously been set at 70 per cent - meaning prospective buyers would need bigger down payments.

The HKMA also reduced the maximum debt servicing ratio - the monthly repayment of the borrower as a percentage of monthly income from 50 per cent to 40 per cent for borrowers who are buying a second residential property for self-use.

Furthermore, as part of measures, the maximum debt servicing ratio - the monthly repayment of the borrower as a percentage of monthly income - will be cut from 50 per cent to 40 per cent for all non self use properties.

Chan said: "The new measures may affect buying plans of first time buyers. But the authority always tries to strive to achieve a balance between the need to tighten mortgage financing to protect banking stability and the desire to minimise negative impact on genuine end-users, especially the first time buyers".

Further measures to cool down the property market would come “hard and fast” when they are needed, Financial Secretary John Tsang Chun-wah said earlier on Friday morning.
==
> http://www.scmp.com/...-market-cooling

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TOO HOT?? : "Home prices for small units rose 15%" from June - Dec.2014 - SCMP

 

Week : CCLI : CMMI : RobinPl: Tregun : Dynast : Clovell/ IslHarb: ParkAv: Waterf : Sorrent : TArch : C'ribC : TaikSh.

02/22: 136.20 137.34: 15,679 : 19,670 : 24.101 : 22,500 /12,641: 11,792 : 14,180 : 16,398 : 22,439 : 6,573 : 13,319 :
02/15: 137.20 138.52: 15,672 : 19,661 : 24,091 : 22,491 /12,640: 11,791 : 14,193 : 16,412 : 22,459 : 6,570 : 13,932 :
change -0.73% -0.85%

 

Maybe people expected SOME measured to be imposed, we saw a drop rather than a surge in the Centaline index this week:

 

[Centa-City Leading Index] 136.2 down.gif0.73 %

For those who Sell-on-Rumor, and Buy-on-News, might find this announcement less shocking than it might have been, and start buying next week.

 

 

New property cooling measures will see higher down payments for Hong Kong buyers
Friday, 27 February, 2015

Hong Kong Monetary Authority Chief Executive Norman Chan Tak-lam today announced measures to cool the city's property market after the prices reached what he called an all-time high.

Speaking at a press conference on Friday afternoon, Chan said that residential properties under the HK$7 million mortgage ratio would be capped at 60 per cent having previously been set at 70 per cent - meaning prospective buyers would need bigger down payments.

The HKMA also reduced the maximum debt servicing ratio - the monthly repayment of the borrower as a percentage of monthly income from 50 per cent to 40 per cent for borrowers who are buying a second residential property for self-use.
==
> http://www.scmp.com/news/hong-kong/article/1724867/hong-kong-finance-chief-pledges-hard-and-fast-property-market-cooling

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From afar it looks like the latest property cooling measures will take some of the heat out of the smaller flat market and probably lead to a further stand off between buyers and sellers more generally in the secondary market. I expect Centalline to tick down slightly say around 3-5% over the next few months while we await the first US IR rise in the Summer.

 

How have the measures been received in by the press and market commentators in Hong Kong?

 

Lev

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Here's a pretty good thread with a diversity of opinions:

 

Cooling Measures... for Hot Small flats

https://hongkong.geoexpat.com/forum/155/thread314657.html

 

(Guess who OTP might be? No prizes for right guesses)

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Thanks for the link Dr. Sounds like a number of people are disappointed that the cooling measures don't go far enough but the main purpose of the measures is to protect the banking system and not to crash the market or make it decisively more affordable - slow drift down coming now into the summer while we wait the macro picture methinks.

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...- slow drift down coming now into the summer while we wait the macro picture methinks.

 

Maybe.

If this latest measure doesn't work, there will be more.

 

But I think that the HK market could levitate for another year or so.

Example: My GF keeps saying she wants to buy another property.

I get little traction, when I tell her to stick with the small and "cheap" property she has already.

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Interesting - once prices have been going up for 10 or more years people tend to forget that they can go down as well as up. The London and South East market suffers from a similar myopia. With the threat of more cooling measures it implies we are heading into a rounded top in HK as opposed to the blow off top we tend to imagine and that characterised the 1997 top? Is that what you also expect?

