I plan to do more work on this thread,
particularly on the Hongkong Property Market

- - -



But in the meantime, am collecting some links.

How about this as a start:
Not The... South China Morning Post: http://www.ntscmp.com/
HK-oriented Weblogs: OrdinaryGweilo
News & Networks: tdctrade.com/ uk : hktrader.net/

Despite reports that Mr Tung is resigning due to stress and ill health, some analysts in Hong Kong believe he was sacked by China because he was seen as weak and unpopular.

This is the view of political commentator Steven Vines.

"I think the real lesson of all this is that the government in Beijing has demonstrated very clearly that they hold not only ultimate power but that they are prepared to exercise it," he said.

"If they are prepared to dismiss the most senior official in Hong Kong without any consultation with Hong Kong people whatsoever, it tells you that promises made to Hong Kong by the former paramount leader Deng Xiaoping really don't mean a great deal."

'Sham' autonomy

Mr Deng promised Britain, before the territory was handed back to China, that Hong Kong would be given a high degree of autonomy to run its own affairs. He called it 'One Country, Two Systems'.

"There's no longer Hong Kong people ruling Hong Kong, there's no longer a high degree of autonomy," said Martin Lee.

"If you ask me, 'Is there still one country two systems?' I would say, 'Yes'. There is a much larger system, which is the mainland ruled by [Chinese President] Hu Jintao and [Chinese Premier] Wen Jiabao," he said.

"Then there is the much smaller system of Hong Kong, but it is now ruled by [Chinese Vice-President] Zeng Qinghong, so if you like, that is still 'one country two systems' but Hong Kong is now ruled by different members of the same Communist Party."

Professor Joseph Cheng agreed. After all, he says, under the current system Hong Kong itself only has a limited input into the selection of the next chief executive.

Arguments about how long Mr Tung's replacement should serve, for instance, will be decided in Beijing.

"It is obvious that we will not have the opportunity to discuss the issue of political reforms in detail for the election of the third-term chief executive and beyond," the professor said.

"Whatever arrangements are to be followed, it is obvious that there is no room for Hong Kong people to play any part in deciding our future," he said

...MORE: http://newswww.bbc.net.uk/1/hi/world/asia-...fic/4333525.stm

Dr Bubb

I think Hong \kong may give the most important clues to what lies ahead. At the moment corruption is rife. One factory I know of pays 900 staff in cash to avoid tax all round. A tighten up on this would hit big time prices of imported goods in the west. Perhaps by 10 to 15 percent, and we know that this margn could be absorbed as imports would still hold a monopoly due to cheapness.

thnx, CP

My gf is from HK, and I used to live there.
We may be traveling out later this year, and are looking to do some business
in China, so I am keep an eye on the place.

Here's a sceptic's view on the former British Colony's future:

- - -


Why The World Sees Hong Kong As China’s New Colony
Mr Stephen Vines, a Hong Kong-based writer, journalist and businessman,
was the Foundation’s guest speaker on 8 November 2000.

EXCERPTS:

If Hong Kong were seen as just another city in China, this would not be enough to assure its future. As a Chinese city, Shanghai was much bigger and had greater potential.

It was true that dissidents were not being arrested. ... There was a steady erosion of rights and processes rather than an explosion – a slow corrosive process that it was hard to put a finger on. ...

However, it remained a fact that Hong Kong was very much more free than the Chinese mainland. And however bad it became in Hong Kong, a substantial gap was likely to remain.

Mr Vines described Hong Kong as China’s new colony. How could this be a valid description when Hong Kong was within the nation of China and consisted of the same Chinese people? Mr Vines left aside the debate on whether Cantonese was in fact the same language as Mandarin.
...
How was Hong Kong doing three years into the "glorious reunification"? Mr Vines felt that it was very fortunate for the Chinese leaders to inherit the colonial system left by the British in Hong Kong. It suited very well a regime that wished to rule Hong Kong at one remove. It also suited very well the people within Hong Kong who mattered, namely the business tycoons: under the colonial system their views were consulted in preference to almost anyone else’s. These mechanisms provided continuity and enabled China to retain control as Britain relinquished power – a process that normally led to independence and the people of the former colony choosing their leaders by direct election. And so Tung was able to present the handover as a success.

The problem was that Hong Kong had moved on. One had only to look at the situation on the terms set by the Government’s own propaganda. Hong Kong was, or was claimed by the Government to be, a global trade centre, and financial centre, and (more dubiously) a cultural centre. Yet how could Hong Kong be a leader in these respects while clinging to a third class governmental system? ... Like the Communist Party, the Hong Kong Government was obsessed with control, with maintaining stability, as if Hong Kong were collapsing into a sea of civil war. This was of course absurd. Mr Vines had not noticed much social unrest on his way to the Hong Kong Club that morning.

All important decisions were made in Beijing, for example the choice of Chief Executive. In Mr Tung, the Chinese leaders had selected someone who was instinctively of the same views as themselves, so they had no need to intervene in Hong Kong to achieve their desired ends. Tung was well-meaning, staunchly patriotic, but completely out of tune with the people of Hong Kong. He deferred to the Motherland in all things.

What was the consequence of all this? The sequence of events after the handover was depressing. The semi-democratic legislature was abolished and replaced by an appointed body. When push came to shove, and the Court of Final Appeal ruling on the right of abode was not to the liking of the Government, they referred it to the National People’s Congress, a political rather than a judicial body, so taking the decision out of Hong Kong’s hands.
...
The colonial mechanisms provided continuity and enabled China to retain control as Britain relinquished power – a process that normally led to independence and the people of the former colony choosing their leaders by direct election.

Authoritarian societies were generally less developed, poorer and more prone to unrest than democratic societies, said Mr Vines. He acknowledged that people objected to this thesis. They pointed to Korea, Taiwan and Hong Kong in earlier stages of their respective development as being authoritarian and yet relatively rich and stable. Even if these apparent exceptions were valid they only counted at lower levels of development. If Hong Kong were seeking to be a world leader in plastic flower manufacture, it could rest content with its immature political system. If Hong Kong had higher aspirations, then it would need to reform itself.
...
Hong Kong was expensive. If it was to compete with other Chinese cities it had to be significantly better than them, otherwise companies would simply go to the cheaper cities. Hong Kong could not revert to being a domestic-oriented self-sufficient economy. Hong Kong needed its international links.

