[antelope123]

After 6 long years in HK, my wife & I (and 2 kids) are considering investing in property here. Need to gather more info to gain confidence that the positive trend in prices will continue (at least to some degree). Before I put my family's financial future on the line and leverage up to my neck with a money-hungry bank, I hoped I could get some help with on-going background research.

We're looking at a 2-story village flat in Clearwater Bay. Price range $4-6M. We'd plan on holding for >4 years (anything less doesn't cover overhead loss), and doing renovations along the way to add value (and as a fun project).

1) Very positive pricing trends since 2003. Obviously no one has a crystal ball, and of course future gains will be very dependent on specific locations in HK, but are there any indications the positive cycle for the average HK property is only beginning / slowing / reversing? Where to find historical & projected pricing data?

2) Doing the math, returns on property don't get interesting unless prices rise >7% YoY for an extended period of time. How much risk am I incurring with this threshold - is this too optimistic to assume ~7+% YoY for the next 5+ years? Seems there are competing forces: Shanghai effect countered by mainland migration effect - not sure how to determine which will affect things more (among other forces).

3) Expats seem to make a very large proportion of people in CWB. As such, maybe it makes sense to study demographic trends of HK expat migration to estimate future property demand here (?) A 2006 article states that a 15% drop in Western expats was seen in 2005. Is it true that net expat migration in HK is so steeply negative? Other sources of data?

4) Does anyone have any insights to share about property trends in Sai Kung / CWB? Good area given the onshore winds help clean the air (some of the year), but on the other hand, locals consider it quite far away from the 'action', which reduces demand??

5) Who else here is considering taking the leap into property in the next year? Why now, and why do you feel comfortable enough that things aren't going to flatten / decline in the coming years?

thanks all

[Poorboy]

Along with normal demand/supply issues to consider, I think one of the more important things to consider about investing in HK property is the impact (due to the HKD/USD peg) of
a) Currency fluctuations
- Mainlanders/Foreigners could drive demand due to weak currency.
- When it is time to exit, will the property have made money on a currency adjusted basis? It would really suck if your property doubles in value, but HKD falls 50%
b) US monetary policy
HK changes interest rates in line with Fed regardless of HK inflation/deflation concerns. Remember when the US was hiking rates when HK was going through deflationary period after the Asian financial crisis? It drove property prices to the ground. This time around, it looks like the Fed might be reducing rates while HK goes through an inflationary period due to China. .......perhaps an asset bubble will form as a result?

[Katanga]

Whilst property in HK is doing ok, I would wait. You just have to see the global min-crisis in the financial markets, the way inetrest rates are going globally etc.

Seat out the next 3-6months.

[HK_Newbie100]

Ultimately, property performance, as with stock or bonds, is all about economics, so here’s my humble view: it is an absolute no brainer that markets are going to crash badly on an epic scale in the not too distant future. The only thing that has prevented it from already happening is that central banks around the entire world are printing money like mad to flood the system with liquidity to prop it up. It’s like if you racked up say a million dollar loan that you couldn’t pay back and the banks are set to call in your loan, then somehow you conjure up another source of funding out of thin air to finance your existing loan, adding fuel to your already untenable situation. Virtually all govts are doing this but the US (being the by far the largest economy) is the main culprit in absolute terms, to the extent that the world is awash with dollars, which devalues it, so now investors everywhere are very jittery about holding dollars and starting to sell en masse. This is why we are seeing the dollar plunge in the Forex markets of late, with the possibility (imo inevitably) that it will get a lot worse because it will soon breach a huge psychological level on the Dollar Index (an index like the Dow that all traders follow) to trigger a whole new wave of selling. Once the floodgates open, it is highly doubtful that the central banks can prop it up like they are doing right now. We might see a small bounce in the following weeks as this is holiday season and things are generally quiet now but when the traders return, there will be intense renewed pressure.

The dollar affects everything. The falling dollar pushes up prices of imports, which adds to price inflation, which pushes up interest rates, increases pressure on mortgage markets that are already crumbling and will soon lead to full scale housing collapse; it will decimate the bond markets (which are crumbling right now) as investors realise bonds can no longer keep up with inflation. As nervousness creeps into the general public (along with mortgage difficulties), spending will be tightened, leading to falling sales, unemployment, bankruptcies, foreclosures, and so the vicious cycle of recession takes hold. Not to mention geopolitical tensions such as Iraq and Iran, which Bush will most likely invade before he steps down; and rising commodity prices such as oil, which further fuel inflation, along with so many other negative factors.

Govts don’t want you knowing about their inflationary game. That’s why for example the US has stopped printing M3 money supply stats. If Joe Public cottons on and sells dollars, the game is up. But this is already happening. As they say, if you want to know, just follow the (smart) money: dollar is in freefall (both right now and measured over long term), gold is shooting up. That should tell you something.

Imo (and it’s just an opinion), do your wife and kids a favour and review your options. On a 4+ year view, your property in both nominal and real terms will most likely be worth a fraction of today's prices. Even if the world didn’t cave in, basic logic will tell you it’s not smart to buy something at peak prices. Prices rise and fall, eg when SARS hit, prices fell over 60% from 1997 peak.