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davehk

Hong Kong property outlook - and Data Base

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" that rapidly rising property prices result in zero negative equity cases in Hong Kong or cringe at the appalling journalism that produced a headline and an entire article that conveniently demotes to the last paragraph the inconvenient fact that the claim that there are zero negative equity cases in HK excludes developer second mortgages "

Haha.

Hard to lose money when the asset RISES in value after you buy it.

Even 10% - 20% equity should make this an almost No Lose proposition for mot lenders.

Obviously, the real test with be in a falling market.   And developers giving 2nd mortgages will be the first to feel the pain

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Actually, given the high transaction costs in HK (stamp duty, legal fees, agency), outgoings (management fees, rates), possible fit out costs and holding costs (mortgage payments) (less actual or implied rent of course), I'd say it is very possible to lose money even if the underlying property price does increase. If you were in the position of paying double stamp duty (15%), you would need prices to increase by at least that amount to have any chance of breaking even.

Agree that the test will be the falling market and I suspect that the next down turn may be a bit different from the last one because:

1. the banks have less direct risk exposure due to the higher LTV requirements

2. the banks' indirect exposure through lending to developers who on lend to buyers is (IMHO) relatively low risk because most of the HK property developers have very strong balance sheets are are themselves well able to survive a big fall in property prices. They will feel the pain of losses but will survive

3. the number of non-residents owning property in HK is (I believe) much higher than last time. Intuitively, I would expect non-residents to be more willing to walk away from their obligations resulting in more mortgagee sales

4. if things get bad, the HKSAR govt can remove some or all of the cooling measures.

 

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Interesting points, TI.

I agree that next downturn is likely to look different.

Most who own will be keen to hold at least three years, to get past the 3-year extra tax

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Hong Kong Real Estate Prices Fall Most Since 2008

  • The monthly home price index fell 3.5 per cent to 366.3 in November, up from 2.56 per cent in October
  • Largest fall in a single month since November 2008

Prices of lived-in homes in Hong Kong saw the sharpest decline in a single month in November since the global financial crisis in 2008.

HK$ per sq ft of saleable area : Nov 2018 HK$22,714 : 

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Source: Midland Realty

The monthly home price index, which represents movements in the secondary property market, fell 3.5 per cent to 366.3 in November, compared to the 2.56 per cent slide in October, 1.27 per cent in September and 0.05 per cent in August, according to data from the Rating and Valuation Department.

Home prices have slumped 7.2 per cent after peaking in July following a 28-month surge starting in April 2016,

. . . “It is the largest fall in a single month since November 2008,” said Derek Chan, head of research at Ricacrop Properties.

Home price plunged 8.22 per cent in November 2008 and hit the year’s low of 104.8 in December. After a three-month decline, home prices began to rebound in January 2009.

A number of investment banks and analysts have forecast that property prices will continue to fall, with some predicting declines of as much as 25 per cent next year.

Denis Ma, head of research at property consultants JLL, expects home prices to fall at least 15 per cent in 2019.

(PRIMARY Prices UNDER Second hand):

“Part of the reason why prices fell at a faster rate in November was because developers started putting more projects on to the market in the previous months. The flurry of new launches has seen sell-through rates fall as developers also scrambled to find buyers,” Ma said.

Buying interest also remained weak.

“Home sales in the secondary market plunged 67 per cent over the weekend with just one flat sold,” said Willy Liu, a director at Ricacrop Properties, which monitors 10 major housing estates in Hong Kong.

Sino Land has been offering flats at its Grand Central development in Kwun Tong at prices that are 14 per cent lower compared to those nearby, luring home seekers away from the secondary market.

 

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Then again - just out today the latest numbers show a whopping 0.07% increase in the CCL last week: http://www.aastocks.com/en/stocks/news/aafn-content/NOW.916475/top-news

 I know, its not meaningful, but it does help to stir the pot.

 

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