Was there any chance that Hong Kong could act as a model for China in its own political reform process? Mr Vines doubted this because it would conjure up for the Chinese leaders the ultimate nightmare of Hong Kong as a base for international subversion of the Mainland. This was precisely why Article 23 was needed. Mr Vines felt that it was really very difficult for Hong Kong to influence China’s political development without arousing a negative response from the Chinese leadership. It would seem to undermine the rule of the Chinese Communist Party.

...MORE: http://www.hkdf.org/newsarticles.asp?show=...newsarticle=110

The Future of Hong Kong's Monetary System
Mr Tony Latter, Visiting Professor,
EXCERPTS

Long term future of monetary system
In order to understand the possible future of the monetary system, said Professor Latter, one had to appreciate the history and the institutional structure.

The history was that Hong Kong was a colony. Colonies did not have central banks. They either used the metropolitan currency, or established a currency board based on the metropolitan currency. Hong Kong was an exception. It was a trading post for China, and it used silver as its currency as China did. This was a kind of silver standard, as employed by China. When China left the silver standard in 1935, Hong Kong faced a quandary. It had no central bank and so could not handle a managed float. So it adopted a currency board based on sterling.

So it was not the case, Professor Latter emphasized, that Hong Kong's currency board was invented in 1983. Hong Kong adopted a currency board in 1935, and inadvertently left it in 1972 amid the international currency turmoil and, in particular, the weakness of sterling at that time. The territory then survived more by luck than good judgement until the early 1980s when the stresses of the impending transition of sovereignty began to overwhelm the currency and it was realized that it had been a mistake to abandon the currency board.
. . .
Institutional arrangements
Nonetheless, Professor Latter emphasized, Hong Kong's de facto central bank differed in important respects from central banks overseas. Elsewhere the central bank was a separate corporate entity and statutorily independent of the government. For example, in order to qualify for membership of the European Central Bank (ECB), national bank heads had to demonstrate that they were statutorily independent from the finance minister. The HKMA, in contrast, was not independent. The Monetary Authority was a legal person appointed by the Financial Secretary. The Financial Secretary could appoint or dismiss him at will, and give instructions to him as he saw fit. Nor was the Financial Secretary answerable democratically to the people.

The Financial Secretary thus had the freedom, and lack of accountability, to take major decisions on the monetary system himself.
...
What would be the alternatives to the US dollar linked rate system? If there had not been the peg, there would not have been the inflation of the 1980s and 1990s, nor the deflation of recent years. But instead there would have been a fluctuating exchange rate. Would that have been worse? It was difficult to say. Nonetheless, three or four years ago, when people had been complaining about the effect of the linked rate, there had been no coherent proposals to replace it.
...
Should the Hong Kong dollar be pegged to or shadow the RMB? A lot of nonsense had been spoken about this, said Professor Latter, albeit that the RMB had been stable against the US dollar for eleven years, and China's internal prices had adjusted considerably to accommodate the fixed rate. However, if China moved the peg once, the markets would not believe that it could move back. The RMB could not be a backing currency for a currency board since the RMB was not freely convertible. So for the Hong Kong dollar to track the RMB would be a managed float with intervention.

A further reason not to consider the RMB was that structurally, the monetary economy of China was about to undergo profound change. In particular, capital controls were going to be lifted. When this happened, the RMB might even fall - and then would Hong Kong want to go down with it? Further, the People's Bank of China had no track record of managing a free floating currency. Perhaps they could do it, but it was just not known. In contrast, the US Federal Reserve was well known for its capability and disciplined management.

There was no ground in the Basic Law for Hong Kong to abandon its independent currency, said Professor Latter. Far from it, Hong Kong's constitution mandated its monetary independence. Was China's size a factor? Should Hong Kong follow its neighbour simply because it was big? Professor Latter drew attention to the examples of Canada and Mexico, which were much smaller than the US and more dependent economically on it than Hong Kong was vis a vis China, and yet had independent currencies. Switzerland and Germany were a further example.

Was the volatility of the US dollar a problem? It was true that the US dollar had been volatile. A basket of currencies would be more stable on average. Given today's technology, a basket could be managed relatively easily. However, it was difficult to monitor. It would not be transparent to the man in the street. Thus confidence might would be difficult to sustain. And a link to a basket of currencies was still a fixed rate system. The implication of such a system was that one had to surrender control of one's monetary policy. One had to accept the monetary policy of the economy to which one's currency was pegged.

In 1983, Hong Kong had chosen a currency board because it did not have a central bank. If it had had a central bank then, it might have chosen otherwise. Now, Hong Kong in effect did have a central bank, and could decide to adopt a managed float system. Nonetheless, the latest changes to the linked rate system were in line with the way the system had been operated in recent years, and essentially confirmed the way the system was already operating.

@: http://www.hkdf.org/newsarticles.asp?show=...newsarticle=164

.. duplicate ..

September 17, 2004
Spike - what went wrong?
Wednesday's Standard had a more detailed piece about the closure of Spike magazine:

Spike's demise had been predicted among the territory's small expatriate journalist community ever since it opened. Spike was launched last November and was supported by nine investors - individuals and companies - among them staff and contributors.

The magazine set out to use satire to explain the workings of the government, "at a time of heightened interest in politics, deepening cynicism about the government's ability to meet the aspirations of Hong Kong people''. The July 1 anti-government demonstrations and pro-democracy wins in the District Council elections last year were the catalysts for its launch.

The magazine offered translations of Apple Daily and Next magazine stories, and an `Expat TV' section whose fictional programmes poked fun at foreigners. The plan was to refinance it after six months, Vines said, having proved to potential investors its creators had "something to show''. While other investors were secured, the major investor did not deliver the amount they had agreed on before the company's deadline.

"We were left high and dry, I'm afraid,'' Vines said, declining to disclose financial figures. Political columnist and Spike investor Andy Ho said he thought the magazine put up a "good fight''. "People liked to read it, especially the expatriate community,'' he said.
...
A magazine is a buisness, Spike failed because it had no advertising and couldn't attract enough people to buy copies to cover its costs.
...
The market for English language media is not very strong in Hong Kong. I don't think The Standard publishes circulation figures, and there is a good reason for that, whilst TVB Pearl and ATV World are subsidised from the profits made by the Chinese channels. It was always going to be a challenge to establish a new title, and they needed more time. If their business plan didn't allow for that, then clearly they got it wrong.

