HK - Housing 01 (May 08 - Aug 11)

[millionairemind]

Published December 4, 2008

HK's home sales dive 79% in Nov

(HONG KONG) Hong Kong's home sales fell 79 per cent last month, the biggest drop since at least 1996, as a recession and a falling stock market hurt demand.

The number of residential units changing hands in the city sank to 3,264 last month, according to a Land Registry statement yesterday. That followed the largest drop since November 1999 in October. By value, residential sales fell 87 per cent from a year earlier to HK$9 billion (S$1.8 billion) last month.

A recession in Hong Kong and a 52 per cent plunge in the city's stock market this year have hurt home sales as people curb spending.

HSBC Holdings plc and Bank of China Ltd, the city's two biggest home lenders, have also raised mortgage rates to maintain profitability, adding to pressure on property prices.

Luxury home prices have fallen 17.7 per cent since June, according to realtor, Centaline Property Agency Ltd.

HSBC, the bank with the most branches in Hong Kong, increased its mortgage rates in the city the most since Asia's 1997-98 financial crisis.

The bank will charge 1.5 percentage point below its so-called best rate for mortgages above HK$1.5 million, spokeswoman Louisa Leung said. The discount, down from 2 percentage points, will bring HSBC's home loan rates to about 3.5 per cent, according to Bloomberg calculations. -- Bloomberg

[winston]

Hong Kong Home Prices May Fall More on Tighter Credit (Update2) By Kelvin Wong

Dec. 5 (Bloomberg) -- Hong Kong home prices, down almost a quarter from their five-year high in March, may drop further as the credit crisis drives up joblessness and threatens to spark defaults.

“There’s a real lack of funds,” Leland Sun, chairman of Hong Kong-based Pan Asian Mortgage Co., said at a Bloomberg forum yesterday. “Banks are unwilling to lend to other banks, let alone individuals and small and medium businesses.”

HSBC Holdings Plc, the city’s biggest bank by branches, raised mortgage rates as much as 75 basis points this week, the most in a decade. Increased risk has prompted banks to tighten credit even as benchmark borrowing costs fall worldwide, reviving memories of the 1997-98 Asian crisis when Hong Kong home prices slumped by two-thirds from their peak.

“The latest rate hikes in mortgage interest rates, more job losses and weak retail sales figures suggest that the outlook for the property markets in Hong Kong will remain difficult,” Citigroup Inc. Hong Kong-based analysts Tony Tsang and Marco Sze wrote in a Dec. 2 research note.

Mortgage rates in Hong Kong have climbed even as the de facto central bank has cut benchmark borrowing costs in line with the U.S. Federal Reserve, which has reduced its target federal funds rate nine times since September, 2007, in an effort to spur lending.

Higher interest rates may depress sales and contribute to further declines in home prices, which already have fallen 22 percent since March, according to Centaline Property Agency Ltd.

The number of housing units changing hands fell 79 percent in November, the biggest decline in at least 12 years, according to the government.

HSBC, Fed

Banks in Hong Kong are raising mortgage charges after having tracked six of the Fed’s past nine benchmark rate cuts. HSBC cut its best rate to a four-year low of 5 percent on Nov. 7.

The Hong Kong University Property Derivative Index shows investors expect a drop of as much as 30 percent in property prices in the next year, Richard Wo, head of Product Services and Training at Sun Hung Kai Financial Ltd., said in an interview with Bloomberg Television.

The number of homeowners with apartments worth less than their mortgages surged 174 percent in the third quarter, the Hong Kong Monetary Authority said last month. With prices of some homes lower than the value of the loans they secure, banks may not be able to recoup the money they are owed when the sell apartments on which they have foreclosed.

Negative Equity

Sun at mortgage originator Pan Asian said “negative equity” homeowners in Hong Kong might rise higher than in 2003, though he said people will keep paying their mortgages, as long as joblessness doesn’t spiral.

Homebuyers and banks may be concerned both about Hong Kong’s economy, which contracted 0.5 percent in the third quarter to put the city in its first recession in 2003, and the jobless rate -- which rose to 3.5 percent in October. A further 6,000 jobs have been lost in the past six weeks, the South China Morning Post newspaper reported on Dec. 1.

Sun Hung Kai Properties Ltd., Hong Kong’s biggest developer by market value, had its target price cut by Citigroup Inc. on expectations prices will fall further. Still, Sun Hung Kai told shareholders yesterday that prices stabilized in the past two weeks.

Hang Seng Index

The Hang Seng Property Index, tracking the share of the city’s biggest developers, has fallen 61 percent in 2008, more than the 50 percent drop in the benchmark Hang Seng Index.

HSBC itself, which employs more than 21,000 people in Hong Kong, said last month that it’s cutting 450 jobs in the city. Standard Chartered Plc said on Dec. 2 it will fire 200 people, 4 percent of its Hong Kong employees.

