Hong Kong property prices in “free fall”

From Bloomie:

Hong Kong property prices have declined and sales are hovering near a 25-year low as the city grapples with the repercussions of a slowing Chinese economy. Home prices have dropped about 13 percent from a peak in September, according to data compiled by Centaline Property Agency Ltd.

“Hong Kong’s in a worse position than it was in prior to the ’97 crisis today,” Bass said at the SkyBridge Alternatives Conference in Las Vegas on Wednesday. He said credit in Asian emerging markets has grown “recklessly,” citing Malaysia and Thailand.

Because the HK dollar is pegged to the US, it was forced to hike rates when the Fed did.  And that was enough:

That, and the evaporating Chinese property bid…

Houses and Holes
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    • If the BI figure is right, Mr Salt’s analysis that we need to up NOM to soak up the supply is completely correct – only a little short of a new apartment for every new net migrant.

      • Immanuel Kant

        Three migrants per apartment – means – we are building waaaaaaay to many.

      • 168k net migrants versus 120k apartments (10k per month per BI headline) – looks a bit fewer than 3 migrants per apartment.

    • Australia building 120,000 apartments per year and invites in about 200,000 immigrants per year.
      That seems to be plenty of apartments for the immigrants, but then what is left over for the locally born population growth?
      Another thing: I am told that Chinese like to buy these brand new apartments and leave them empty. If we take away so many thousands of the apartments it becomes obvious why there is a shortage and high prices and high rents.

      • Australia building 120,000 apartments per year and invites in about 200,000 immigrants per year.
        That seems to be plenty of apartments for the immigrants, but then what is left over for the locally born population growth?

        The detached houses ? ABS has 110k commenced last year divided up amongst 145k natural increase.

      • SchillersMEMBER

        What is often ignored is the significance of the change to FIRB’s rule (2010) regarding the retention of at least 50% of new apartments in multi-story developments, exclusively for sale to Australian citizens.
        The biggest apartment builder in Sydney, Harry Triguboff, openly boasts of (now) selling in excess of 85% of his new builds to foreigners. Many of which are left empty or only used on infrequent trips downunder. How this provides more usable housing stock for the locals is a mystery.

  1. Good. The more Chinese raiders “do” their equity and the more banks “do” their capital in HK, the less there will be for reckless lending and illegal bidding in Australia.

  2. and we just lowered interest rates… You wont see any decent property price falls here until foreigners start to reconsider Australia as a risk free rate of return country. And you won’t see that until the currency comes under serious pressure, as in making new lows in the 60s. Still a good few months off…

    • Immanuel Kant

      Currency hasn’t got anything to do with it. Here are the drivers :

      Limited demand through clamps on Chinese investment (check)

      Limited demand through ballooning unemployment and skyrocketing underemployment (check)

      Limited domestic demand due to excessive prices (check)

      Limited domestic demand for existing dwellings as negative gearing only available for new builds (check)

      Limited demand from investors as prices start falling (check)

      Limited demand as stock on market increases due to falling prices (check)

      Its all happening.

      • Actually, apart from your first point, none of it is happening. The exchange rate has got everything to do with it. It measures how much capital is going into the country versus how much is trying to get out. When foreigners stop rolling over their loans (gross value around $2 trillion) they will be the first sign that we can’t finance our current account deficit at current (FX) prices. So the dollar falls. That’s what provides foreigners more purchasing power…

        To be honest, your other points are just a wish list.

      • BrentonMEMBER

        @Greg, from a recent CoreLogic report:
        “Factors contributing to a slowing in rental growth include falling real wages, excess rental supply in certain areas and lower rates of population growth – all of which have impacted on demand for rental accommodation.”

        Those same factors can, and no doubt, will affect property prices, independent of AUD.

    • Jumping jack flash

      “You wont see any decent property price falls here until foreigners start to reconsider Australia as a risk free rate of return country.”

      Indeed. With government guaranteed property prices why wouldn’t anyone on earth want to send as much money over here as possible to buy their own piece?

  3. Know IdeaMEMBER

    The prices in HK seem to have come down at about the same rate they ramped-up. So if coming down is described as free-fall, then going up must have been free-flying. Let’s see if the market can continue to retrace symmetrically with the ramp-up. That would be a neat trick. A palindromic market trace; the market equivalent to the Porsche Boxster; a head and shoulders pattern extraordinaire. That would be something to note.