What I find disappointing is that so many people seem to have been willing Spike to fail. I can only assume that Steve Vines has made a lot of enemies in Hong Kong.

Posted on September 17, 2004
@: http://www.ordinarygweilo.com/2004/09/spike_what_went.html

July 18 - Bloomberg (Joshua Fellman):
“Hong Kong luxury-apartment prices are likely to near 1997’s record high as investors bet a shortage of larger homes will outweigh the impact of rising interest rates. ‘This city is awash in liquidity and people here have a property obsession,’ said Andrew Ness, a Hong Kong-based executive director at property agent CB Richard Ellis Inc.”

@: http://www.prudentbear.com/creditbubblebulletin.asp

I have a property in Hong Kong which I bought near the peak in about 96. After the 97 crash I was convinced the highs in property would never be repeated. It looks like it is now nearing this mark again after only 8 years! Shall I bail out now and at least get what I paid for with this property? What do you think Bubb? There is still a possibility I will return to HK in a few years.

Although the property in the main centers is high, there are allegedly bargains to be had on the outerlying islands. Lamma has long been a gwailo stronghold and I have friends who have bought there recently at the bottom of the crash and they seem to be renting out ok. They have told me that they're getting about 8% yield. There is so little information about this small market and it seems that you have to go out there and ask locally to find out what is available. If anyone knows of any good info sources, please post them here.

Franky speaking, places like Lamma Island (Lantau Island etc) are a very small market.

'Gwailos' love to live in the places, and they pay of course!

Having said that, it is such a small market that sometimes properties can be difficult to sell as banks are not willing to provide much finance on such properties.

Be aware that at the current time (i.e. this week) banks in HK have raised interest rates - this will likely impact prices.

Might be time to watch & wait perhaps?

Good luck.

I had a look on Lamma recently and saw flats selling from around UK pounds 25k. A friend of mine just got a very nice one for less than UK pounds 60k with full sea views and the roof. It's a tiny market and I'm told that you need a lawyer who is familiar with island property as there are tribal considerations. The banks shy away from buildings that are less than 15 years old and normally require a deposit of 30-40 percent.

Hello, does anyone have any more links for Hong Kong stats on house prices, the economy, etc..... similar to what is posted here. My dad is about to buy a place over there and I'm not sure what to advise him! He was already stung bad in 1997.

Try:
www.centanet.com
and
www.midland.com.hk
these are the biggest two agencies in Hong Kong

Only a few of the better areas have reached back up to the levels of 1997, most areas are still hanging around between 80-90% of the peaks.

Oops should have said that the centanet website has some great graphs of average house prices - just go to the for sale section and chose an area then beneath each available property there is a graph symbol, click that to see average monthly, 6 month and yearly averages.

Friends are comsidering a move to HK.
Can anyone help answer the Questions that i am getting:

What is the approximate monthly rent for a decent Flat in Mid-Levels these days?

What other areas are worth considering?

Be careful. I know a few UK people who sold once UK price peak was regained following the crash. They now look back with dispair at thier haste given the fact prices went on to far exceed the previous high water mark.

A "decent" mid-levels flat say 900sq feet will cost around HK$ 16-20,000

Consider Causeway Bay - older (but biggar) buildings with just as good transport links.

Try looking at either - www.centanet.com or www.midland.com.hk

If they are on wealthy expat contracts they probably won't care, but I would consider the New Territories. More space for your money and still easy to get onto HK island on the MTR. If they are young and need to be near all the action (stagger home from the bars) then Happy Valley, Causeway Bay or Mid-Levels. I used to live on Mid-Levels it does vary greatly (upper, middle, lower) but a decent place will be costing over HK$20k. Happy Valley gets my vote for HK Island if I ever move back there.



Yep, my dad bought a UK property in 88 and sold 00/01 because he was so relieved he 'got his money back'

TUNG CHUNG AREA of Hong Kong == update: Dec. 2006

Here's an update for the area of HK where I am presently living. Tung Chung is on Lantau Island, at the end of the MTR. This area of the Tung Chung coast over looks the airport, and longer term should be expected to benefit from developments on Lantau Island, such as airport expansion and the completion of the long HK to Macau bridge which is expected to be completed in 2010-12.

At the moment, there is an overhang of supply, from buildings which have been almost completed, but have not yet been released for sale. There are three main developments, Caribbean Coast, Coastal Skyline, and Seaview Crescent. All three are JV's between various developers and the MTR, which owns the land until the current SAR regime with China comes up for renewal in 2047. The first two developments each have two towers which were delayed for release due to poor sales- see below.

Coast Skyline Towers . : Development around Tung Chung MTR ; CS is third from left
.

La Rossa, the catchy marketing name for the last two towers of the Coastal Skyline development (two on the right, see above) were released for sale in early December. About 380 flats will be sold in each the two towers, A and B. The B Tower is closest to the MTR stop, and has come up for sale first. Prices for a 3BR at a mid-level with a decent view are about HK$3,100 per square foot. (At current exchange rates, that's about Pds.210 per sf.) For those unfamiliar with Hong Kong, these prices are less than 50% of what you might pay for properties of similar standard on Hong Kong island within a similar distance of a major MTR stop.

La Rossa's impending launch has pressure prices at Caribbean Coast where i live at present. Prices dropped from perhaps HK$2,700-2,900 /sf, to maybe HK$2,500-2,700 /sf about six weeks ago. And there may be further downwards pressure if the sales do not go.

I had a look at the show flats today, and it looks like the properties may be a somewhat better standard than CC. Ther views on the harborside are better, and the location in closer proximity to the MTR is better also. One thing I do not liek is that CS lacks shops and restaurants, something that CC does have on its lower floor.

CC is meant to open its last two towers in January 2007, and it will be interesting to see what happens to prices when the competition hits.

HK Property Index


Overall, I think the HK market is looking a bit toppy, and set for a further correction. But the flats in these towers may represent an opportunity, since they were mostly build before material prices skyrocketed, and once they are absorbed,m there could well be some appreciation of rents, since the MTR rise into central HK is only about 40 minutes, and these properties are of reasonable modern standard.