Still, the mortgage delinquency ratio was unchanged at 0.05 percent in October, the HKMA said last month. That compares with a ratio of 0.78 percent in October 1998.

Peter Wong, an executive director at HSBC’s Asia-Pacific unit, said economic conditions may dictate further mortgage rate increases. “We have not decided whether we will raise interest rates again,” Wong told reporters in a briefing this week. “That depends on the operating environment, and also on the credit and risk profile in the economy.”

[winston]

Mortgage rates may rise further
AlfredLiu


DBS Bank (Hong Kong) said the city's mortgage rates may increase further next year as the rates are already at a low level.

Chief executive Amy Yip said yesterday that for the level of mortgage rates to be less than the best lending rate is exceptional. "The mortgage business is nearly not profitable now," she said.

Asked if DBS will relax lending next year, Yip said it will follow the market but there will be no room for a cut in Hong Kong if the US Federal Reserve lowers interest rates again.

She said DBS has no plans to follow HSBC Holdings (0005) and set up a fund to increase credit access for small and medium-sized enterprises during the financial crisis.

Dah Sing Bank and Mevas Bank, which are both part of Dah Sing Banking Group (2356), said yesterday they will raise mortgage rates for new customers by 25 basis points. This followed increases by other major players.

They will charge prime minus 1.5 percent, or 3.75 percent, for mortgages of less than HK$1 million, with plans including a cash rebate of 0.25 percent.

The two banks will charge prime minus 1.75 percent, or 3.5 percent, for loans of more than HK$1 million, and offer a cash rebate of 0.5 percent.

The changes, which take effect today, mean new customers taking out a HK$1 million home loan will pay HK$2,500 more each year.

Last Tuesday, Bank of China (Hong Kong) (2388) raised its mortgage rates 50 basis points to offer effective rates of 3.5 percent to 3.75 percent.

On Monday, HSBC increased its mortgage rates by 50 to 75 basis points to provide effective mortgage rates of 3.5 percent to 4 percent.

[millionairemind]

Published December 11, 2008

HK developers in denial as prices slide

(HONG KONG) Hong Kong's big developers have been in denial mode for the last week, countering grim forecasts of more property price slides with upbeat messages.

But faced with recession, looming job cuts and rising mortgage rates, few in the city believe them - although some analysts think their share prices reflect too much pessimism.

In property agency shop windows across the city, slashes of red marker pen and newly scribbled prices suggest apartments have already dropped 20 per cent in value in the last month.

Growing public expectations of a repeat of a 2003 slump, when the Sars respiratory disease ravaged Hong Kong's economy, prompted Sun Hung Kai Properties to predict last week that prices would rebound 5 per cent in 2009.

And Henderson Land chairman Lee Shau-kee, nicknamed Hong Kong's Warren Buffett for his savvy investing, ventured that the worst for the city's property market was past. He then added that the worst of the global economic slowdown was yet to come.

Many disagree with that property outlook, including Stephen Riady, president of Indonesia's Lippo Group, which invests in property across Asia, including in Hong Kong and China.

'I doubt that,' Mr Riady said of the upbeat predictions. 'I think Hong Kong will probably go down much more. It's a very volatile market. It'll go down more than Singapore.'

A poll of analysts last month showed Hong Kong apartment prices were expected to drop 20 per cent by the end of next year and Singapore prices would fall 21 per cent.

Brokers GFI Colliers say indicative property derivative levels suggest investors are betting Hong Kong prices will reach a bottom in December 2009, falling at least 25 per cent from now.

Chris van Beek, vice- president at GFI Colliers, said landlords, with anywhere between five or six apartments to portfolios worth US$65 million, were keen to switch to cash.

But they were dropping prices because buyers are scarce, partly because banks are demanding 30- 40 per cent downpayments rather than 10 per cent before the financial crisis.

'Some are offloading at 30 per cent discounts, but struggling to sell,' Mr van Beek said. 'Many buyers think they might as well wait another four or five months for prices to come down more.' Hong Kong property transactions fell to a 17-year low in November, down 87 per cent in value from a year earlier.

The territory is in recession, with exports hit by weakening global demand and consumers jolted by falling asset prices.

Although Sun Hung Kai reported strong interest at one of its projects last week - where buyers were given discounts of up to 13 per cent - the firm has cut its target for apartment sales this financial year by a fifth.

Mortgage rate hikes by HSBC and Bank of China (Hong Kong) last week did not help, with the banks keen to address concerns over higher lending risks.

However, analysts do not expect a repeat of the negative equity on mortgages seen in the early 2000s, because property prices have almost doubled since the beginning of 2004.

CLSA analyst Nicole Wong expects residential prices to fall 15 per cent in the next year, but believes investors have been too bearish on Hong Kong property stocks - pricing in a Sars-like scenario when that was unlikely.