 

I cant make my mind up whether to sell or not ATM but am hoping that the $ appreciation against £ and Euro will continue over the next few months given the UK election and hung parliament risk, US IR direction and continued political risk in Europe as that would make selling much more attractive when repatriating funds. I am actively looking for a property in Spain now as prices are nearly 50% off the 2008 top - the Euro is weak and there are a few green shoots starting to appear in the economy. I think a floor will be found in prices there in the next couple of years as most of the down side risks (maybe currency apart) start to recede.

 

Lev

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" I am actively looking for a property in Spain now as prices are nearly 50% off the 2008 top - the Euro is weak..."

 

Sounds like a good move.

We need to have a thread on Spanish property. (maybe Portugal too)

Would you post on it?

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HK house prices to see mild correction, says SCMP, pg 1 Property section

"...seeing a slow pullback due to an uncertain outlook,
given the possibility of further tightening measures from the government."

"Some homeowners have started cutting asking prices..."
"Overall sentiment is very quiet..."


(as a possible "unintended consequence", another headline says):

Developers may shun sites for small flats

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A TESTING TIME for HK Property's uptrend?

 

The SCMP predicted a correction this morning:

HK house prices to see mild correction, says SCMP, pg 1 Property section
"...seeing a slow pullback due to an uncertain outlook,
given the possibility of further tightening measures from the government."
"Some homeowners have started cutting asking prices..."
"Overall sentiment is very quiet..."
"

 

Here's HK-12 (Henderson Land) which closed on the 144d-MA today ... update

 

HK12-6mos_zpsyhlxtgc4.gif

 

OTHERS:

SHKP (HK16), CheungKong (HK1), Sino (HK63), HangLung (HK10)

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Jake VDK : Now talking about the De-Peg Option

Jake Van Der Kamp has been a supporter of the pegging of the HKD to the USD:
as "the bedrock of economic success."

But no more. He now sees that the Ultra-low interest rates that come with the peg are dangerous for HK. The (required) low rates have lifted property prices to nosebleed levels. And the seven cooling measures that the HK govt has imposed are not working.

"The rich get richer and the poor get a lottery ticket."

So what can be done?:
"It is time to talk heresy... The Fed has gone mad... We need to look at our options."

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  • 1 month later...

1/

Outpriced, Hong Kong Home Buyers Look Abroad

HONG KONG—
In Hong Kong, one of the world’s most expensive property markets, housing prices have doubled since 2009.
Chris Parker, who has lived here for seven years says housing costs are a cause for worry.
“This is where I want to be now. I certainly don’t want to go back to the UK," he said. "So I don’t see me ever leaving Hong Kong per se, but I do feel that there will come a point where I am struggling to find a place to live either here or in some other place. I might have to make a change in location.”
Last year, home prices surged a record 13 percent. A 100 square-meter apartment in the center of town has an average cost of $2.3 million. Earlier this year, the government took measures to cool the market for fear that an influx of mainland Chinese buyers may be inflating prices - creating a bubble.

More http://www.voanews.com/content/outpriced-hong-kong-home-buyers-look-abroad/2704144.html

 

2/

Hong Kong Real Estate: Is The Lack Of Land A Myth?

Ronnie Chan, the chairman of Hung Lung Group, compared himself to Brad Pitt during a real estate conference in Hong Kong in December. “I am a man. Brad Pitt is a man. We aren’t exactly fungible assets. In the case of commercial real estate, I am Brad Pitt,” he declared.
Chan was making a point that China is building far too many shopping malls, some of which are so big that a shopper will require more than a day to walk an entire complex. A veteran property developer and a billionaire, Chan welcomes a consolidation in the real estate sector in China. “In this business for one winner, there are 10 to 15 losers.” “Bankruptcy is a healthy thing. It is part of a process of concentrating the industry in a few hands and why not?” he asked.

More http://www.forbes.com/sites/beelinang/2015/04/03/hong-kong-real-estate-is-the-lack-of-land-a-myth/

 

Ronnie Chan is not Brad Pitt.
He's richer... though with a different presence

As the article makes clear, some policy changes are inevitable:

While rising property prices have enriched developers, many lower income families are struggling to own their own homes. According to government data, only about half of Hong Kong people own their own homes, compared with nearly 90% in Singapore, 67% in Australia and 85% in Taiwan.
. . .
However, John Wright, a barrister and chairman of Friends of Sai Kung, says that the shortage of land is a myth. “The land bank that private developers are sitting on and the land bank that the government is sitting on in urban areas showed that there is no shortage of land for public housing,” says Wright. “There are over 200 hectares of land available for building in the urban areas. The shortage of housing is real but that is because of deliberate manipulation of the market by the government.”