= = =

One way to look at the pricing is to consider how many years it will take to return an investment at the current rental rates.

ILLUSTRATIVE CALCULATION : Caribbean Coast, small 3BR of 1,000 sf, about 840 sf net:

Rental p.a.... : $HK8,500 x 11.5 = $97,750(note: we pay $8,000/mo, which is not so easy to achieve now)
Maintenance. : $1.60 x 1,000 sf = $16,000
Annual Net... : HK$ 81,750
Approx Price : HK$ 2,600,000
Net Yield...... : 3.14 percent // mislead due to lease of only 40 years
Years to pay : 31.80 years
Return at 40 : 25.8%, at zero interest rate

RENTS are too low at present to make this of much interest, unless one wants to bet on a cheap renewal at 2047- a reasonable assumption perhaps

= = =
(from HKR Int'l's PR of 7. Dec):

"In Tung Chung, sales of the 783-unit La Rossa of Coastal Skyline has been re-scheduled to the fourth quarter of 2006 due to severe price-cutting of properties sales in the district during the period under review"

@: http://www.hkr-intl.com/cms1/hkr/hkr2967.html

= = =

A CLOSER LOOK AT HK
here: http://www.greenenergyinvestors.com/index.php?showtopic=920

I presently live in Tuen Mun area of NT and thinking of buying!

A friends wife has a senior position at Sino Land and insists the region represents an investment opportunity ( maybe singing from the hymn sheet but believe it is her impartial view).

My observation:

1) Most of western New territories lacks character and/or too industrial and will always be the poor relation to other areas in HK

2) There is a significant oversupply in the region. Gigantic(e.g Bellagio) and new (The Sherwood) projects have swamped the region in recent months.

3) The area suffers the worst pollution in HK. An influencing factor for anyone deciding on possible areas to relocate to.

4) Sentiment has significantly slipped during the second half of 2006. Prices have fallen back a little.

For me , these are reasons enough to take a wait and see position..............

(PM's have been de-activated for Desert Orchid, and so my pm was bounced,
and is posted below...
I will de-personalise this once it is clear Desert Orchid has read it.)

Good posting about HK property.

There's more discussion like this on my website, GEI
link:
http://www.greenenergyinvestors.com/index....p;showtopic=920
. . .

I tend to agree with you about a wait-and-see attitude, but I've had a great run in the markets and in my trading in 2006, and want a little diversification. And i have a sense that Tung Chung will get better over time, and prices will firm after the current glut is absorbed.

I was in your area last weekend, visiting a friend who lives in the Kerry Properties development next to Bellagio.
I think there's good potential there too, but it is not quite so convenient to the MTR, as Caribbean Coast and Coastal skyline.

No problem. I'll get a response on your site later this eve.

I am more or less in the same position as you but I think I have a bigger concern with respect to the size of the glut that needs to be absorbed. I am optimistic medium term for the area but looking at recent buy/sell activity I am also onvinced there's plenty of purchasing to be done to absorb the quantity of units in the luxury sector in what is not the most affluent part of HK.

However, Tung Chung, Sham Tseng and Tuen Mun alike, improved transport links reveal these areas as 'value' in the HK market.

Im thinking of reviewing my position mid '07.

The key is rents...

Current rent levels in Tung Chung are too low to justify the (reduced) prices of HK$2,500-3,200 psf.

I reckon rentals will rise once the stock is absorbed, but that may take many months,
and meantime confidence may get hit if the hong kong stock market slides in 2007,
as I believe is likely.

Nevertheless, I think a purchase of a 2-3 year old flat in this area at $2,500 psf or less,
may represent a decent (but not spectacular) investment. If it goes down to $2,000 psf,
then that woudl be bargain territory.

I think that rental levels of $8,000-9,000 monthly for a 1,000 sf flat represent excellent value,
in relation to the $15,000-20,000 that one might find at mid-levels.

SURE, there are a limited number of Airport workers who find the location ideal, but the
reliable MTR journey of 40-50 minutes makes the location attractive for the size of savings.
More will move here, as they discover the attractions

(there's some commentary growing also on the AsiaExpat board, about Tung Chung)

Here are some issues mentioned:

- "We see a problem with kids education as we have two kids studying at the moment. I heard there is a lack of school facilities there." (jiji)

- "they are building on that huge grassy knoll in front og CC, CS & SC" (DizzyDog)

= =
My response was:
"Jiji,
These buildings are suurounded by schools- three within 2-5 minutes walk.

DD,
The grassy knoll, as you call it, will be built up, probably within 3-5 years. i understand the plans are already underway. The towers will reportedly get taller, as they move towards hk, away from the airport. Much of LaRossa, and Coastal Skyline will keep its views. And also the higher floors on the higher numbered towers at cc.

An issue worth thinking about, but it still does not elminate the argument in favor of (cheap at under $3,000-psf) properties at Tung Chung being a great long term investment."

= =

HAVING SAID that, i do think that for TC to work as a long run investment, rents will have to increase faster here, than in HK in general. I do think that is likely, but not certain.

Why not visit: the Hongkong property thread:
http://www.greenenergyinvestors.com/index.php?showtopic=920
and comment there too, so we can build up a dialog on both sites

Hong Kong has been rated the freest economy in the world...
for the 13th year in a row by the Heritage Foundation and the Wall Street Journal.

Scoring 89.29 out 100 points, Hong Kong stayed well clear of the closest rival Singapore. which notched up 85.65 points. Although its tally is down 1.6 points from last year due to a new tabulation system, Hong Kong still commands a hefty lead globally.

India and the China mainland ranked 104th and 119th, respectively.

Top Ten:
1. Hong Kong....... 89.29
2. Singapore........ 85.65
3. Australia........... 82.69
4. United States.... 81.98
5. New Zealand.... 81.95
6. United Kingdom 81.55
7. Ireland............. 81.31
8. Luxembourg..... 79.31
9. Switzerland...... 79.05
10 Canada........... 78.72

(Having just BOUGHT A HK PROPERTY , it is interesting to see
these folks are reading from the same song sheet-
But seeing this as a first page lead story, worries me a little- is this becoming a mania??):

Market watchers tip boom in assets

Wednesday, January 17, 2007

Strong economic growth spurred by continuous domestic consumption and revival of investment looks set to lead to an asset boom this year, according to market watchers.
"[For the buoyant Hong Kong economy], there are some differences between last year and this year," said George Leung Siu-kay, adviser on strategy and economics for the Asia-Pacific region at HSBC.