She pinpointed Sun Hung Kai, Henderson Land and Sino Land as good value. The stocks are trading at discounts of 48-62 per cent to net asset value. -- Reuters

[winston]

20081218 Macquarie TurnKey - HK landlords - don't dip the toes in

Rally won’t likely be sustained until the economy and physical rents are closer to the bottom

The HK landlords’ share prices have halved over the past 12 months and are now trading at a 46% discount to NAV. Is it time to wade back in, or perhaps dip the toes back in the water? Not yet in our view. The HK landlords have bounced 30% off their November lows outperforming the HSI by 16%. This is a typical short-term rally before a sustainable recovery in listed prices likely to occur later.

In past cycles, we saw this occur once before the true bottom was reached in the 1994/95 downcycle, twice during 1997/98 and once during 2001 to 2003. Our Microstrategy team also believes we are in a bear market rally – see its report of 17 December, Settling the debate of “P” over “E”.

Indicators suggest 2Q09 sustainable recovery more likely

2009 is likely to be bleak economically for HK, which will have an obviously negative impact on spot rents. This is well known. It is likely that the right time to buy the landlords is when physical market news is at its worst and the economy is firmly entrenched in a recession. Intuitively it will feel uncomfortable buying stocks that have the primary business of collecting rent.

However, past cycles show that listed prices reach their bottom 3 to 6 months before the economy and around 18 months before spot rents. On a YoY basis, HK GDP may not bottom until closer to the end of 2009 and a typical two-year physical office downturn suggests a bottom for spot rents in mid-to-late 2011.

Dividends to be cut, but 1998 not likely to be repeated

We expect the landlords to reduce payout ratios and retain cash, similar to many other real estate companies around the region. We have cut the sector’s 2008 weighted average dividend by 17%, 2009 by 20% and 2010 by 16%. Those seeking yield from these names may be disappointed. However, balance sheets and acquisition and development plans are more conservative in 2008/09 compared with the Asian Financial Crisis. This means sharp drops in dividends are unlikely. Post the dividend cuts, the sector is showing an FY09 yield of 5.3%.

Hongkong Land move to Underperform; Swire stays Underperform; Hysan to Neutral; Wharf stays Outperform

Given recent stock price moves and our scepticism about a sustainable recovery at this point we downgrade Hongkong Land to Underperform and downgrade Hysan to Neutral. We retain our Swire Underperform. We believe Great Eagle remains good value although lacks a catalyst and clarity over its future strategy and Wharf remains our top pick in the sector.

[winston]

Year of cheaper flats looms by Alfred Liu

The residential property sector is expected to remain weak next year with prices in the mass market falling as much as 25 percent.

"A deepening global economic crisis, rising unemployment and the possibility of rising mortgage rates will continue to slow down demand for residential properties," said Joseph Tsang Hon-ping of property consultant Jones Lang LaSalle. "The tightening credit market is also expected to extend into 2009, further dampening investment and end-user demand."

As Jones Lang LaSalle sees it, the overall property market will not start to rebound until the latter half of 2010, despite Hong Kong's strong fundamentals and Beijing's efforts to maintain economic growth.

Market sentiment in the local property sector dampened in the second half of this year as the global financial situation worsened after the collapse of Lehman Brothers in September.

Overall residential prices dropped 23.3 percent to an average HK$3,260 per square foot compared with a peak of HK$4,251psf earlier in the year, according to Midland Realty corporate development director Gordon Tse Tsz-man.

In October, prices plunged 10 percent - the largest fall in a single month this year. The luxury residential market was hit particularly hard, with prices cut by 35 percent since September, returning to the levels of the second quarter of 2007, said CB Richard Ellis.

"As purchasing sentiment will remain slack for the time being, with potential buyers staying cautious in light of the weakening economy, luxury residential prices may continue to trek south by not less than 20 percent over the next 12 months," it forecast.

On transactions, Centaline Property expects the total number of deals this year to be 114,000 with a value of HK$413 billion, showing declines of 22 percent and 21 percent, respectively, on 2007. Centaline also estimates deals will decrease 12 percent next year to 100,000 from this year and their value will drop 15 percent to HK$350 billion.

Still, Midland said buying flats is attractive because of the price plunge and low interest rates.

"We predict these factors will shore up buyers' confidence and drive up transactions in the first half of next year," chief analyst Buggle Lau Ka-fai said.

About 27,000 new flats will be available next year.

[kennynah]

when the cry is louder...it just means the pain is greater now...let this noise get louder and then...it will be time to scoop up...

remember, how often we told ourselves..."f**k man...only if, i had bought at that time...now i would be 1 million richer from the capital appreciation" ...well, get this..."f**k man...here's the time to get smart"...

