9 weeks left!!

倒數：還有9個星期就byebye！

Residential Mkt Forecast for 2014: drop 10-20%?? Mkt generally estimates home prices to drop 10-20% in 2014 because of a few factors.

•  Increased Housing Supply: After the Residential Properties (First-hand Sales) Ordinance implemented in 4.29.2013, there was a dormant period in Q2 and Q3 because developers were very, very cautious – a misrepresentation of info could now become a criminal offense..i.e. go into jail. A few key developers, especially for those with a weaker presence in China, failed to meet their sales target in 2013. Thanks to the accumulated purchasing power of HK end-users, mkt sentiment has improved recently as evidenced by the strong sales in both mass and prime mkt. So undoubtedly developers are much more aggressive this year re-starting their engines again. Lots of large-scale supply coming up in NT.
• Increased Land Supply – Policy Address: not much surprise from CY, again reiterated the importance of land supply in HK. The key 3 ways to boost short-medium housing supply are : re-zone re-zone re-zone GIC sites and Green Belt for residential use (this could be problematic if without proper density control),  PR relaxation (site area x PR = max. GFA) and arbitration of land premiums to speed up the agreement process.
• Developers want volume > price: Developers have been offering attractive discounts and stamp duty cash rebates to lure both end-users and investors to vs. competitors, absorbing a majority purchasing power from the secondary mkt. According to the news, these flats are priced near to, or even lower than the secondary mkt. Another incentive for developer is that, if you have sold everything in your development, you can officially “close file”. Otherwise, you still have to update the sales brochure every 3 months as required by the new Ordinance, that’s a huge investment of time and manpower.
• Continuation of gov’t cooling measures: gov’t believes these cooling measures, DSD x BSD x SSD and ‘HK land of HK people’ have successfully curb external, speculation and investment demand for homes in HK. No reason for gov’t to cancel something with impact.
• US tapering: interest rate is expected to rise, they said.

My view?

• Are developers really pricing near to the secondary mkt? Not really…I realized that the newspaper usually picked comparables that are not really “comparable”. It may be a huge gimmick that xyz ‘s new development is 5% lower than other second-hand apartments in the same district. But newspaper doesn’t really take “positioning” into consideration. I would say the price is reasonably priced, but not crazily cheap that would force second-hand owners to cut prices massively and sell before its too late!
• More land supply, cheaper land value, more land to be acquired land bank? Even value is reasonable, material cost, construction cost and manpower $$ could be astronomical. I.e. Selling price in the end will still be high.
• US tapering? The effect on the local mkt is still very uncertain. Not with immediate impact.
• And what is 10% anyway? 10% is a very conservative guess. Probably whatever happens this year you won’t be too far away from 10%. Not a “downturn” rate.
• So what’s my estimate? Virtually no change. 1) Home prices will change when second-home owners are willing to sell their flats at a discounted price. Did you see this from the agency shop windows? Why do they have to do it now? 2) Will developers really cut prices at a great discount? They don’t have to. In fact, from the “toothpaste” style of sale, they are raising prices each time, and still have no problem in clearing all the stocks…3) Demand is still good as many “家長客” are prevailing..i.e. buying flats for their young children/kids like us.   4) So, unless mortgage rate suddenly rise or an economic downturn hits la or LTV ratio limit changes la…otherwise same thing la. and after all, some developers don’t really care what’s happening out there …. (wink).