"Last year there was the spending spree and the equity market was hot. This year there will be an asset boom."

He believes the city's economy will grow by 5.3 percent this year. "The slowing in export growth is expected to be mild, while domestic consumption will remain strong. I am optimistic on economic growth this year," he said.

Since the Hong Kong dollar is pegged to the US dollar, which is currently weak, the value of the Hong Kong dollar versus other currencies is understated given the strong economy.

When assets in Hong Kong are denominated in foreign currencies, the prices look cheap, attracting buyer interest, Leung said.

The yuan's appreciation - which is causing a relative depreciation in the Hong Kong dollar - has also played its part. "Asset prices need to rise to offset the factor of depreciation," Leung said.

"The rise in salaries will accelerate, particularly in the financial sector, as the unemployment rate falls. It will eventually spread to other sectors in the economy.



"The rise in salary increases family income, which enhances the appetite for assets."

Hong Kong's November unemployment rate fell to 4.4 percent, the lowest in almost six years.

Leung predicts that inflation may rise to 3 percent on rising rent, salary and import prices.

"Hong Kong interbank rates now stay below 4 percent. While the inflation rate will rise to 3 percent or higher, the real interest rate will fall to near zero," Leung said.

Because he believes funds will continue to flow into Hong Kong, Leung expects interest rates to stay low for most of the year.

Market watchers in the real estate sector also have faith in a property boom. "The real estate and mortgage market will be more active this year as mortgage rates may fall by a further 50 basis points to 4.5 percent from the current 5 percent," said Donald Cheng Wai-hung, principal vice president at mortgage agency mReferral.

New loans may hit their highest value since the 1997 peak, Cheng forecast, saying new residential loans may climb nearly 35 percent year on year to HK$145 billion this year. He said prices for the secondary market in 2007 would rise by nearly 20 percent amid a downward trend in interest rates and pent-up demand from upgraders.

Midland Realty chief analyst Buggle Lau Ka-fai said with the inflation rate and savings rates "on par," people will look to investments less volatile than stocks - such as real estate - to protect their money from inflation.

The secondary residential market has seen a strong recovery recently. Transactions at 10 large benchmarked housing estates totaled 193 in the second week of 2007 compared with 127 for the previous week, according to Ricacorp Properties statistics

@: http://www.thestandard.com.hk/news_detail....&con_type=1

This is the same old chestnut of industry insiders trying to ramp up the market. The vice president at mortgage agency mReferral and Midland Realty chief analyst Buggle Lau Ka-fai seem to be the main commentators. Personally, I still think affordablitity remains an issue for Hong Kongers. However, a speculative rush may occur sometime in the next few years, but this will be much to the detriment of HK as a whole. I believe the HK governement will try to avoid this.

Unlike the UK,
we are seeing substantial rises in incomes and rentals,
which should serve to underpin a continuing rise of HK property prices

HONG KONG has weekly property info in its English newspapers
THE LATEST CHARTS - from Today's SCMP: 1-17-2007



These charts happily confirm what I have been saying and thinking:
Outlying islands (like Lantau) are following the General HK Rental index in a breakout.
Note : 729 sf x hk$14 = hk$10,206 ... so my hk$7800 rental asumption is a -23.6% discount.

i will put this into the header on my GEI thread, and update it from time-to-time

= =

If you read through the whole thread, i think you will get a clear sense of how my thinking has developed.
This is not an "unthinking and unblinking" follow-the-leader type of investment.

Having said that, there is no guarantee that i will get it right, and I am only investing a modest amount.
But even that took plenty of thought in a time of a Global property bubble.

Im thinking your main motivation to purchase were similar to my likely dip into the market in a few weeks: a hedge against what could happen if you dont buy as oppose to an investment in expectation of huge gains. Sensible strategy I believe.

HONG KONG vs. UK ...

it is off-topic, but here's a sort of indication how one pro sees Hong Kong versus the UK:

Rehlaender Bets on Asia Real Estate After Europe Made Him No. 1

By Ian C. Sayson

Feb. 1 (Bloomberg) -- James Rehlaender, manager of the top international property stock fund, is selling shares of European real estate companies and buying more in Asia as demand for offices and housing in the region boosts prices.

``We've had a pretty good run in Europe,'' Rehlaender, the 53-year-old co-manager of the $314-million E.I.I. International Property Fund, said in a phone interview from his home in New York. ``Potential returns in certain markets in Asia are more attractive.''

Office vacancies at a six-year low in Tokyo, a shortage of apartments in Hong Kong and Asia's economic growth are helping drive up rentals by as much as 50 percent in the region.

Rehlaender, who says Asian investments may rise to 60 percent of his portfolio this year from 45 percent in 2006, has bought shares of Central Pattana Pcl, Thailand's biggest shopping-mall builder, and of Keppel Land Ltd., Singapore's third-largest developer by assets, according to data compiled by Bloomberg.

Among his sales: Unibail Holding SA, France's largest real- estate investment trust and Great Portland Estates Plc, a U.K. property company that specializes in central London.

The fund, which Rehlaender co-manages with Peter Nieuwland, returned 60 percent last year, the biggest gain among 15 real estate funds worldwide that invest outside their home markets, according to data compiled by Bloomberg.

...more: http://www.bloomberg.com/apps/news?pid=206...&refer=home

IS THERE A SHORTAGE?
xxx from today's HK Standard:

Potential residential land supply in HK: expected to be 536 hectares over the next five years
= providing an estimated 139,000 flats

BUT the exact supply depends is subject to the progress of land-conversion premium agreements,
wherein developer bids trigger land sales.

But immediate supply is tightening somewhat.

