Property, time to Sell?

[trevfly]

Anyone think that the flat prices will continue to appreciate in the next 2-3 yrs? Stocks are plummeting, but as a HK property investor, should I sell sell sell?

Are we in for a beating, like our stocks?

Or not...

Thankfully the company gave us a big housing increase last year, which will be the last for ever.

I would hate to be on the bottom of the CX seniority, without housing allowance, esp with all those local basings to replace NY and MAN base. Go think.

[Frogman1484]

If you have a small flat you will be ok. If you have taken a big bite at the apple...your too late to sell your price is going down! Prices have already been going down for a few months now.

Interest rates will be going up in the near future too so. If the fed did not cut rates the other day , you know that they are at the bottom.

[Fly747]

Hey Trev, you are too late, the time to sell was before the HSI plummeted down through 20000, its on its way to below 10000. HK property too is due for one of its 50% corrections.
This is the big one, maybe a depression. In order to save the airline we will see jets parked up and pilots furloughed within a few months. Remember you read it here first.
Good luck!

[AAIGUY]

Depends on the property. Some is still stable or even increasing. There is only so much available on the island. Just had a unit in my building sell for about 500,000 K more than one 4 months ago, but its a sought after location in the midlevels. All those massive MTR projects and places like Tung Chung will take a big hit.

Layoffs? No way.. still understaffed , and isn't CX gonna fire the FRA guys who don't play ball?

[404 Titan]

Most people who know my style of writing here would know that I have been very bearish on the world economy since about July last year and that hasn’t changed, including the HK property market. But to state we may be heading towards a depression is in my opinion way off the mark. Let me very briefly explain what happened to the US and world economy between 1929 and 1933 and why I believe we aren’t heading towards a depression.

Firstly during the Depression in the US unemployment reach about 25%. Average wages for those still working fell 42% and US economic output fell from US$103 to US$55 Billion per year. World trade plummeted 65%. GDP in the US from 1929 to 1933 was -8.6%, -6.4%, -13.0% & -1.3% respectively. And finally it is now widely accepted that the US Federal Reserve aggravated the depression by cutting the monetary supply by about 30% where as today they are increasing it.

So what do I think will happen? Well as far as I can see the US has been pretty close to if not already in a recession and it will probably be in it for at least four more quarters. The rest of the world isn’t immune to the woes of the US. Europe is heading for a recession and I can see Asia, Australia and New Zealand doing the same. What will govern who comes out of the recession first is who went into one earlier and where interest rates stand in each country. Based on this I can see the US and Asia will probably lead a recovery because of a low interest rate environment in these economies right now and Europe, Australia and New Zealand lagging substantially behind because there central banks have been tightening monetary policy with increasing interest rates up until very recent times.

[Guava Tree]

People who said that it was too late to sell are often very sorry a few months later when the price is very much lower again.

[Cpt. Underpants]

A "townhouse" at the "new" development in Tung Chung has gone from an eyewatering HK$11000/sq ft to slightly more than half that amount in three days. Go figure.

[claire40]

if you decide to sell you can put your property on here for free
htttp//www.852realestate.com
at least you might save the inflated property agents fees
cheers:ok:

[Frogman1484]

I think in the next few months we will find out who has borrowed too much and paid silly prices for silly investments.

As they say "only when the water moves out will we see who has no swimsuit on"

[hongkongfooey]

A "townhouse" at the "new" development in Tung Chung has gone from an eyewatering HK$11000/sq ft to slightly more than half that amount in three days.

So its now going for something around what its worth :}
IMHO, Tung Chung : Central/DB prices for the pleasure of being the first ones to suck in the lovely pearl river delta toxins, mixed with copious amounts of jet fuel ( ever wondered why your floors are black ) and the dulcet tones of a GE/Pratt/RR every 2 minutes, I mean, why would'nt ya :E
PS any TCers interested in some AIG shares :cool:

[fire wall]

hey froggie, it was Warren Buffett who said :

"It's is only when the tide goes out do we see who is swimming naked !"

He has a way with words.

As an aside, Allco Finance Group whose directors were David Turnball, Rod Eddington, Bob Mansfield etc were sitting at just over the $ 13 mark per share around early '07 before the Qantas takeover was blocked .... now at 13 c.

What do you reckon would have happened to QF if the take over did go ahead and they, as detailed, stripped the cash out of the company before this fall happened?

I reckon the KRuddster would have to put his hand in his pockets.
Goodbye future fund.

[fire wall]

Also, beware the dead cat bounce !

[boofta]

Worse, Eddington is also a non-exec director of JP Morgan Aust.
Somehow, a miracle occurred and finance was arranged thru JP Morgan
to keep Allco afloat and still trading, albeit at 13 cents.
Amazing how high finance works.

[Frogman1484]

Fire wall you right...sounds better when he says it!!!:D

[trevfly]

Yes, did that cat bounce yesterday:D

Will be worth 5% on my property in 2 months when this crisis is over.

[oicur12]

404 titan,

all good points but its worth noting that the yardstick for the measurement of unemployment has changed in the US (and Australia) for a very good reason. Our "leaders" are not stoopid.