[millionairemind]

Hong Kong's New Mortgage Loans Fall for Fourth Month (Update1)
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By Chia-Peck Wong

Dec. 29 (Bloomberg) -- Hong Kong mortgage loans fell for a fourth month in November as banks tightened lending amid the economic slowdown and as property prices slumped.

Banks in Hong Kong approved HK$8.5 billion ($1.1 billion) of new mortgage loans last month, 69 percent less than a year earlier, figures from the Hong Kong Monetary Authority show. Loans fell 38 percent from October, the HKMA said today.

House prices in the city have slumped almost a quarter from a five-year high in March as the global credit crisis drives up unemployment and threatens more loan defaults. Existing home sales for the full year may fall almost 18 percent to 75,160 units, according to a Dec. 20 report by Centaline, one of the city's biggest real estate agencies.

``Banks are not willing to take on this business as margins don't amount to much and housing prices will adjust in this climate,'' Yuk Kei Lee, a Hong Kong-based analyst at Core Pacific-Yamaichi International, said before the HKMA's announcement.

The outlook for mortgage lending will likely worsen as unemployment rises and banks raise interest rates on home loans. HSBC Holdings Plc, which has the biggest bank network in the city, earlier this month raised mortgage rates as much as 75 basis points earlier to maintain loan profitability. HSBC also cut 500 jobs in Asia last month, most of these in Hong Kong.

Lending Slows

The proportion of new loans approved at more than 2.5 percent below the best lending rate fell to 15 percent in November, from 90.9 percent a year earlier and 51.7 percent in October, HKMA figures show.

The so-called best lending rate is 5 percent at HSBC, Hang Seng Bank Ltd. and BOC Hong Kong (Holdings) Ltd. The benchmark lending rate at Standard Chartered Plc and Bank of East Asia Ltd. is 5.25 percent.

Hong Kong lending in October posted the first month-on- month decline since Dec. 2007, the HKMA said. Total lending climbed 7 percent to HK$3.41 trillion, the slowest growth since May 2007, from HK$3.19 trillion a year earlier, figures from the HKMA showed last month.

First Recession

Hong Kong Chief Executive Donald Tsang said Dec. 8 a recession in 2009 is ``inevitable'' because of the global financial crisis, and forecast the economy will recover in 2010.

The city's economy last month entered its first recession since the outbreak of the deadly SARS epidemic in 2003. The seasonally adjusted unemployment rate in the city of 7 million people rose to 3.5 percent in the three months ended Oct. 31, the highest level in almost a year.

The number of homeowners with apartments worth less than the mortgages they borrowed -- negative equity -- almost doubled in the third quarter to an estimated 2,568 cases worth HK$6 billion, the HKMA said Nov. 21.

[millionairemind]

January 6, 2009, 5.14 pm (Singapore time)

HK says 2008 property deals fell over 20%

HONG KONG - Hong Kong's property market contracted sharply in 2008, with the value and number of sales for all types of building units falling by more than a fifth, government data showed on Tuesday.

The Land Registry said it recorded 113,298 agreements last year compared with 145,691 in 2007. The total value of the deals amounted to HK$413.11 billion (US$53 billion), down 21.4 per cent from HK$525.63 billion in 2007.

The Land Registry had said on Monday that the total number of sale and purchase agreements for residential units rose 44.2 per cent to 4,706 in December from November, but the December number was down 65 per cent from the year-ago period.

The residential agreements in December were valued at HK$17.7 billion, up 96.1 per cent from November but down 66 per cent from a year ago.

The improved month-on-month home sales data helped spur buying in Hong Kong property stocks on Tuesday, with the blue-chip property sub-index gaining 2.5 per cent, bucking a 0.35 per cent fall in the benchmark Hang Seng Index.

Analysts generally expect to see a stable property market in the city in the second half of 2009.

Shares of Sun Hung Kai Properties, the territory's biggest developer, surged 4.2 per cent while Henderson Land climbed 4.4 per cent. -- REUTERS

[winston]

DJ MARKET TALK: Daiwa Tips HK Ppty Shrs Undervalued,Positive View

0852 [Dow Jones] Daiwa tips panic selling in HK property physical market has subsided, while some demand returns, with sustained take-up of new launches in primary market and increase in secondary-market transactions lately (weekly average number of transactions in 35 major housing estates for December was 155 units, vs weeks ended Jan. 4, Jan. 11 at 191 units, 187 units, respectively).

"The near-term outlook for the sector will hinge on whether buyers are willing to pay higher prices and whether new launches become too large for the market to absorb," says Daiwa. Believes sector remains undervalued and keeps positive rating.

Keeps Cheung Kong (0001.HK), SHK Properties (0016.HK), Henderson Land (0012.HK) at Outperform. Hang Seng Property Subindex closed +0.8% at 16,793 Friday.(