Number of shares available for pre-sale:

Q3- 2006 : 65,000
Q4- 2006 : 59,000 - 9.2%

Average annual take-up is 20,000, so that's a significant drop,
but there remain some three years of supply still available

for those interested in fundamentals, consider:

SOME BULLISH POINTS from Today's Hong Kong Press

+ HSBC set to Spark martgage War- (Front Page Headline)
.. HSBC dropped its mortgage rate to 4.87 percent from 5.00, plus a cc-spending rebate of 0.88%
Ina survey by Ricacorp, 46 percent of 100 buyers said the rate cut would speed up peoples' buying plans.
(note: HSBC has the largest market share at 17.6 percent, with BOC at 15.9%, HangSeng at 13.8%)

+ Investment banks see upturn in home sales (Standard. pg.A6):
.. Thanks to: wealth effect of buoyant stock market, and wage rises... plus strong RMB, low deposit rates.
Also: "from now until 2009 there will be a severe imbalance between deamnd and supply (in residential market)
The deleivery of flats will fall from 35,000 units in 2002, to 12,000 in 2009, while the market absorbed 24,521 units
in the period 1998 to 2003. Andrew Look of UBS said.

+ Rates forecast to hit 12-year lows- (Property-P3-Stan.)
.. Real interest rates, or the interest rate minus the prevailing inflation rate are likely to fall to about 1.5 percent this year, a 12-year low. This compares with an average of 3 percent last year

MIPIM 2007

As the world's premier real estate summit, MIPIM draws upon its unique international coverage and reputation to bring together the most influential decision-makers in the market, offering them access to the largest available showcase of development projects. Take a look at our interactive presentation to learn more about the 2007 market. More information about MIPIM 2007 VISIT - www.mipim.com

Despite yesterday's 9.2% slide in Shanghai stocks, there are some encouraging words about property in today's press:

1/
The Standard says: "Big Tax Rebates are on the Way" (in HK):

"It could be the sweetest budget yet for Hong Kong's taxpayer's and underprivileged"- with hefty salaries tax rebates and increased welfare spending. Possible return to the lower salary-tax rates of 2002-2003 is anticipated by some.

2/SCMP says: "Negative Interest Rates to Lift Price"
Bank deposits will move to higher-yielding investments such as property

+ Savings rate likely to stay flat at 2.3 percent- for deposits of less than hk$100,000

+ the immanent change to a negative interest rate environment prompted optimistic forecasts that residential prices will rise 20 percent to 30 percent as economic confidence improves ands salaries rise

As of last Dec.2006, a total of hk$4.7 trillion was deposited in HK's banking system. A change in the cash-to-property ratio from 50:50 at present to 40:60, would translate to a 30 percent rise in residential prices as a result of money flowing into the real estate market.

Intense property speculation triggered prices to shoot up 329 percent from 1991 to 1997, when real interest rates were between 1.6 percent and negative 8.7 percent... Veteran property investor Peter Churchhouse, who is also a property director at LIM Advisors said: "Property prices will move up one month following the (apeearance of) negative interest rates."

HONG KONG PRICES RISING, says Cheung Kong's Chui...

did warn you, says `god' Chiu

Danny Chung ...Friday, March 09, 2007

For Justin Chiu Kwok-hung, Hong Kong's "god of property" and executive director at developer Cheung Kong (Holdings) (0001), it was perhaps inevitable that the bubble would burst on the stock market.
"At the end of last year, I said to everybody: `It's about time to sell out and buy property.' If you listened to me, and sold stocks at 21,000 points, bought property and made money after making money [from stocks], then you'd be even happier," Chiu said.

Still, he recalled that in 2005, he thought property prices in 2006 would have little room for growth and investing in the stock market would be a better choice for investors.

Chiu was speaking earlier this week after coming back from an overseas business trip to see investors enduring a roller-coaster ride on the back of recent volatility in the local and global stock markets.

Monday, the stock market closed down 777 points, the biggest one-day fall since the September 11 terrorist attacks in 2001.

In any case, those investors that did get out in time would be sitting comfortably for the time being.

"The property market in the past two months has risen at least 5 percent," Chiu said.

"If you sold shares and bought a flat, then you'd be rich. Not a lot of people listened to me."

..
...more: http://www.thestandard.com.hk/news_detail....;d_str=20070309

COMPARING THREE ECONOMIES

Economic Indicators : Macau : HongKong : Shenzhen
Period................... q1-q3'06: .. 2006 .: .. 2006
Real GNP.............. : +15.4%: . + 6.8% : . +15.0%
Exports................. : +18.6%: . + 9.4% : . +34.1%
Tourist arrivals...... : +17.6%: . + 8.1% : . +12.5%
Bank Loans OS...... : +15.2%: . + 2.7% : . + 9.9%
Unemployment rate : .. 3.5%: ... 4.4% : ... 2.3%
Inflation rate.......... : + 5.4%: ... 2.0% : ... 2.2%
Property prices....... :

Centaline now has sub-indices for various estates on their website:
url : http://www.centanet.com/cci_e.htm

example:
[Hong Kong Island]
Taikoo Shing............ 5,380.78 3.53%
Heng Fa Chuen........ 4,381.53 1.59%
Kornhill.................... 4,501.30 4.21%
Baguio Villa.............. 5,720.18 5.41%
Robinson Place......... 8,265.97 0.54%
Hong Kong Parkview.. 8,659.39 6.16%
Dynasty Court.......... 12,128.51 0.71%
Beverly Hill................. 7,355.39 0.31%
City Garden................ 5,339.52 8.69%
South Horizons........... 4,326.66 7.60%
Convention Plaza Apts. 7,932.75 2.91%

"Easter boon for home sales" - says SCMP article

Property sales over the 5-day holiday

PROJECT============= : UNITS: DEVELOPER
Manhattan Hill, Lai Chi Kok..... : #180 : Sun Hung Kai Properties
The Sherwood, Tuen Mun etc* : #150 : Henderson Land Development
Bel-Air, Cyberport................. : # 77 : Pacific Century Premium Developments
Harbour Green, Tai Kok Tsui... : # 65 : Sun Hung Kai Properties
Sausalito, Ma On Shan........... : # 60 : Cheung Kong Holdings
Apex, Kwai Cheung............... : # 30 : Cheung Kong Holdings
Vision City, Tsuen Wan.......... : # 23 : Sino Land
............................. TOTAL ... : #585 : up sixfold from Easter 2006 (90 units)

* plus:
Grand Promenade, Sai Wan Ho
Royal Green, Sheung Shui
Grand Waterfront, To Kwa Wan

Housing rents have increased 4 to 5 per cent from the beginning of the year, and may go up 10-15% when current leases are renewed.