Its similar to changing the way murder is defined as apposed to KIA in Iraq in order to pretend the surge is working.

We dont know how many people are unemployed in the US when making comparisons to the great depression.

[Fly747]

Trev, this is the mother of all dead cat bounces. I'd suggest you use the opportunity to get out fast!

[bored]

trev, this crisis is just warming up, read below

"Panic, Consolidate, Game Over" by Jim Willie, CB, FSU Editorial 09/18/2008 (http://www.financialsense.com/fsu/editorials/willie/2008/0918.html)

[volarecantare]

Jim Willie (article above) is unable to contain is puerile glee at the potential end of "the world" proving his old doomsday scenario whinge had some oracle-like knowledge. Don't ya just love these guys who keep giving doomsday scenarios in the hope that someday the world will prove their worthless asses right. Ironic thing is that the fear terror and scare tactics of the press and load speakers are a SIGNIFICANT and overlooked major influencing factor on what is happening.

Trev, if your house is a home, then the value of that should be considered. The important thing though is to find some balanced opinions before making decisions and reactions.

The only thing the world is learning at the moment is there are no real "securities" or sure things, our habit of thinking we are in control is a bit misplaced. However while we cannot control what happens we can control how we respond. There are a lot of factors to consider, how long you intend staying here, your future plans, your current situation etc...those things are personal to you and could influence better your decision than ranting and ravings of journalists who were "wetting on themselves enough to print a heading called "I told you so"... that article is more about HIM than the current economic situation. Good luck though whichever way you decide.

[Arcla]

Volarecantare :D:D
Finally someone with a bit of sense.

[volarecantare]

PS : don't forget to factor in the housing allowance..depending on your package and company the fact is this is money you are investing which you would otherwise be spilling down the toilet on rent. Do your sums you may find you can afford property to go down eg 20% more over x months or years and you stlll break even AND have a home rather than be paying off someone else's asset with your rental allowance.

Look at the quality of life of those who are advising you and their values. Often the ones who didn't invest wisely will shout "you are crazy to buy when you are buying mate" then when prices go up they will say "sell ow coz the bubble will burst" then if things take a downturn they will clap their hands and justify the fact the have "lost nothing". If you think this is a good way to live ones life....bend their ear, or find those who come over make the best of their packages stick their necks out and regardless of economic potential trends at least are not scouring the headlines for bad news everyday and have lived a life as well as been an expat.

I think Buffet said...be greedy when everyone is fearful and be fearful when everyone else is greedy. :ok:

[404 Titan]

volarecantare

The problem is that the people in Hong Kong aren’t yet fearful, unlike people elsewhere. If the world wide turmoil continues like it did overnight then Hong Kong will be affected.

[stillalbatross]

Centa-City Index (http://www.centadata.com/cci/cci_e.htm)

[arse]

My two cents worth; which was $1 about 90 years ago and be worthless in a few years time:

If you own a home, keep it ...... IF:

· You have factored in a significant increase in interest rates. If not re-evaluate how much debt you are carrying. IMHO around $5M in debt is a good balance of risk v reward, and very wise use of the CX housing allowance.

· You intend staying in Hong Kong for a while. If not, now might be a good time to get out. If you don’t need the equity in your home country ... keep the house and rent it!

· You are far enough up the seniority list to not be affected by a company downsize! If you are new to CX and you own, your risk side of the equation goes up. If you are new to CX; IMHO hold off any home purchase for a while.

What will happen to HK House prices? IMHO it depends on whether you are looking at the short, medium or long term?

· In the short term, prices will most likely come back a bit. Why? Well there is an element of fear out there as well as the fact people are probably carrying more debt than they should be which will slow things down a bit.

· In the medium to long term? Much harder to predict! If the USD continues to weaken (I disregard the recent USD strength) then HK property would start to look cheap to people buying using RMB or other foreign currencies. Of course, for expats this “price increase” would be nurtured by the loss in home country exchange rates. If the HK Govt decided to depeg , repeg or abandon the HKD, then prices could do anything! A rapid increase due to speculation or a rapid decline due to perceived over valuation! If I knew the answer to this I wouldn’t be flying buses for a living!

404:

· No depression? Not yet! Recession? Most definitely and for quite a while already! Surely you do not believe the Government Statistics? Check out http://www.shadowstats.com/ (http://www.shadowstats.com/) for a more realistic picture. It should be obvious that it is not in the interest of any government to paint a bad picture of their economy. The CPI and unemployment numbers are the easiest to manipulate. Other figures like M3 have been abandoned by the US government! What is M3? M3 is a stat that shows how much money is being printed! Surely, that isn’t important to know! Riiiiiiiiiight!!!!!

For those who think the problems are over, consider this:

· The sub-prime crisis was an estimated $5 Trillion problem and it has caused the current mess. Just wait for the derivative market to bomb! That is a $600 Trillion dollar market with potential loses of almost $60 Trillion dollars! What is happening now will seem like a holiday if/when that happens!

· The US Government’s $700 Billion dollar bail out is a perverse blank cheque to failed businesses and will result in significant inflation. NB: Inflation is the increase in the money supply not how much your burger costs! Deflation is a contraction in the money supply which is impossible in the current environment! The current bail out will not be the last, but each effort to protect the various failures will only make things worse!
Sincere best wishes to all!