Up to 40% of Hong Kong is made up of country parks and only 24% of the territory is built up. Agriculture land accounts for 6% of Hong Kong and the remaining is undeveloped up land, which includes smaller islands, village housing, steep slopes, open storage facilities and vacant government sites.

Leung has attempted to seek land in the New Territories but has to confront the powerful Heung Yee Kuk organisation, which represents the indigenous communities. “Developing new towns on brown field sites in the territory always leads to compensation issues; dealing with people with vested interest in the land,” says Paul Zimmerman, a district councillor for Pokfulam. “There will always be social and political problems and no matter how fast you want to push it, you will still have to resolve these issues and they will slow you down.”
. . .
“The small house policy has been abused by indigenous villagers for many years,” says Liber. “The government began a review of the policy in 1995, but we have not heard of any progress. This is probably the longest review of a single policy the Hong Kong government has ever done.”

“No matter how reluctant the villagers are on any changes, changes are inevitable,” Liber added. “First is the inherent unsustainability of the policy: the population of indigenous people is infinite by theory, but the land is finite.”

. . .

“Increasing land supply while prices are high, and vice versa won’t work because property developers will hold onto their existing stocks to maximize profits, and this drives up prices,” added Liber. Leung had touted the possibility of imposing a vacancy tax on unsold new homes to stop hoarding by developers. However, the measure was never introduced. “The government should be studying the implications and feasibility of implementing vacant property tax,” stressed Liber.

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  • 2 weeks later...

Surprise plan approved to tear down Excelsior
18 April 2015
South China Morning Post Excerpt

IMG_5860.jpg

IMG_5886.jpg

 

Four-star hotel The Excelsior may be torn down to make way for a commercial development after 42 years as a Causeway Bay landmark.

Excelsior Hotel (BVI), a wholly owned subsidiary of luxury hotel operator Mandarin Oriental International, has secured approval to build a 26-storey commercial building over the four-storey basement at 281 Gloucester Road, the Building Department’s February monthly digest released yesterday stated.

The plan would yield a total gross floor area of 684,005 square feet if Mandarin Oriental goes ahead with the redevelopment.

Alvin Lam Tsz-pun, a director at Midland Surveyors, said the proposed redevelopment would definitely enhance the commercial value of the site.

“The plan is a bit of a surprise to the market,” he said. “But the property is in a great location and commands an excellent sea view. Both hotel and commercial development will be sought after.”

With an estimated construction cost of at least HK$5,000 per square foot, he said the redevelopment project could involve an investment of HK$3.4 billion.

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At last!


Someone had the nerve to do this:



Discovery Bay investor sues over loss of sea view



He/she lived in The Chianti (2007), and Amalfi (2011) is now blocking the view



"... claimed developer HKRC misled..."


promised: "a continuous view" in a brochure, which mentioned "a mid-rise residential development"


Not: a building of the same height


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HK Property Slowing ?

 

"Home rents in HK fell for the first time in 12 months in March" - says the SCMP

 

"Views are mixed on rather the fall in rents is a prelude to a house price correction,

with that more likely to depend on when interest rates start to climb."

 

Centaline's Rental index - HK$32.80 - down 0.6%

(Secondary home rents at 100 housing estates)

The record high was HK$33

 

"New" properties ready for occupation include:

Park Signature in Yuen Long : 1,620 units

City Point in Tsuen Wan ------ : 1,717

Mont Vert in Tai Po ------------ : 1,071

The Austin in Kowloon -------- : 0,576

=======================> 4,984

 

Private housing completions hit an 8-year high of 15,700 units last year.

 

"The property market this year may show a surplus for the first time in three years,"

according to an analyst at Bocom Int'l. The same guy expects home prices to fall

by 10-20 % this year.

 

An analyst (Joyce Kwok) from Credit Suisse sees the drop in rents as seasonal.

And she thinks higher property prices may drive some to rent, rather than buy.