Manhattan Hill sold 180 units over the past 5 days. About 1,000 of the 1,100 unit project had been sold. The flats went for hk$7,500 psf, and the devloper planned to raise the price of the remaining units by 15-20 per cent.

Dr Bubb, agree HK is not a bad place to invest in right now. This year is much more positive, though I think Macau will be better !!! Singapore (just went easter) has gone property mad, so much harder to say. HK is safe, Macau is a gamble, and Singapore in between !!

YES.
The signs of a healthy property bull market are increasing in HK.

Macau meantime, is facing a few teething problems as the government catches flack from those loacls who have not shared in the boom. (see Macau thread)

If you are curious about property on Lantau Island, you might have a look at a new forum:
http://z4.invisionfree.com/LantauLiving/in...?act=SC&c=4

Banks find financing speculation irresistable - even in Hong Kong
(which saw its cyclical low just 3 1/2 years ago)

Latest News:

STANCHART ACTS ON INVESTMENT PROPERTY LOANS

Reacting to the rising demand for investment properties, the HK unit of Standard Chartered (HK:2888) announced an innovative mortgage program which will make it easier for people to acquire such properties.

Under the new scheme, the downpayment for investment property buyers will be reduced to 15 percent from the current market average of 30 percent. Standard Chartered (Hong Kong) becomes the first lender in the city to offer a loan-to-value ratio of up to 85 percent at conventional interest rates.
. .
While Hong Kong Monetary Authority regulations prohibit lenders from offering first mortgages exceeding 70 percent of a property's purchase price, Standard chartered is getting around the rule by having Radian Group, a global credit risk mamagement company cover the extra 15 percent under its mortgage insurance program. StanChart will bear a higher risk level as a result of relaxing the loan-to-valur ratio. Analysts say the investment property market has become very attractive as there is a significant increase in rental demand.

= =

"Innovative"?? LOL.
You want innovation? Banks will provide innovation, to get HK's property bubble going again,
just 3 1/2 years afer the Sept.2003 low- which was 70% of the 1997 peak.
Some folks never learn- and those that did learn have been transferred by now.

See also HK-prop. thread on GEI: http://www.greenenergyinvestors.com/index.php?showtopic=920

Any modestly priced property with low down payments and easy to obtain mortgages for investors you would recommend?

Prices are no bargain in HK, and yields are not high.

So why do I like this market?:

RENTS ARE RISING

Yesterday's SCMP was talking about expats getting 10 - 15 percent increases in their housing allowances because of fast-rising rents. Luxury flats are expected to go up by 10-15% this year, after 10-30% rises last year. Rental growth is boosted by a limited supply and fast grwoing demand as expats are drawn to the HK SAR by a booming financial sector. There's a new factor, mainland chinese companies getting listings on the HK market are also moving people to HK- a chinese expat boom.

With the HK$ falling against the RMB, prices look attractive to cash-rich chinese buyers

Yields??
6-7 percent for older flats in central
4-5 percent (if you are lucky) for flats in places like Discovery bay

HK ENTREPRENEUR's GROUP meeting coming up
see: http://www.greenenergyinvestors.com/index.php?showtopic=1960

= == == =
(Info for meeting):

I found this report:
http://www.colliers.com/Content/Repositori...7-Knowledge.pdf
EXCERPTS:
1/
Thanks to the wealth effect attributed to the buoyant stock market prices, the average luxury
residential price increased 1.6% QoQ from HK$9,753 per sq ft in November 2006 to HK$9,910 per sq ft in February 2007.

• Given the positive buying sentiment, luxury residential prices are predicted to increase 16%
in the next 12 months. Luxury rentals will rise further by another 9% during the same period
in anticipation of the sustained leasing demand attributed to the financial sector.

2/
On the local front, local banks remained competitive in offering their mortgage rates to their customers in 1Q 2007. Before making any reduction in prime rates, a number of leading banks in Hong Kong have cut mortgage rates during 1Q 2007, primarily because of the strong liquidity in the banking sector. Being the typical reference benchmark in the banking industry, the three-month inter-bank offer rates stayed low, and moved within a 50-basis point range between 3.90% and 4.40% during the period between December 2006 and February 2007. Amongst the various local banks in Hong Kong, HSBC took the lead again to offer their customers attractive mortgage rates. Instead of gauging its mortgage rates at Prime (“P”) minus 2.75% (or 5.00% per annum), the new effective mortgage rates are reduced to “P” minus 2.88% (or 4.87% per annum). In response to the new mortgage terms offered by HSBC, other banks such as the Bank of East Asia, Bank of China (Hong Kong), Citibank and Chong Hing Bank all followed suit to provide new mortgage plans to lure customers.

3/
Industrial property assets, by virtue of their premium rental yields, continued to be sought after by the investment community in 1Q 2007. A spate of whole-block industrial buildings with lump-sum price brackets between HK$40 million and HK$200 million were transacted during 1Q 2007.

The two prominent ones in terms of scale were Wai Yuen Tong Medicine Building in Kowloon Bay and Prosperity Centre in Kwai Chung. The former, comprising about 129,000 sq ft of industrial floor area, was purchased by an investment fund for a total consideration of HK$188 million or an average unit price of HK$1,455 per sq ft. The latter was snapped up by a seasoned local investor for HK$208 million or an average of HK$862 per sq ft. Beside the popularity of industrial developments, the local property investment market featured a couple of major investment transactions of retail developments in Mong Kok, where the number of sizeable investment sales has been few.

In January 2007, Mong Kok Computer Centre, located in one of the most popular streets in Mong Kok, was acquired by an investment fund for a total consideration of HK$750 million. Lately, a majority interest of over 90% at Golden Plaza, one of the themed shopping arcades in Mong Kok, was transacted for HK$530 million.

