HK property price will fall..as well

[1st timer]

Apocalypse soon

The leverage pyramid supporting world property prices is unravelling, but it's not too late to sell.


The troubles at Fannie Mae and Freddie Mac, the US semi-government lenders that hold or guarantee US$5.4 trillion of mortgages, have exposed the innermost sanctum of the credit-cum-property world of the past decade. They have lent their semi-government credit ratings to dubious financial products that purport to decrease financial risks by reshuffling the deck. While government money will bail them out, they will cease to be the sugar daddies for Wall Street. The leverage bubble has nowhere to hide; it will explode.



Rising leverage was the tide that carried all asset prices upwards. In Hong Kong, London, Mumbai or New York, rising property prices became the reason for prosperity, and this prosperity was the rationale for the rising prices. As one Hong Kong tycoon told me, wealth begets wealth; people who make money in the stock market buy property, people who make money in the property market buy stocks, and the happy story goes on and on. Yet, the free lunch was an illusion. Its engine was the debt pyramid game.



The bricks for the pyramid were new financial products that purported to decrease risk for owning assets and, hence, required less capital for their purchase. The rising price trend validated the power of the financial innovations for several years. In fact, the rising trend was due to the belief in the new products that created a demand boom for risk assets with debt financing. Like any bubble before, this one fell under its own weight. As a bubble grows, it needs proportionally more money to stay afloat. At some point, there isn't enough to keep it rising. The ensuing rush for the exit reverses the momentum. The way down is usually much steeper than the way up.



Rising oil prices are an accelerator for the downturn. Money is reallocated from most bubble cities to oil exporters. The money reduction sucks the air out of the bubble. To fight the receding tide, central banks are printing money to slow the descent. But more money leads to higher oil prices, sterilising the central banks' efforts. Further, high oil prices depress economies and decrease investor confidence. The central banks are fighting a losing battle against falling asset prices and are fuelling stagflation. The inflation will take years to cure. The central banks are digging their own graves.



Investors should sell any asset that has benefited from rising leverage. Property is entering a bear market everywhere except among oil-exporting countries. All else being equal, while inflation is good for property, the current price is already too inflated to be supported by inflation. While the consumer price index rises, property prices fall. At some point, the ratio of the two returns to the historical norm and the bubble is fully deflated. On that basis, property prices may fall by one-third globally, and by half in many "hot" cities.



Hong Kong's property market is triply vulnerable. First, the city's economy depends on its stock market. That is falling. Local speculators made billions from mainland IPOs and they splashed out on luxury properties. The wealth spillover from the stock market boom was the driving force for the property market.



Expanding financial sector employment was another spillover. As investment banks expanded their payrolls on the dream of endless hot Chinese IPOs, many bankers got their big bonuses. But the hot IPOs of yesteryear are now underwater. Loss-bitten investors are not re-entering the market. Those bankers lucky enough to keep their jobs have no expectations of a bonus. This is definitely not the time to splash millions on a luxury property that is actually a modest-sized concrete box.



Second, the US Federal Reserve is likely to raise interest rates after the November election. US inflation is becoming entrenched. The Fed is caught between financial and price stability. Every time it tries to sound tough on inflation, another financial explosion forces it to loosen the money supply again, sparking more commodity speculation.



Next year, the explosions may cease and the Fed may be able to switch to fighting inflation: it may raise interest rates to 5 per cent in the second half of the year. As adjustable-rate mortgages dominate Hong Kong's property financing, the massive rise could hit investors or speculators hard. The default rate could spike.



Third, China's economic cycle is turning down but inflation is staying up. In particular, Guangdong faces a serious downturn. Its export economy is being hit hard on rising costs and falling demand. What is happening to Macau's casino business shows how a lack of money in Guangdong could affect its neighbours. At the same time, inflation means that Guangdong will charge Hong Kong more for its goods and services. Hong Kong will get less money from, but pay more to, its neighbour.



The triple squeeze may imply one of the worst years, next year, for Hong Kong property. During the current bubble, the mass market hasn't inflated dramatically. The pain from the massive price decline between 1997 and 2003, plus sluggish income, has prevented mass hysteria in the property market this time. Those with money to spare ramped up the "luxury" market. Citing negative real interest rates, too many people - mostly financial professionals who may lose their jobs soon - have maximised leverage for property purchases in the past two years. The prices at many well-known developments have tripled since 2003.



Hong Kong's luxury property price may fall by 50 per cent from its peak. It is not too late to sell. An offer may be significantly lower than you expect. But you should take it. The big fall is yet to come.



Andy Xie is an independent economist

[1st timer]

just highlight - he predited that HK high end proper ty will fall by 50%.

Andy Xie used to work for Morgan Stanley as chief economist. He had the track record of prediting HK property price to fall before 1997. It happened as he predited.

Interesting to see this time..

[I dunno]

about HK but here. Please provide a first the view on the correlation for the two..

"Thousands throng showflats at Park Central@AMK

SINGAPORE : Some 3,000 home hunters thronged showflats at Park Central@AMK on the first day of its launch on Wednesday.

The developer is still tabulating the applications.

But as of noon, 130 people have applied for the flats in central Singapore which will be ready in 2011.

Of these, 130 have already applied for the flats, which will be ready in 2011. "

[To 1st Timer]

Do you realise what you're letting yourself in for? What ever you do, DON'T I repeat don't attempt to correlate HK with Singapore.

Anyone who posts anything even remotely bearish gets licked by the eternal flames of hell here 

Best of luck. 