[Frogman1484]

Just remember one thing , a lot of current cx pilots were not here during the 97 crash! I know of some guys that paid close to 5 mil for a flat in DB and even today they are only worth 3.5mil.

If you have a huge debt...I'm afraid you will be needing sleeping tablets to get some sleep. With interest rates at 2.35% and the USA about to dump nearly 1 Trillion dollars on the market (that is just what they printed last week for AIG) and another 700 Billion next week, inflation is going to be a big problem in the future and we all know where there is high inflation there will be higher rates!

Also it was only a few months ago that we 5% rates here...can you stomach 7% or 9%....:confused:

[volarecantare]

...and everyone panic dumping will of course help the situation like it did back then. How much would those DB guys have saved had they dumped their DB appts in 97 went onto the rental scheme? At least their 3m appts are most likely their asset now. 10 years of loss of housing scheme =??? do the sums. 10 years of rental =0 + what you could have lost out in investments plus the benefit of living in some rental place paying off someone else's asset.

Again make personal decisions calmly and taking all your own circumstances and plans into consideration.

Sounds like some people are so invested in misery and doomsday and a fearful of ever been proved wrong!

[Tassie Devil]

Sounds like some people here have been watching the big boys and are trying some market manipulation of there own. Pprune is a start but I think you may need to own your own paper to really drive the market. Good luck:ok:

[Frogman1484]

Volarecantare, they actually did not do as well as you think. If they just took the money they were paying for the extra tax, management fee and rates and invested it into the stock market for the next ten years or any other property market around the world, they would have made more money than 3 mil honkey today (as long as you sold out a few months ago).

If you purchased a 400,000 place in the UK, Aus or the Us back in 97, you would have more than doubled your money and with the exchange rates your probably would have tripled your money.

Just remember the Hong Kong market is driven by sentiment, and unlike other places it is timing that counts more than time in the market. The people that make the big dosh move in and out a few times in a rising markets and usually you will see their involvement at the beginning of the boom

Now I'm not saying that you must not use your housing allowance, all I want to say is that if you are looking at your house and a investment , then you need to make good investment decisions , which means buying and selling at the right time, and not just buying because you have a housing allowance.

The other down side of the guys buying in 97 is that they were forced to live in the same place until CX paid it off, as they had massive negative equity and very low rent , interest rates were as high as 9% possibly even 11% if I recall correctly).

[volarecantare]

Frogman points well made and I think a better tone than some of what is often used here. At least some real discussion can take place and help out some of the new guys with small families etc to make some informed personal decisions. My issue was with the scare mongering and hyperbole that is often trashed out here often in response to some genuine expressed concerns and vulnerable people. We have no control over the press and manipulations of the international press, look back at Y2k coverage, SARS, 911 etc. We are a group of professionals remember who are trained to deal with emergencies. If this is a global emergency then we should employ the same level headed tactics and ensure we are well informed and inform those with facts rather than panic and scare tactics.

Not sure if selling up and investing saved cash from management fees etc and investing in the stockmarkets is the solution just now though...then again, maybe this is exactly the time to buy...the fact is who knows? At my age the only thing I can say gives the best return on investment and is within our control is our health and relationships. Loose them and it doesn't matter what seat one is in or the value of their house or stocks....and fear and STRESS by the way does the biggest damage to both.

[Flying Bagel]

In the end, no one has a crystal ball. I still remember people berating others during the SARS crisis for buying property then, saying that our jobs were on the line, why are people even considering spending such astronomical sums in a potentially dead market?

No doubt that this financial crisis is going to hit our pockets in a big way. However, one must not lose sight of the big picture, especially if you're planning to stay in HK for the long term. I know one who bought a flat back in 97, stayed in negative asset until late last year. But he's doing just as well as everyone, because he kept on going instead of sulking about how much he lost on his original flat. I think he owns a few flats in HK now, among other places.

Frogman and Volarecantare has brought up a few good points for either side of the argument, but I don't think anyone has a specific answer to anything, just opinions. In the end, the most important thing is to take your time and assess your situation. It's good to be cautious, but then, the risk of having nothing at retirement by being cautious is almost as high as being risque.

[volarecantare]

:ok: well said

[Frogman1484]

Volarecantare what you say works in an ideal world, but as we all know we do not live in one and what you will find is that emotions rule the market. Greed and fear go hand in hand. When you have no fear , greed will eventually take over and you will accept almost any level of risk. When the bubble bursts, fear takes over and everyone tries to sell at the same time.
Buffet says " When there is fear in the market, Buy. When there is greed, Sell!

Thats why he sold Pertochina at $21 and bought Goldman when he did....timing!!!

[Frogman1484]

Why is this thread pining Hong Kong Real Estate:Property for sale and rentals Hong Kong and international (http://www.852realestate.com) with our comments? Check the Trackbacks when you reply.. :mad::mad:

[AAIGUY]

Look if you buy a place today, you can pay off with you housing in 10yrs.. then whats the big deal? In 10 yrs.. you will get most of the money the COMPANY put in.. back in your pocket.

