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Thread: Experts warn bubble brewing in HK property market

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    Default Experts warn bubble brewing in HK property market

    Experts warn bubble brewing in HK property market

    17 September 2009 1909 hrs (SST) 1109 hrs (GMT)

    HONG KONG : Hong Kong's residential property prices have rebounded this year by up to 30 per cent, despite continued economic uncertainty.

    Consultants said the property market is disconnected from the wider economic reality, while economists warned that a property bubble has formed.

    Developers attribute the rise to record-low mortgage costs, near-zero interest rates and tightened supply.

    Consultants predict property transactions will be around 20 per cent higher in 2009, compared to the previous year.

    But they believe there is a disconnection between what's happening in the property sector and the real economy.

    Some expect prices to plateau towards the end of 2009, and continue into 2010.

    "At best, a plateau for 2010, perhaps even a dip. Nothing dramatic, but just an adjustment or correction as reality prevails, if you like... as people realise that the potential could be more job losses, and people feel vulnerable in terms of their employment. These sort of things could affect sentiment in the market," said Nicholas Brooke, chairman of Professional Property Services Ltd.

    Just this week, a local property agency announced it closed a sky-high deal on an apartment in a luxury development.

    A Hong Kong businessman paid US$3.2 million for a 816-square foot apartment in the Masterpiece development in Kowloon district.

    That is about US$3,850 per square foot - a record price for a one-bedroom apartment in Hong Kong.

    Realtors said that's enough to buy a second-hand luxury flat with three bedrooms in the city's prime mid-levels area.

    Economists warned that much of the prime property market has been buoyed by hot money from mainland buyers and investors, rather than end-users.

    "There's already a bubble, no doubt about it. But whether or not the bubble will burst away soon, or whether the bubble still goes on for a while, that's the issue," said Raymond So, Finance Department, Chinese University.

    The bubble is expected to burst once the hot money leaves the market, but when exactly that will happen is hard to predict. - CNA /ls

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    Flooding the economy with cheap money is just not that right after all. It is akin to turning up the tap to fill a leaking sink.

    Fix the sink. Fix the companies which are leaking or perhaps just let them die?

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    Quote Originally Posted by Channel NewsAsia


    Property prices in Taipei skyrocketing
    Christina Lo
    Taiwan Correspondent
    Channel NewsAsia
    Taipei, Taiwan
    Friday, 18 September 2009, 0028 hrs


    Taiwan property

    "To Let" or "For Sale" signboards were everywhere in Taipei when the global financial crisis hit in the fourth quarter last year.

    The real estate industry was among the most badly affected. Weak demand for residential property and office space also caused a sharp fall in prices.

    But a year later, property prices in Taipei have skyrocketed, while home sales in the West are still experiencing a slump.

    Professor Chang Chin-eh, Land Administration Department, National Chengchi University, said: "The financial crisis should have lowered housing prices. It actually did for a while, but large sums of capital kept coming in as everyone expected greater cross-strait relations."

    Low interest rates have also boosted demand and attracted speculators to the property market.

    "Houses have become popular investment tools. News reports encourage people to put money into housing market since the interest rate is low. So, the prices go up," said Prof Chang.

    Residing in Metropolitan Taipei is not easy. A housing magazine's survey has showed that Taipei citizens will have to work over 23 years, without spending on eating or drinking, if they want to save up for a three-bedroom apartment.

    A 100-square metre home costs about US$630,000 in the Taiwanese capital a huge sum, considering that the average income of people in their early 30s is just over US$2,000 a month.

    One said: "It's a huge gap. It's difficult to buy a house for a family that only makes US$1,600 per month."

    "The rich will get richer. They have more chances to invest, but the middle-class might suffer from limited income," another added.

    Prof Chang said: "You will become a mortgage slave if you buy an overpriced house. It's a heavy burden if you buy it. In Taiwan, there are too many over-consumption and over-investment. It's not healthy."

    Property prices are expected to go up by another 20 to 30% in the next two to three years.

    Analysts said if nothing is done about it, continued strong demand could lead to over-inflated prices, developing into a housing bubble.
    Singapore should not overreact.
    Singapore is not the only one facing the problem.
    There is Hong Kong.

    Hong Kong should also not overreact.
    There is Taiwan too.

    ..........

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    http://www.straitstimes.com/Breaking...ry_431538.html

    Sep 18, 2009

    For sale at US$38m


    HONG KONG - TWO penthouses in Hong Kong were each put on sale for a record US$38.5 million (S$54.5 million), a developer said Friday, as demand from wealthy Chinese buyers has sent prices in the city soaring.

    Sun Hung Kai, the world's largest developer by market value, said it raised the asking price by 20 per cent for the 4,000 square feet penthouses on top of the Cullinan twin towers, Hong Kong's tallest residential development.

    The properties will be the city's most expensive apartments if they are sold at the 300 million Hong Kong dollar asking price, which translates into US$75,000 per square foot.

    'We decided to increase the asking price after seeing the market is going up so much,' a spokesman for the developer told AFP, adding that buyers from Hong Kong, China and overseas had shown interest in the units in recent months.

    The penthouses, on the 91st to 93rd floor of the 270-metre (886-feet) towers, have their own outdoor garden and swimming pool.