4/
===Rents (HK$ / sq ft / month)...... Capital Values (HK$ / sq ft) Yields
========Feb 06 Feb 07 Feb 08(f) Feb 06 Feb 07 Feb 08(f) Feb 06 Feb 07 Feb 08(f)
Peak............ 40.25 44.55 49.90 .....12,169 13,417 15,831 3.97% 3.98% 3.78%
South Side... 34.96 36.89 40.58 .......9,872 10,469 12,353 4.25% 4.23% 3.94%
Mid-levels.... 27.84 29.90 32.29 .......8,136 8,462 9,562 ....4.11% 4.24% 4.05%
Happy Valley 25.11 26.83 29.24 .......7,340 7,845 9,100 ....4.11% 4.10% 3.86%
North Point... 22.04 22.81 24.41 .......6,323 6,620 7,480 ....4.18% 4.14% 3.92%
Average....... 31.39 33.66 36.82 .......9,293 9,910 11,467 ..4.05% 4.08% 3.85%

INDUSTRIAL MARKET - KEY MARKET INDICATORS
Rents (HK$/sq ft/month) Capital Values (HK$/sq ft) Yields
========Feb 06 Feb 07 Feb 08 (f) Feb 06 Feb 07 Feb 08 (f) Feb 06 Feb 07 Feb 08 (f)
Factory.......... 6.44. 7.19. 8.12............. 957 1,155 1,363.......... 8.1% 7.5% 7.2%
Warehouse..... 6.34. 6.75. 7.76............ 880 1,026 1,180.......... 8.6% 7.9% 7.9%
I-O Building.. 11.16 12.39 13.63........ 1,935 2,205 2,469.......... 6.9% 6.7% 6.6%

Now HONG KONG is leaving UK Property behind also...

40% JUMP in HK property prices is forecast

"Property stocks also moved higher, traders said, with the Hang Seng Property subindex up 0.97 percent.

Sino Land, the biggest gainer among blue chips, rose 2.6 percent to HK$17.92 after UBS AG raised its target for the developer to HK$21.30 from HK$18.36.

The investment bank said Sino Land will benefit from rising residential property prices in Hong Kong. UBS also predicted home prices in the city will have risen 40 percent by the end of 2008 from the beginning of this year.

Cheung Kong edged up 0.6 percent to HK$114.70, and Hang Lung Properties moved up 1.4 percent to HK$29.95."

-see: http://www.iht.com/articles/ap/2007/07/23/...ong-Markets.php

DrBubb - do you have any updated view on prospects for capital appreciation of Hong Kong island property in 2007/2008? I'm bullish and have just bought a second buy-to-let in the Western mid-Levels area. Rental yields on both are over 5.5%.

i'm Bullish still.
Important reasons why:

+ HK property developers shares tend to lead HK property by about 6 months, and they have stayed bullish

+ A falling HK$ (relative to the chinese RMB) is making HK prices look cheap to mainlanders

I have more to say about this on the HK property thread on GEI

Where will China's excess liquidity go? Hong Kong,
$100 billion of $2 Trillion of Savings. A first step?

China's stock markets have been driven to nosebleed levels by excess liquidity.
And that is liquidity which until now has been trapped in China. Now that looks set to change
===============

On the first day under the new system, HK stocks are up 3%.

China Blesses Hong Kong

By Christopher Hancock / August 24, 2007

On Monday, Beijing announced that it would permit mainland Chinese citizens to invest in the Hong Kong stock market. The proposal allows Chinese citizens to open accounts at the Tianjin branch of the Bank of China, and then sell renminbi (RMB) and buy Hong Kong dollars without limit for the purpose of buying shares in Hong Kong.

The news sent the index of Hong Kong-listed shares in mainland companies up by 8.74%, their biggest one-day rise since May 2000. This should also go a long way in easing speculative pressure on the Shanghai A-share market.

This is probably the most important financial development in China since their entry into the World Trade Organization in 2001. So you all were a little surprised the announcement was delegated to page six in the Financial Times.

Once again, the cover story focused on the U.S. liquidity crunch. If you’re looking for liquidity, there’s arguably no better place to turn than China.

China had accumulated foreign exchange reserves in excess of $1.33 trillion at the end of June. Total national household savings in China are estimated to be roughly $2.2 trillion.

With regards to the “bigger picture,” releasing capital account control is the next step towards the eventual flotation of the RMB. This move should allow many on Capitol Hill to take a deep breath.

China took the first step towards currency liberalization in December 1996, when it made the renminbi convertible for current account transactions, removing both quantitative and regulatory restrictions on the use of foreign exchange for current account transactions. China’s WTO accession in 2001 has also been seen as a catalyst for capital account liberalization and currency convertibility.

For lack of a better description, the current account is the difference between a nation's total exports of goods, services and transfers to its total imports of the same. Relaxing the current account has allowed Chinese manufacturers to feed American consumers. Thus far, this has been primary fuel feeding the Chinese economy.

@: http://www.howestreet.com/articles/index.php?article_id=4613

- - -

Guess what else will be a likely beneficiary of this move?

Hong Kong Property.

That's yet another bit of evidence showing the superiority of HK property investments,
over buying the bubble-peak in London and the UK

(Whodathunkit?)

A NEW BREED OF SPECULATOR - says today's SCMP/

TIN SHUI WAN

"A new breed of speculator came by the coachload,
bussed in from Shenzhen by property agents for the launch"
(and they accounted for up to 15% of sales)

This for a property at Tin Shui Wan, "the site of the fierced property speculation in 1997-98".
The property then was Cheung Kong's Kingswood Villas, one of the largest in HK.

Some of those properties fell 67% in value, versus a contract price of HK$4,300 /sf

This time the buyers are chasing properties at Central Park Towers, next door to Kingswood,
at an average price of HK$2,585 psf. Only small downpayment needed, with the devloper financing
up to 100% of the purchase on the first 24 units. (new strategy??)

A new rail link on the Lok ma Chau spur line, may have encouraged interest

Agree with your view DrBubb. Going long on HK property at this point in the cycle is a no-brainer IMHO, although HK island investments around the Central area are always less risky than on Kowloon side. Market consensus seems to be that mid-tier property prices may increase 10-20% over next 12 months, I think it may surprise on the upside. HK stockmarket is poised for sustained growth phase from mainland China capital investment outflows, this will feed on into lower-middle residential property investment; luxury market in HK is already booming beyond belief. And I think this is only the start. HK is poised for another bout of asset price inflation which could last for several years - stocks and property. I'm fully invested!