If you need 20-30 to pay it off.. you're over buying.

Anyone can put up with HKG for ten years.. some may even like it.

Buy a house, have them pay for it, and then in 10 yrs decide if you want to play the market..until then, well you have to live somewhere don't you..

[volarecantare]

You are right Frogman, emotions fear and reactions do tend to rule the markets, I just don't agree that it should rule our lives, we always have a choice how we respond to situations and a response is always better than a reaction. Collective conscience of that is akin to peer pressure. Are you suggestion that choosing something other than peer pressure is purely idealistic. Where do you thing change begins?

[Frogman1484]

one person is not going to move the market. It is up to you to use the irrational fear in your advantage.

The thing of sitting on a property for 10-15 years is a good idea if you can buy something big enough to accommodate a growing family (try panning more than 6 months ahead with CX!!!). Generally now if you are buying something big enough it also means that you most probably not going to pay it off in that period.

I personally think that CX lets us move in and out of the rental/owner market...use it to your advantage. You have 15 years of owner income from CX but most of us have 20-25 year careers with CX.


Timing is everything!:ok:

[volarecantare]

I have always used the fear to my advantage by looking at how the fearful are reacting and responding differently. In doing so each time I have been laughed at or mocked by the fearful during their panic stages and then a while later being told I was "lucky". The scenery may change but principles stay the same. I just refuse to allow the lower common denominator of negativity and fear decide my life. At the end of the day no one knows how things will unfold but terror living is no way to live.

...and by the way change always starts with just one person. It could be you frogman.



:O"If you think you are too small to be effective, you have never been in bed with a mosquito." - Betty Reese

Oh and Frogman by the way....Buffet has just invested 5b into Goldman Sachs
Stocks fluctuate after Buffett-Goldman deal
By TIM PARADIS – 2 days ago
NEW YORK (AP) — Financial markets were tense Wednesday, with stocks fluctuating following investor Warren Buffett's decision to invest $5 billion in Goldman Sachs Group Inc.

[hits80]

Thats why he sold Pertochina at $21 and bought Goldman when he did....timing!!!

Patently not true. According to reports at the time, he sold some of it between $12-$13.

Buffet Sells More PetroChina Shares - Companies * US * News * Story - CNBC.com (http://www.cnbc.com/id/21203489)

[Intransitgent]

Frogman1484 said:

Buffet says " When there is fear in the market, Buy. When there is greed, Sell!

Thats why he sold Pertochina at $21 and bought Goldman when he did....timing!!!


While I agree with much of what you have said, it would be more helpful if commentaries such as yours contained factual information rather than pure hype.

The facts are that Buffet sold the Petro China stake over an 11 week period (12/07/07 to 27/09/07) at prices between HKD11.26 and HKD13.89, not even close to the HKD21.00 you state. The share price went to its all time high (HKD20.25)after the announcement that he had disposed of his entire holding. Market commentators at the time used the premise that there was now no Berkshire/Buffet overhang, for PetroChina's sudden price spike.

When asked a month or so later when the price was close to its all-time high of HKD20.25 as to why he had sold, Buffet stated "it was all about the price and nothing to do with PetroChina's business dealings in Sudan"

Buffet is a spectacularly successful investor, but he's still not a God (last I checked at least). Time has again proven him right with his PetroChina disposal, given the current price of HKD8.48 is something like 37% lower than his highest disposal price.

However, he clearly could not perceive the price going to HKD20.25, otherwise he would not have sold everything when he did. Even geniuses like Buffet can't accurately predict the highs and lows. That is simply impossible.

It's just another demonstration of the manic characteristics of Mr. Market and our susceptability to his manic depressive state, as we are seeing now.

My own opinion is that the market is beginning to look very attractive from a valuation perspective and I will be steadily adding to my holdings over time, but with a long investment horizon. That doesn't mean they won't fall more over time, they possibly will. However, I can't be sure of that.

Based on current sentiment, I also fully expect to see more downside with extreme volatility a feature for some time to come. However, it would not be the first time that sentiment has been radically changed overnight by some unexpected positive development. The truth is, none of us will ever know and we can only invest on the long term fundamentals presented to us at the point in time you make your investment.

As for property,well it's definitely got some falling to do. HSBC have reduced valuations on many of the properties in my area by 15% this past 3 weeks alone. This is backed up by the Centadata info. Prices are only just starting to fall.

In the financial crises we face today, ultimately ALL asset classes will fall and cash will be whittled away by inflation if left in the bank. I wouldn't be running out and buying property any time soon, unless you are prepared to see it fall at least another 15% to 20% in value. One only has to look at the way property followed the stock market down some 6 to 12 months later in all previous financial crises in Hong Kong, to see where it is headed now.

Even gold has not retraced its rise to over USD1,000 and that's been in unbeliavably volatile and panicked times.

It will all get better one day, it's just going to take some time. :ouch:

[bigPONDsmallfish]

Dump valve opened taxying back past the nullah at Kai Tak.....whats that smell???

"Son, thats the smell of money"


Just remember folks "Money can't buy time".....pass that glass sir!