    But back to reality: with prices back to September 2014 levels they must be really feeling it. To paraphrase an earlier popular quote: I have never seen anything like these recent falls and I have been in the market for twelve months now.

  4. Wanna read about a dogbox market shitting itself, google up what happened in Honkers around 1997. This might give you a foretaste of what’s on its way in Straya. Funny how short is our collective memory span is, ah?

    • I remember being told about the Hong Kong market back then. I hoped that Sydney property would do the same. Remember that 10 years prior to that there had been an horrific doubling of house prices in Sydney, so some thought the “bubble” was already 10 years old in 1998.
      18 years later I’m still waiting, and still smug pricks can be found confident that a bubble burst is imminent. They might be right this year.

  5. Hong Kong is the most unaffordable at 19 times annual household earnings (median multiple) of the 367 urban markets covered within this years Demographia Survey (check out Schedule 3) …

    2016 12th Annual Demographia International Housing Affordability Survey


    Multiple stretch is lethal.

    Understandably, the Authorities are having nervous twitches about Auckland (now a stratospheric 10.2 Median Multiple) … last nights evening news clip …

    Govt: Auckland housing shortage ‘matter of national significance’ | Politics | Newshub#axzz48KGpagxC#axzz48KGpagxC


    • Hugh, this is hardly rocket science.

      First create a shortage by bringing in people faster than you allow extra houses to be built. This means that X families must “miss-out”.

      Since houses are priced in a market then it follows that prices will rise just high enough so that X families are priced-out.

      Investors, speculators and future house needers will notice the price rises and some will become particularly keen to step-up their buying to take advantage of the rising prices (or fear of missing-out in the case of the future house needers).

      With price rising, then add lower interest rates and lending at high LVR’s. What do you think this does to price?

      Abundance of credit + shortage of houses + keen buying interest = ???


      • + add in foreign buying and speculation particularly of existing stock and generous negative gearing + half capital gains tax and it’s a lethal cocktail.

  6. Does HK ban mainlanders from buying HK flats?

    Or is it like AUS where it is banned, but the LNP are too corrupt to enforce the ban.

  7. But but but… are they building more land in Hong Kong? Prices can only go up! (…until they don’t)

    • Dubai did build artificial islands, and houses on them, then sold the houses to foreigners like David Beckham.

      Hong Kong flattened an island to build their airport.

      Maybe they can do it again to build apartment blocks.

      Also, a HSR is under construction to link Hong Kong with the mainland. People could live on the mainland and commute daily.

    • Actually that’s exactly what they do in Hong Kong. They release undeveloped land. There is buckets of it.

  8. Let’s not forget that Australia is different as we have a chronic land shortage! /s

  9. bleeterMEMBER

    guys hate to pee on the parade but Hk property prices are still beyond the moon. They have tripled (yep tripled) in the past 6 years and a 13% fall is laughable in the face of that. Also you can get a mortgage at around 1.5% all in so don’t get suckered on this one

  10. TailorTrashMEMBER

    Ok …..so Hong Kong unaffordable ( by the locals ) …..Vancouver unaffordable ( by the locals ) …….Auckland unaffordable ((by the locals ) ………….Melbourne unaffordable ( by the locals ) …….Sydney unaffordable ( by the locals ) …………………so how come all those factory workers in China can afford property in these places ? ……….debt ?………………did someone say debt ?

    • TT….

      China has a long history of Family cooperation in setting up the younger generations and group investment. LOL the VoM multipliers…..

      Disheveled Marsupial…. reminds me of the old fair dinkum Italian families on Christening…. more gold on the baby that it weighs and envelopes of money out the wazoo…

      • TailorTrashMEMBER

        True ………I agree, but those old ( and should I say good and noble ) habits have become distorted and poisoned with too much easy ” non earned ” money
        …..now I know I don’t understand all of this….but when the children of the wealthy of Canada ,New Zealand and Australia are displaced by “mysterious wealth ” from China ……..something tells me things are not quite right ……..by any standards I am wealthy ………and I don’t have debt ………but I and my children could appear poor in our own country ……….now what is the economic explanation for this ……or it it that my debt is bigger than your debt ……..not being an economist I am at a loss to understand ………..

      • I thought some of my links or opinions might have given you a hint, labour being liquidated to increase profits w/ an offset to easier credit, which enabled more short term profit to be extracted, whilst price was taken by an increasingly smaller segment of society.

        Disheveled Marsupial…. it matters not if it was with intent or serendipity… tho the former has finger prints all over it…