The end of the Hong Kong property bubble

[Threethirty]

Good article here which demonstrates the only reason for ridiculously high prices in this city is due to the Federal Reserve printing money to bail out banksters. The Hong Kong peg to the US dollar is also a reason.

Will Fed "Taper" Talk Crush Chinese Property Prices? | Zero Hedge (http://www.zerohedge.com/news/2013-05-15/will-fed-taper-talk-crush-chinese-property-prices)

[Threethirty]

Great comment from a guy on Zerohedge regarding HK, not that any of you are remotely interested, too busy getting a hard on for the 350 that's still 2 years away!

"Back in the days when I practiced the dark arts for a living, I did a stint in HK. I could understand the most arcane workings of just about any market, but never could I understand Hong Kong real estate. I lived for a time in an apartment that afforded me a clear view---as clear as Hong Kong allows, which is to say about as far as a gwai lo's nose stretches out---of upwards of 20,000 apartments that rented for a minimum of US$8000 per month. My own went for $20000, but that didn't come from my pocket. I knew there were not that many wildly profitable businesses there, nor were there many people fortunate enough to earn at a clip where $8-40K per month for shelter wouldn't fall somewhere between excruciatingly painful and outright fatal. Yet somehow the apartments got filled, and their inhabitants helped produce that galaxy of stars one could see each night if he took the 26 cent HK Ferry ride to the other side and looked south.

The best explanation I got---at least it began to make sense---was that most were two income households who supplemented their take with "winnings" from the stock market, all of which still required them to pay 75% of monthly gross on shelter. Hong Kong's 15% tax rate helped gross kind of approximate net, as least relative to a country like Sweden.

Most residents, if not already owners, were shut out of the game. Of six or seven million citizens, maybe a hundred thousand or two lived well, which is also relative, since nobody really lives well in Hong Kong. They just act like they do. The government, which owned a good deal of land, would occasionally drip another postage stamp-sized piece out on to the market, or grant approval for one tycoon to landfill in front of another tycoon's already sold-out soon-to-be-former "waterfront" project, allowing Li Ka Shing, Lee Shau Kee, or the Kwok brothers to make another billion...risk free. It truly was risk free, as proven in 1997, when Li Ka Shing got a refund from the government for a property he had won at auction, arguing that the Asian Financial Crisis was unforeseeable and had cut into his expected profit. That's Asian TBTF.

And what do these respected tycoons do with the land? Built absolute junk. Pure trash. Embarrassingly bad, or at least it would be embarrassing if there was even an iota of pride in product, and not profit, produced. Tycoons get approved for twenty floors, go about building thirty, and each floor has a gaggle of two or three bedroom, 400 square foot "luxury" residences, "for those select few who have finally made it". Name it "Beverly Hills Shores" or "Golden Double Happiness Savoy", construct a gauche Coat-of-Arms as its logo, and prospective buyers, viewing a roped-off but completed model residence, will not notice that the furniture has been scaled down to midget size to make the place look more spacious. Also lost in the pie-in-the-polluted-sky dreams of the wannabe landed gentry was the fact that local practice allows space to be measured in the circumference, meaning walls and closets are included in that 400 square feet, in addition to the owners theoretical share of building common space such as the building lobby and fire exits. Oh yes, it also includes the 20 square foot Filipina Maid's room.

In the end I suppose it was the trickle, or flood if needed, of immigrants from the other of the Two Systems, One Country that kept a bid under things, and I have no doubt the aforementioned tycoons had some say as to how wide the door should be opened.

It seems that now, even in the land of 1.3 billion dreams, the door cannot be opened wide enough. At least for now the limit has been reached. Folks will have to lie back on the bed in their 48 square foot Master Bedroom with en suite combo shower-sink, and just enjoy the cacophony of ten thousand hydraulic jacks, wielded by a recent illegal from Fujian, obliterating a former dream and hoping to construct another."

[China Flyer]

Ok, I admit that I was on the 350 thread: very nice indeed.

ZH is definitely a strong favourite of mine, especially as it gets harder and harder to get anything resembling actual, unbiased news from the main stream media.

[Shutterbug]

Good one 330, missed that one.

I noted this from the article. An extreme divergence in transaction volume and price action:

Will Fed "Taper" Talk Crush Chinese Property Prices? | Zero Hedge (http://www.zerohedge.com/news/2013-05-15/will-fed-taper-talk-crush-chinese-property-prices)

Ask any of the guys who bought into the bubble in '97 what it's like to ride out a 15-year price slump in your little cemented nest egg.

Caveat emptor.

[spleener]

The fundamentals and history point to a HK property market downturn. :bored:
However: The actions by the present HK government to cool the market are rather different than the free wheeling market approach adopted in the run up to '97. This provides scope for some 'unwinding' of restrictions to limit the downside and provide assurance for a softer landing. Probably not gonna be 1500 and smooth though!

[Vidab]

Probably not gonna be 1500 and smooth though!


Not even close.


Mr Block, founder of Muddy Waters Research, which has gained a reputation over the past three years for its in-depth reports on financial irregularities in scores of Chinese companies, said the country’s banks hold more toxic assets than their peers in the West did ahead of the 2008 financial crash.

“We believe that the domestic Chinese banking system is a mess, with an enormous amount of bad loans, or loans waiting to go bad,” he told the Sunday Telegraph.

“The problems of China’s lenders are greater than those of the Western banks on the eve of the finanial crisis, but because they are state-owned, the government will most likely print money and prop them up. This will of course have dire consequences for China’s economy though."

He added: “Our view is that China is a massive asset bubble. This puts resource-based emerging market economies and Australia, Canada and New Zealand at direct risk. A China unwind will have significant knock-on effects in other developed markets too, likely implicating liquidity and asset prices. The severity of the effects in the rest of the developed world of course partly depend on the timing of the unwind.”



Meet the man who is betting against China - Telegraph (http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/10066042/Meet-the-man-who-is-betting-against-China.html)