[hongkongfooey]

If you purchased a 400,000 place in the UK, Aus or the Us back in 97I know KA won't pay for a place in another country and I'm fairly sure CX the same :confused:
Rent money is dead money ( in this situation ) and long term you would think paying 40-50K a month off the principal of any mortgage beats renting. Sure if/when rates go up this could reduce to 10-20K, but in the long run you should come out of it with something......underline: In the long run.

[And Then]

I have an 9 million dollar property almost paid off- bought for 6. Now I am soon to upgrade and keep the original.

House purchase is common sense and worth ruthlessly pursuing with all the cautions of buying property anywhere else.

Good luck. The guy I joined with still bags HPS. He rents. I own! :bored:

[anotherbusdriver]

To each his own.

The money one may make by purchasing a property in HK may not be worth the value of the sacrifice in lifestyle reduction over the period of time to some people.
Ie. buying a small apartment vs renting a large luxury home for a single guy is different to those people living here with a family.
Some people may prefer 10 years living on The Peak in a colonial 3,000' lowrise or townhouse, enjoying lifestyle and space regardless of their loss in "property profits". Instead of 1,000' in Mid Levels or DB.

Either way, if you're happy with your choice then it doesn't matter what goes on in the other camp really, does it? And each is correct in his choice.

However, if you do choose to buy , I say: buy when everyone is selling and sell when everyone is buying! It really is that simple!! ;)

[Cafe City]

I have an 9 million dollar property

Ummm. Says who?



Edited: As of 2 am today (HK), you may be lucky for it to be worth what you paid for it.

[Humber10]

Interesting to see the large amount of property up for sale on the board at cx. Good luck

[Apple Tree Yard]

...friend just callled. His property sale was due to go to contract today. Buyer called at 5pm and said he was pulling out unless friend dropped his price by 1mill (originally agreed at 8.5m). Needless to say, in despair... (he suspects that if he agrees..the buyer will ask for a still lower price...etc). Sell now...if you can.

[Frogman1484]

he should say f off and take the deposit. Unless he has to go on a base and has to sell...etc etc. After all as the thread has stated CX is paying it off while he lives in it!

[christep]

Yes - take the deposit (850K I guess) and then put it back on the market at 8M. Still 350K up.

[willnotcomply]

Take the deposit, keep the flat. 850k is a nice cash reserve, especially coupled with the housing allowance. Stay calm, be rational and don't follow the crowd for the exit.

[1200firm]

I am guessing the deal never got as far as him getting the deposit.Anyway don't sell if you don't have to.
In fact this might be a good opportunity to sell your (small) place & buy a bigger one.

[And Then]

Edited: As of 2 am today (HK), you may be lucky for it to be worth what you paid for it.

Well I hope so. I want to upgrade. Your statement could become reality. WHo knows? But as it stands now, in a retreating market, in reference to my repatriating currency, the property is being buffered by a 20% strengthening in the HKD in the last few months.

In my position with HPS I feel I lose with a falling property market and weakening USD. Otherwise riding a winner.

[Frogman1484]

he must have got some deposit. You only have to pay 10% when you sign the final agreement. None the less a contract is a contract.

:ok:

[watsup]

Time to sell was yesterday.......

[christep]

he must have got some deposit. You only have to pay 10% when you sign the final agreement.Or when backing out of the Preliminary Agreement, which is what seems to be happening in this case. (Or at least that's how the paperwork has been when I have bought here.)

[hongkongfooey]

Min deposit to owner is generally 3% ( can be agreed to differently, more or less ) on signing of initial S&P, balance to be paid in 2 weeks ( from memory ). At any stage after signing of the initial S&P if either party backs down from the deal they have to pay back the deposit plus 100% penalty, also as a rule the Agent will want his/her full fee ( 1% ) on top.
Pulling out of a 8.5M deal in the first two weeks should cost the buyer 3% of 8.5M = 255,000 plus 100% plus agents fees, after that initial period it becomes a hell of a lot more costly.
Owners can elect to except the full deposit ( 5 or 10% ) straight up which makes it far more costly to default in the early stages.

[Bograt]

Reference your post #35 in this thread (previous page).... 852realestate.com is owned and run by a CX Captain and his wife.

[Frogman1484]

Thanks Bograt...it still does not justify pinging him every time we post something.:mad:

[Bograt]

Yep, I agree with you:*

[Loopdeloop]

Mind you, if you want to buy at least you can now. Whilst the market's going up you can often offer at the asking price only for the seller to say "thanks but it's another 1/2 mil now". You then think about it for a few days and go with the extra 1/2 mil but the seller now says "well, if you'll pay that much then someone will pay an extra mil" etc...You can end up wasting a lot of time and increasing the old BP significantly and still have no flat to show for it!

ATY, we're all dying to know - did he go for the 1 mil reduction or keep the deposit? Personally I'd just say "bog off" and rent as I hear rents are quite good at the mo.

[Apple Tree Yard]

he just had it independately valued. came in 1.5m less than it did a month ago. buyer is no longer interested at even his Monday offer of 1m less than originally agreed. starting to remind me of 1997 again....

[watsup]

Apple... I agree with you, re 1997. Time to sell today,if you can find a sucker.....