 

Biggest declines were seen in Whampoa Garden, with a fall of 3.1 per cent,

followed by Laguna City (-2.6%), and Mei Foo Sun Chuen (-1.3%)

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Q. from Green King, on Asiaxpat:

Interesting. I note however that of the 4 developments ready for occupation 3 are in NT, 1 in Kowloon & none HK island. Also the three biggest falls are Kowloon & NT. It seems falls in price are being driven by the mass market rather than luxury properties? If so it will be interesting to see what measures the government takes and when ie remove stamp duty restrictions implemented in recent years? Property prices are such a see-saw issue that measures nearly always seem to be taken too late by governments.

 

A, from OTP:

==

Luxury properties suffered falls in Rents over the last 1-2 years.

But the N.T. and Kowloon may show the most impact from new supply over the months to come.

 

The Sub-indicies do not (yet) show greater strength on HK Island.

They show the contrary...

 

[Centa-City Leading Sub-index]

Area== : This Wk. : Prev.Wk.: Prev. Month

HK------- : 151.49 : - 1.40 % : + 2.76 % :

KLN ----- : 142.11 : - 0.37 % : + 2.90 % :

NT (East): 144.67 : - 0.99 % : - 0.09 % :

NT (West) 125.49 : +0.61 % : - 0.14 % :

======

> source: http://www1.centadata.com/cci/cci_e.htm

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An anecdotal pointer to the market becoming saturated - I have started getting calls from agents (not ones I have dealt with before) asking me to viewings of new releases before they are opened to the general public. Leaving aside the violations of the Personal Data (Privacy) Ordinance, I view this as a possible indication of the market slowing down (or perhaps some agents are just getting creative in order to get a bigger slice of the commissions on offer).

My view is that the market is too expensive to represent good value for investors - of course, I've held that view for a few years now and the market has proven me wrong.
As a side issue, there are plenty of people who have made good money out of the share market in recent months (even a retiree like me with a stodgy portfolio of dull boring dividend orientated stocks has done okay). If history is any guide, some of those gains will likely be diverted into the property market at some stage.
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Interesting anecdote.

Are the locals resisting prices? Maybe. (Though "cheap" Hemera sold well.)

 

HK PROPERTY : Over the Moon ? What Next ?

 

(The normal pattern is: HK Property peaks a few months AFTER the peak in stocks.)

But is that any guarantee we will see it again?

 

Property, stock indexes seen to hit new highs

By Agnes Lu in Hong Kong
1429580957441_537.jpg

The debate is still raging: Will the stock-market boom, which saw records tumble in the past few weeks, give property prices another big lift?

Interpretations may vary, but real-estate experts generally point to a positive relationship between the two sectors although they regard the housing sector as more of a laggard, with the stock market much susceptible to both internal and external influences.

The consensus, nevertheless, is a win-win situation for both markets.

“Under the latest wealth effect, it’s very likely that both sectors will see new record highs simultaneously,” reckoned Louis Chan Wing-kit, chief executive officer (residential) for Asia Pacific at Centaline Property Agency.

“Homes prices have been benefiting from the quantitative easing monetary policies in many countries, plus the housing shortage pushing up prices in Hong Kong as well. That’s why we’ve been experiencing a prosperous property market in the past two years, led by small- to medium-sized homes,” he said. “But, the stock market has, apparently, been underestimated.”

Sammy Po Siu-ming, chief executive officer at Midland Realty’s residential department, said he has seen homes buyers switching to larger apartments in the primary market recently.

“Basically, luxury homes costing more than HK$20 million are in demand, and buyers admit they’ve become bolder after making a fortune in the stock market,” he said.

In his view, the real boom in real estate has yet to come. “It’s just the beginning, and many are still investing in the stock market. We have to wait until the HSI has soared for a while and people start taking profits and pump them into the housing market.”

Property developers are, seemingly, over the moon...

==

> more: http://www.chinadailyasia.com/hknews/2015-04/21/content_15253493.html

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Using the 18 year Cycle - we should be close to a Top in HK.

 

1997 + 18 = 2015

2003 + 14 = 2017 - the "up" phase is normally 14 years

Ideally then: 2016 +/- 1 year

 

But we may get a Top in stocks first... with the Peak in property to follow a few months later

 

Hong Kong Property vs. the Hang Seng Index : HSI-update-all : chart below w/o lines

 

HKprop-vsHSI-2_zpswaiqdvky.jpg

 

> source: http://www.chinadailyasia.com/hknews/2015-04/21/content_15253493.html

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