How will the US debt crisis affect Hong Kong property prices?
The anxiety of the US debt crisis caused mayhem on the world's stock markets last week, and the Hang Seng in Hong Kong was no exception, dropping nearly 2000 points.
The fear of an economic slowdown also apparently affected property sales in Hong Kong, with there being a number of reports of recent buyers of apartments forfeiting deposits and failing to complete purchase agreements for fear that property prices might fall.
So called property "experts" in Hong Kong appear divided on whether the recent crisis will have any effect on the continued growth in property prices Hong Kong has seen over the last few years. My own view is that prices are likely to keep rising, after perhaps a month or two of short-term uncertainty.
The US Fed said at its last policy meeting that it will keep its benchmark short-term interest rates at close to zero through to at least mid-2013. This ensures continued super-cheap borrowing in HK (due the the HKD peg to the USD), and it means we will likely see strong asset inflation in Hong Kong over the next few years. Both gold and property will likely to continue to be seen as good inflation hedges, with prices rising as the USD falls, with property having the added benefit of actually being useful (ie you can live in it), producing an actual income, and the ability to obtain financing to assist in purchasing it.
I also wonder whether some investors will simply move their cash from stocks into property, viewing property as being a safer investment.
Hong Kong apartment rental prices have apparently also hit new highs, now at an average of HKD $22.33 per square foot. So, property yields are continuing to rise, which in the light of a lengthened outlook for low interest rates will also continue to make Hong Kong property more attractive as an investment.
The latest property stats for show Park Island up 1% so far this month, but let's see what happens over the next month or so. We might well get a decline over the next month - lets see. I would advise anyone thinking about buying, whether on Park Island or elsewhere in Hong Kong, to use this time to find a panicked seller, and then try to push for a good price.
The latest two graphs below show (1), the moving average price for Park Island apartment transactions, and (2) Park Island property sales compared to Hong Kong property sales.
be careful of the estate agents though... some of them have very underhand tactics.
ReplyDeleteOne even sold a house we had bought twice, about an hour after we had paid the deposit, and strung us along for two weeks until the other buyer upped their offer.
Lost us over 50000 dollars and a house!!
I can let anyone who wants to know the name of the estate agent.
word to the wise though. Be VERY careful of some of the estate agents. We recently bought and signed for a house, a good deal, the estate agent was talking to us for two weeks assuring us everything was ok. It turns out the same guy had sold the apartment again about an hour after us, and kept us hanging on for 2 weeks while he secured the other deal.
ReplyDeleteTHey lost us an apartment, and about 50000 dollars.
If you want to know the estate agent please email me! We have a new apartment now but buying a house here is very much Buyer beware....
PIMARC - I am sorry to hear about the problems you encountered.
ReplyDeleteDid you have a signed agreement with the seller?
What happened to you can occur in a rising property market, but if you had a signed agreement, there would usually be a penalty clause included that specifies what the other side would need to pay if they fail to sell to you as agreed.
The usual penalty specified is between 5%-10% of the purchase price and is negotiable by both parties prior to signing the agreement for sale.
What are the latest rentals for Park Island PSF?
ReplyDelete