[Cafe City]

SCMP 5 Oct 2008

Worst still to come for HK amid crisis'Financial tsunami' bigger than '97, banker saysMaria Chan, Cheung Chi-fai and Agencies in Washington and Paris
Oct 05, 2008 http://www.scmp.com/images/icon_rss.gif (http://www.scmp.com/portal/site/SCMP/template.JSP_INCLUDE_PAGE/page.scmp_jsp_include_page/?jsp=scmp_rss_feeds&s=idx_Services&ss=RSS)http://www.scmp.com/images/icon_s_email.gif (http://javascript<b></b>:void(0);)| http://www.scmp.com/images/icon_s_print.gif (http://javascript<b></b>:void(0);)


Despite the passage of the US government's US$700 billion bank bailout, Hong Kong must brace for belt-tightening amid the global "financial tsunami", the city's labour chief and a top banker said yesterday.
HSBC (SEHK: 0005 (http://www.scmp.com/portal/site/SCMP/template.PAGE/page.company_profile/?companyId=0005.HK&s=business&ss=scmpIR), announcements (http://www.scmp.com/portal/site/SCMP/template.PAGE/page.company_profile/?companyId=0005.HK&s=business&ss=scmpIR#investor_relation), news (http://www.scmp.com/portal/site/SCMP/template.PAGE/page.company_profile/?companyId=0005.HK&s=business&ss=scmpIR#news)) Asia-Pacific executive director Peter Wong Tung-shun warned the impact of the crisis would be "far more severe" than that of the 1997-98 East Asian financial crisis.
"This will affect Hong Kong and the whole world," he said. The effects would be felt for another 12 months and recovery would take "much longer" than a decade ago.
So far investors - including buyers of minibonds backed by bankrupt US bank Lehman Brothers, who scuffled with bank security staff yesterday - have been the biggest losers locally from the crisis. But both men warned its impact would grow.
Mr Wong expected Hong Kong businesses would have to control costs, but said mass layoffs were unlikely. Matthew Cheung Kin-chung, the secretary for labour and welfare, forecast jobs would go, however.
He said: "The financial tsunami will have a far-reaching impact. Enterprises may need to make manpower changes and there is a chance unemployment will rise, particularly in the finance and property sectors. Consumption will likely be hit too." .................................................
.................... Associated Press, Reuters, Agence France-Presse



"unemployment will rise, particularly in the finance and property sectors".

My heart bleeds. :*

[stillalbatross]

I'm painfully waiting to buy in again and everytime I call about an offer the owner has dropped it another half a million to below what I wanted to offer him for it. What I wanted to know is if anyone has had to stump up for a bigger deposit ie have mortgages stayed at 95% as the money market tightens?

[Apple Tree Yard]

Hang Seng down 3% this morning. Better wake up to the fact that this party is about to be well and truly over. I think 97 will seem like a tea party when this shake out is done. The cascade of selling and collapsing prices is only weeks away. Those of you who doubt that......well, the same assurances were uttered in 97....for a few weeks anyway. Get out now if you want to see any profit left. :eek::eek::eek::ugh:

[Frogman1484]

You cannot get out!!!! There are no buyers. It is too late!

[Guava Tree]

Don't say there are no buyers. You just have to reduce your price to what is reasonable now.
:yuk:

[volarecantare]

Frogman, Apple, what a pack of Drama Queens you are....peeing on yourself with the prospect of frightening people.

Its not what you guys say, as an opinion is an opinion and in these uncertain times all are valid but its that gleeful tone of doom when people need support instead of fear .

Again to those wondering what to do, my advice would be ONLY seek advice from people you would consider to have a lifestyle you admire, not those "balanced types" with chips on both shoulders who have never invested or taken a risk with anything so love to see markets crash on those who they envy. Hold steady and respond thoughtfully and don't despair.

Also remember PPRUNE is where the worst Jungian "shadow" of the pilot body lurk. Full of Anon windbags who spew their venom. Unfortunately its also where the younger or vulnerable people come looking for advice and their vulnerability and often sincere questions are treated as a feeding frenzy for the underbelly of the industry.

[Apple Tree Yard]

sure Volare...(real corinthian leather!). Perhaps you would like to turn on your television. If you have a modicum of economics training, you will see that the world is at the precipice of the most major economic meltdown in history. I will remind you that 97 was mainly caused by the collapse of one currency (Thai Bhat). This situation is far in excess of the 97 problem. Think what you like. Big trouble is coming. Having said that...I hope i'm wrong. :{

[trevfly]

Ive been checking some valuations on HSBC. Although valuations are ~7% less than 6 months ago, this seems quite optimistic by HKs largest lender. Do they want to create more toxic debt by overvalueing Mid Levels units?

Will owners now be offering flats at "20%" below valuation", as was the case 5 years ago?

HK property is still secure (!),and has so far lost much less than my HK stocks and MPF (down 60K this year)

Most guys have doubled their investment in the last 3 years. A fall of 20% shouldnt worry most, we will just buy more :D

[Cafe City]

Sorry VC.
When it suits you, you like to talk the market up. At the moment it suits me to talk it down.
Here's another good bit of news for you.