    Until now, Hong Kong's most expensive flat per square foot is a 5,497 square feet unit on the 80th floor of The Arch in Kowloon, another development by Sun Hung Kai. It was sold for US$225 million, or US$40,931 per square foot, in June last year.

    Prices in the city's luxury market have been largely driven up by super-rich mainlanders who tend to target new, top-end properties, as the Chinese economy has picked up in recent months.

    Buyers from the mainland buy in Hong Kong as an investment as well as a means to obtain residency in the city, which requires an investment of at least US$6.5 million.

    Earlier this week, a buyer paid a US$24.5 million, or US$30,025 per square foot, for an apartment in the Masterpiece luxury development in Tsim Sha Tsui district, making it the most expensive one-bedroom flat in town. -- AFP

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    Hmmm... perhaps it is really pent up demand from those who missed the boat. My friends in the US are also talking about picking up some property in the US these past few weeks. Perhaps there will be a same pick up there.

    Retrospectively, it feels like Asia in March 2009 at the US currently. Anyone who talks about property just whispers. Not much talk in the papers yet. By the time the papers start publicising the sky rocketing property market, it will usually be too late to catch the boat.

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    Uh.. pentup demand is one thing..
    but whether they can afford what they are signing up for is another.

    I failed to comprehend how those typical household income of around $8k to $15k can buy a >$1mil home and willing to service the loan for 20-30yrs...

    Haven't they considered that the employment trends have changed and there is no longer lifelong employment.. at best, 40-45yrs old, you will be a liability to the company and they will try all means to right-sized the corporation.

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    Quote Originally Posted by focus
    Uh.. pentup demand is one thing..
    but whether they can afford what they are signing up for is another.

    I failed to comprehend how those typical household income of around $8k to $15k can buy a >$1mil home and willing to service the loan for 20-30yrs...

    Haven't they considered that the employment trends have changed and there is no longer lifelong employment.. at best, 40-45yrs old, you will be a liability to the company and they will try all means to right-sized the corporation.
    Assuming they can save $10K per month, it takes about 7 years to pay off the loan of 800K

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    $15k pm income cannot afford $1m home? $1m/($15k x 12) = 5.56. That means it takes 5.56 years to earn enough to fully afford the $1m home! Assuming the family uses 50% income to pay for the property, it only takes 11 years to fully pay off an asset that appreciates with time (given the fact that paper money is fast losing its value. Even less valuable asset like gold also already hit record high prices and yet cannot yield rental income like properties).

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    ok.. you might be right.. $15k might be able to afford 1mil property..
    Let the bull run begin!

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    http://www.businesstimes.com.sg/sub/...27140,00.html?

    Published October 1, 2009

    HK's luxury homes in short supply: Swire Pacific


    (HONG KONG) Swire Pacific Ltd, which is building architect Frank Gehry's first Asian residential project, said luxury homes in Hong Kong are in short supply as mainland Chinese buyers swooped for apartments.

    'There is relatively short supply at the high end,' Martin Cubbon, an executive director of the company and chief executive officer of unlisted unit Swire Properties Ltd, said. There is 'enormous liquidity and buying' from Chinese residents, he told reporters here.

    Luxury home prices in Hong Kong have climbed as much as 28 per cent in the first nine months of the year, as low mortgage costs and interest rates on savings deposits fuelled buying, Colliers International Ltd said. The project designed by Pritzker Prize-winning Mr Gehry may be rented at record rates, Swire's Mr Cubbon said.

    The 'dynamics are all very positive' for Hong Kong's residential market, he said. Swire rose 0.7 per cent to close at HK$89.05 in Hong Kong trading. The stock has surged 67 per cent this year, beating the benchmark Hang Seng Index's 46 per cent advance.

    Average luxury home prices may rise by between 5 and 10 per cent in the next 6 to 12 months, Ricky Poon, executive director of residential sales at Colliers, said.

    The Gehry-designed project will have one apartment with an area of about 6,000 square feet (557 square metres) on each floor, Swire said. The 12-storey apartment block will be built on Stubbs Road in the Mid-Levels district by 2011, the company added.

    Swire isn't selling the apartments because the company considers the site a 'family heirloom', Mr Cubbon said. Swire bought the site in the 1940s and built the first home of its group's director there, according to the company.

    The project will have a 'modest' cost, Mr Gehry told reporters at the same briefing, declining to give specifics. 'It's a folklore that my buildings cost a lot of money.' Mr Gehry's past projects include the Museo Guggenheim Bilbao in Spain.

    Sun Hung Kai Properties Ltd, the world's biggest developer by market value, is seeking to sell penthouses at its Cullinan project for HK$75,000 (S$13,640) a square foot. That would make the homes the world's second-most expensive, Xavier Wong, Hong Kong-based head of research at Knight Frank, said on Sept 17.

    While office rents in Hong Kong are 'plateauing', the outlook for retail property is 'encouraging', Swire's Mr Cubbon also said.

    'We've seen a genuine sign of renewed consumer confidence at the local level,' he said. Swire, the biggest commercial landlord in eastern Hong Kong Island, has a 97 per cent occupancy rate for its office properties and all its retail space has been leased, he added. -- Bloomberg

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