[to "i dunno"]

what it means is that 3000 people in singapore have nothing better to do than to throng a showflat in AMK on a wednesday...  reminds me of when ezlink cards were first introduced in 2004 or so... i watched with absolute amazement as people queued for an hour for nothing more than a fancy train ticket...

[These 3000]

what it means is that 3000 people in singapore have nothing better to do than to throng a showflat in AMK on a wednesday...  reminds me of when ezlink cards were first introduced in 2004 or so... i watched with absolute amazement as people queued for an hour for nothing more than a fancy train ticket...

people are all the same person that is positive on property. The other 130 people that applied are again the same person that applied for 130 times. No one else residing in Singapore is allowed to say the slightest thing positive on real estate..

[What's wrong with]

Do you realise what you're letting yourself in for? What ever you do, DON'T I repeat don't attempt to correlate HK with Singapore.

Anyone who posts anything even remotely bearish gets licked by the eternal flames of hell here 

Best of luck. 

seeking the thoughts of the OP. He is not a post and run type, you know.

[Otherwise]

what it means is that 3000 people in singapore have nothing better to do than to throng a showflat in AMK on a wednesday...  reminds me of when ezlink cards were first introduced in 2004 or so... i watched with absolute amazement as people queued for an hour for nothing more than a fancy train ticket...

people are all the same person that is positive on property. The other 130 people that applied are again the same person that applied for 130 times. No one else residing in Singapore is allowed to say the slightest thing positive on real estate..

you get heckled and name called..

[Yeah.]

what it means is that 3000 people in singapore have nothing better to do than to throng a showflat in AMK on a wednesday...  reminds me of when ezlink cards were first introduced in 2004 or so... i watched with absolute amazement as people queued for an hour for nothing more than a fancy train ticket...

people are all the same person that is positive on property. The other 130 people that applied are again the same person that applied for 130 times. No one else residing in Singapore is allowed to say the slightest thing positive on real estate..

you get heckled and name called..

He reminds me of a high school bully.. or a spoil brat. Mummy, Daddy that guy is having  positive on property.

[bertt]

hk has 1.3bil ppl to buy their property, it doesnt have to worry.. us on the other hand have many houses in the suburbs that nobody wants.. gas is so exp that everyone's moving into tiny apts in the city.. their US citys' real estate is doing very well last i heard

[That's what]

hk has 1.3bil ppl to buy their property, it doesnt have to worry.. us on the other hand have many houses in the suburbs that nobody wants.. gas is so exp that everyone's moving into tiny apts in the city.. their US citys' real estate is doing very well last i heard

one's natural reaction would be. Stay close to where you do your major activities. Some offices will in the meantime do likewise (move to the population centers) if the high oil prices persists. Same goes for companies with high transport/logistics bills, they will try to station themselves near their major customers.

[agent x]

Ok, time to throw my 2cts in the game again. Sentiment still poor due to 'gloom & doom' talk by people like Andy. Sure, if we all sell our assents now the world ecomony will collapse and so funds can buy in at dirt cheap prices. Same trick as last year on the way up.
I just came back from Europe, some areas are really expensive even compared to Singapore standards. I foresee some bloodshed there. Asia is still in good shape supported by high economic growth, low interest rates. If inflation slows down we should be good and this whole episode could have prevented Asia of overheating.
For Singapore there is huge demand in the low end sector. Common room rental >$600 (no aircon!) due to influx of china/asean/india labour. So HDB rental yields are fantastic. This creates demand for HDB + low end private condo and the AMK DBSS launch.
Personally I keep my rental properties and high yielding shares

[Not Looking Good]

about HK but here. Please provide a first the view on the correlation for the two..

"Thousands throng showflats at Park Central@AMK

SINGAPORE : Some 3,000 home hunters thronged showflats at Park Central@AMK on the first day of its launch on Wednesday.

The developer is still tabulating the applications.

But as of noon, 130 people have applied for the flats in central Singapore which will be ready in 2011.

Of these, 130 have already applied for the flats, which will be ready in 2011. "

Only 130 applied for the flats...It's not good news. These are HDB flats. Historically, nearly all HDB flats would be taken up, including the less attractive units. The question is who gets the first pick of the best units. The poor take up rate is a sign that there is still a glut in HDB housing supply. Either that or the HDB flats are not priced realistically...

[Beyond expectations]

about HK but here. Please provide a first the view on the correlation for the two..

"Thousands throng showflats at Park Central@AMK

SINGAPORE : Some 3,000 home hunters thronged showflats at Park Central@AMK on the first day of its launch on Wednesday.

The developer is still tabulating the applications.

But as of noon, 130 people have applied for the flats in central Singapore which will be ready in 2011.

Of these, 130 have already applied for the flats, which will be ready in 2011. "

Only 130 applied for the flats...It's not good news. These are HDB flats. Historically, nearly all HDB flats would be taken up, including the less attractive units. The question is who gets the first pick of the best units. The poor take up rate is a sign that there is still a glut in HDB housing supply. Either that or the HDB flats are not priced realistically...

These are privately built HDB flats priced at 500psf which is very close prices of older condos located 5 minutes drive away(Castle Green, Seasons Park, Sunrise Gardens, etc). So the 130 who booked the flats are idiots. Considering all this,130 booking these overpriced HDB flats on the very first day is BEYOND EXPECTATIONS.

[Troll Troll]

Troll Troll go to Mummy this is a place for adults. Go behind mama's pants.