SCMP 6/10/08

"Cathay Pacific (SEHK: 0293 (http://www.scmp.com/portal/site/SCMP/template.PAGE/page.company_profile/?companyId=0293.HK&s=business&ss=scmpIR)) slid 7.2 per cent to its lowest in more than 5 years as analysts forecast waning demand for air travel from its premium customers."

[Frogman1484]

I agree with Apple. We are witnessing a once in a life time economic melt down. :{
If you have a mortgage which is based on the LIBOR, you are about to get a 70% increase in your interest rate. The HKD LIBOR rate has gone from 3.5% to 5.5% and climbing. That will put huge pressure on repayments and cash flow for other things that you might spend your money on.

Volare call me a drama queen if you like , I can tell you that 1997 was small with regards to this one...I really hope that I'm just a drama queen, but for the first time I scared, as everything up to now I could reason and work around , this time not even economic common sense is helping.

The only reason that the property has not gone down as much is because the market has gone down so quickly that the housing sector is laging way behind.

[volarecantare]

Frogman, I don't think you get my point. I understand completely the fear that is around the domino effect of this will touch everyone. I am not in denial regarding the current massive global economic adjustment, but rather the massive panic and fear that goes along with these uncertain times which actually only serves to contribute to the losses and does not help anyon. Also I am sick of those who sit by awaiting crises to justify their own lack of "investment" in life. It was the same during Sars Tsunami Y2K and on and on. I also hate to see the younger lads and lasses ask genuine questions both here and in the cockpit only to be scared out of their bejeezus by whingers not only on this issue but on many issues. That approach is unhelpful. Are we trained in emergencies to shout..."were goin down were goin down?" A little of the qualities our profession should exhibit in our jobs in should be evident outside of the cockpit as well as inside. It would be nice to see some of that.

The fact is for the past 10 years or so we have fooled ourselves into thinking we have control over our lives and security. Fact is THE ONLY THING WE HAVE CONTROL OVER IS OUR REACTIONS/RESPONCE.

Appletree I have never driven a Chrysler in my life and misquoting Montalbán does not make your attitude smell sweeter! ;)

[Loopdeloop]

Most HIBOR mortgages have a prime minus cap so you shouldn't be caught out too badly.
Also, governments around the world are trying hard to alleviate the effects of the credit crisis which means they'll probably be less concerned about inflation than they are about the general state of the economy, so we'll probably see plunging interest rates over the next few months.

I agree that we're in or heading towards a significant downturn but I can also remember people like NR saying in an update 3 months after SARS that at one stage he thought the company might go under and during the Asian Financial Crisis people saying that it would bring the rest of the world with it, so I think it's a bit far fetched to suggest that the end of the world is nigh!
If you're looking at a 1-2 year timeline this might not be the best time to buy, but I think that sometime over the next 10 years you'll see the price paid today reappear, be it 2011, 2013 or 2018.

[Frogman1484]

Yes you are right , the HIBOR is steady. The LIBOR which the HKG banks that are financing your home in OZ is worked on, has shot up.

The dropping interest rates are true but you will see that the banks will not be passing the cut on to us as they are hording cash. Australia is one example. HSBC has also currently increased the interest by 50% on all new mortgages.

The one positive of holding on to a HKD property is that the rising USD is basically pushing the value in AUD, EUR and GBP upwards.

As it now stands you can drop the valuation of your house by 26% and you will still pull out the same AUD value that you had in AUG 08...then again the USD long term view is in the garbage!!!

[volarecantare]

Cafe, you have a right to do as you wish but if you reread what I said I am not talking the market up or down, rather my issue is with the gloat and scaremonger attitude of some of our colleagues to genuine concerns raised.

However there are as you can see below some more thoughtful and sincere discussion possible which is much more helpful, thats all.

[canuck revenger]

Hang Seng down over 600 points this morning, not to mention carnage in all the other major markets. Bank failures, record deficits, recession. What part of the previous formula makes anyone of you think that property prices will stay at present levels...? :ugh: :{

[trevfly]

HSI down 1400 now!

The primary reason the prices will remain firm is that there is nothing else for the chinese to do with their money.
Gweilos are just along for the ride. Period.

[canuck revenger]

you obviously weren't here during 97....;)

[Kitsune]

Remember 1929 &ndash; what seemed to be the end was only the beginning - Telegraph (http://www.telegraph.co.uk/finance/comment/jeffrandall/3154882/Remember-1929---what-seemed-to-be-the-end-was-only-the-beginning.html)

Anyone know any financial genius that has been buying his company's shares back recently......?

[stillalbatross]

HSBC's taken 15% off most property valuations, the 30% drop in prices doesn't seem so far fetched. How much lower can the Hang Seng go?

[Apple Tree Yard]

...a LOT lower. Believe me, this is the most profound economic dislocation you will ever experience in your lifetimes. Nothing to date will compare to what's to come. If you have EQUITY in your home, sell NOW. A year from now you will be sitting on 40 - 60% percent losses. Come back in a year and see who is right (..and I will be the first to say I hope i'm wrong...!!).

[And Then]

The property market is of course vulnerable.

But in recent times, unlike 97, it has not been the domain of speculators. There was more return on the stock markets for gambling.

The figures for outright home ownership in Hong Kong are staggering if you are from the West. The fact that most of the remainder have less than 6 years to run on their mortgage equally staggering.

Mortgage stress seems to be a Western phenomenon brought on my high consumption and borrowings.

A modest to moderate correction is my prediction. I have a feeling Hong Kong property may be as safe as houses......

My HSBC valuation hasn't changed???? Confirmed by phone. Not that this means much.

[Frogman1484]

No Speculators in the property market?

Ok how does a property go from 11mil to 14 in two months?

Now it is going from 14 mil to 11 mil in one week!

The top end of the market is only about speculators!

[Apple Tree Yard]

9 mill to 7.3 in 5 weeks...:{

[And Then]

I think you are confusing speculation with how the Chinese do business.

Where do you guys have property? I can't get these negative valuations. I don't doubt them. Just wondering.

[And Then]

9 mill to 7.3 in 5 weeks...

Yep. You are stuffed mate.

Would you take 5 million? :)

[Guava Tree]

Maybe too late now that for that price.
If your place is nice I might be able to offer 2.2m, but that would be a stretch since I've lost a helluvalot in this market crash. Think bell curve.

[stillalbatross]

difference in HKG is that instead of going from prop to shares and back as each performs better or worse here in asia investors tend to gear up property and use the cash to invest in Shares. Or gear up on shares to invest in property so if the share market or property stumbles they are forced to sell to keep their head above the water, hence the volitility in this market in comparison to a western country. I can't think of anywhere else that has commercial prop investors refusing tenants and leaving buildings empty because the volatility is such they would rather be in a position to cut and run than have tenants returning income. Crazy

[Cafe City]

From The Economic Times yesterday:

JPMorgan said it forecasts a 25 per cent decline in Hong Kong property prices by the end of 2009 due to the economic slowdown and potential hikes in mortgage rates.

[boofta]

These godlike predictions by companies that are probably
bankrupt themselves.Perhaps an ex Lehman Bros analyst could
reply with his predictions on hong kong property. Its all a crock!

[Humber10]

My 2 cents worth....

It is interesting to note that the owner occupier allowance increased for the month of OCT. So the HK housing index has not been affected yet... Also interesting to note that only the variable rate increased and not the fixed, I thought the variable was a percentage of the fixed amount?

So when will the housing index decrease?

Personally my apartments valuation has dropped 5-8% over the last two weeks. As for selling, sure it will be nice to walk away with a heap of cash. I'm still trying to sell for the right price, but I guess for myself that will have to wait another 5-10 years. If one is able to sell for the right amount then take the cash and reinvest when the market is more stable, one will be able to buy into a larger apartment and have a fist full of cash! Cant sell for what you want, personally I'd hold onto it.

If you dont think the market is going down, you are in denial. Read the newspaper, have a look at some real estate web sites, it's easy to see that the market has slowed down, and prices have already begun to slide.

At the end of the day we all need a place to live, but I would suggest to those looking to buy now to put buying on hold until the market is more stable next year. Just my opinion, but make sure you make yourself as well informed as you can before buying, on everything.

Good luck

[Busbert]

The allowance is based on rents (D&E Class rental index) not property values.

The latest report on the rvd website indicates that the rental index has come off about 3 points, or about 2%, so expect the allowance to come down about HKD1500 next month.

[anotherbusdriver]

My advice is to take what you can now. This is only the beginning, as much as I would love for it to be otherwise!
The world of finance has no real (physical) value to support the paper credits the banking system has been issuing to create credit to offer to the population in return for promises to repay them at credit rate + interest or in default 90% of the value of their home - a value only provided by them in colusion with other bankers based on their own paper valuation based on their own flawed credit system.
This whole system is corrupt and based on the banks only holding a maximum 10% of the assets that they promise to pay in lieu of the credit they promise you. IE. YOU PAY INTEREST ON ON MONEY THEY LEND YOU THAT IN FACT THEY DO NOT HOLD!!!!... You do the math. SERIOUSLY. THEY DO NOT HAVE TO HOLD ASSETS WORTH ANY MORE THAN 10% OF THE BOOK VALUE OF CREDIT THAT THET EXTEND!!!!!!!!!!!!!!!!!!!!!
The only winners are the bankers at the top of the legal pyramid scheme who have been skimming massive bonuses fron you and me Based on nothing but paper profits on only (if only!!) 10% of the assets that they actually hold.
Legal criminals, and backed by the government who are bailing out the calls on those funds that they do not hold. Why?? Because the governmnt are one and the same. Criminals who have way too much to lose!
GET OUT NOW!!!!

[stillalbatross]

Most rentals are on a two year cycle so it will be a while before the rental market drops. In fact it will be in a strange situation where the house prices drop but rental initially (and the housing allowance) stay high for 6-12 months. Then I think the rental allowance will then come back strongly to the low 50's..................

[Kitsune]

Debris from the City and Wall Street will destroy innocent lives - Telegraph (http://www.telegraph.co.uk/finance/comment/jeffrandall/3168301/Debris-from-the-City-and-Wall-Street-will-destroy-innocent-lives.html)