Hong Kong Real Estate Transactions Plunge

Tyler Durden's picture

A month ago, Zero Hedge observed the collapse in March real estate prices and number of transactions in Beijing (here and here), speculating that this could be the beginning of the end of the Chinese real estate bubble. Today, courtesy of the Hong Kong land registry service, we find that the drubbing has shifted from mainland China to Hong Kong. "The number of sale and purchase agreements for all building units received for registration in April was 10,386 (-23.1% compared with March and -27.4% compared with April 2010). Among the sale and purchase agreements, 7,635 were for residential units (-27% compared with March and -37.6% compared with April 2010)." This number of transaction is the lowest since March 2009. As for the actual money changing hands: "the total consideration for sale and purchase agreements in respect of residential units was $39 billion (-24.8% compared with March and -26.8% compared with April 2010)" - another low, as this is the biggest Y/Y drop since June 2010. Yet, not too surprisingly, the actual prices of real estate remain sticky. As Bloomberg reports: "Housing prices in the city, ranked the world’s most expensive place to buy a home by Savills Plc (SVS), have gained more than 55 percent in the past two years on record-low mortgage rates and an influx of buyers from China. The government in November increased property transaction taxes and pledged to boost land supply amid public protests that housing prices are becoming unaffordable and as the central bank warned about the risk of a “credit-fueled property bubble.”" The reason for this is that despite the cash-n-carry scheme described by Sean Corrigan recently, credit was suddenly become so scarce that it is only available to the wealthiest, who in turn are not, for now, in urgent need of hitting bids, thus preventing prices from attaining market clearing levels.

More from Bloomberg:

Sentiment has clearly been waning since February,” said Buggle Lau, chief analyst at Midland Holdings Ltd., Hong Kong’s biggest publicly traded realtor. “A slowdown is almost inevitable when there’s a combination of government curbs, mortgage rate hikes and unpredictable events,” including the earthquake and tsunami in Japan on March 11.

Hong Kong’s bank interest rates will rise on loan demand and capital outflows when the U.S. increases borrowing costs, Hong Kong Monetary Authority head Norman Chan said on April 28.

Home prices in Hong Kong rose for a second consecutive week in the week ended April 24, extending a recovery from a three- week, 1.6 percent slide since mid-March when lenders started raising mortgage terms based on the Hong Kong Interbank Offered Rate, according to an index compiled by Centaline Property Agency Ltd. Prices have risen about 10 percent since November.

The next statement summarizes the glass is half full perspective on what is currently happening:

"The best time for the home market have passed,” said
Eddie Hui, a professor at the real estate and building
department at Hong Kong Polytechnic University. “At the same
time I don’t think we’re at the brink of a crash. The government
measures seem to have brought the market under control

And confirming our view that bid/ask spreads are only going to widen with either another bubble being blown, or a sudden bourst of liquidating ending the stalemate, is the following:

Transaction numbers will probably remain stable over the next few months as developers plan to sell more new homes after a brief halt in March, Midland’s Lau said. That will compensate for a further slowdown in existing-home transactions, he said.

“We are not seeing a drop in prices,” said Lau. “There’s still plenty of buying power there and potential sellers aren’t rushing to sell.”

Then again, the rush to sell by everyone always emerges at precisely the same time. And when that happens, there just never are any buyers. Hopefully by then, the BRIC decoupling BS will be long forgotten, or it will be yet another smear on the already spotted reputation of Jim O'Neill.

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tmosley's picture

Just in time.  I wouldn't mind buying a flat in HK.  US is really starting to suck these days.

Zai jian, bitches.

sheeple's picture

may I recommend you: repulse bay

tmosley's picture

Thanks for the recommendation.  It looks very nice.

If the market falls 90% I could afford a decent place there, lol (http://www.hongkongpropertyman.com/hkpropman/index.asp?action=resi_detai...).  $2500 per square foot in some places in 2006 according to the wiki: http://en.wikipedia.org/wiki/Repulse_Bay.

sheeple's picture

yeah I used to swim there when I was a kid; "swim" =D [and admire the lambos and bugati flying up and down on the repulse bay hair-pin turns]

max2205's picture

What happens when they start printing H$'s and mark to fantasy. It never ends

Harlequin001's picture

They pegged to the USD for years, this is what happens...

sheeple's picture

Yeah $HKD9000/sqft in tsuen wan hong kong ... mad

trav7777's picture

china RE bubble starting to invert...perhaps run to hills time is getting near

Cognitive Dissonance's picture

Today, courtesy of the Hong Kong land registry service, we find that the drubbing has shifted from mainland China to Hong Kong.

I'll check with my man in Hong Hong and get right back to you.

Hey Banzai7. Could you talk a walk around the park, kick some tires and over turn some garbage cans and let us know what's happening on the ground in HK? Thanks.

Banzai7, our man in Hong Kong.

Yo, Vincent Vega, our man in Amsterdam. Jules Winnfield, our man in Inglewood. Get your asses on in here!


sheeple's picture

sigh I still remember the time beginning in 1997 the massive ~60% drop in real estate price in hk... the negative equity gangs drove up bbq coal price in hk due to the high demand in the popular charcoal burning suicide

williambanzai7's picture

I was turning over a can and found Bin Ladens wallet. Sid you know he has a Connecticutt social security number?

Itsalie's picture

Well you can be sure that if ZH is following the HK Land Auth data then you are 3 months behind the curve.

The hot money is just shifting from one money laundering centre to the next; real estate agents in SE Asia are seeing foreigners selling in HK and shifting to the bigger bubbles of Singapore and KL in last 3 months.At same time kiwis and Ozzies are selling their own market and piling into SE Asia. Don't laugh but there is still hope for the Vietnamese Dong. And Bang Cock just got arm-twisted to call off the elections, the military need to a year more to attract hot money so their 1998-era half-built land bank can be sold to foreign carrot-headed suckers from La Suisse (actuall the swiss banks are just a front for Greek and german money trying to escape the other la-la land of europe).


Harlequin001's picture

That's all it ever did. Singapore went up by around 80% in a month according to my friends there. Funny old thing it was just as the auction rate securities markets were failing in the US. I wonder who might be behind that then...

Expect it to be cut in half very soon...

The problem with moving money from market to market is that you eventually run out of markets. Then it finds its way into gold...

PulauHantu29's picture

The ratio of apartment price:income is unrealistic. HK (like China) is in for a massive Bust.

Then, Australia is next where the median house price is....better sit down...USD$630,000!!!

Buying a house now is buying a depreciating, money-losing asset.

dogbreath's picture

the australian education system must be excellent

Harlequin001's picture

It's actually pretty good, or so I'm told. This idiocy is a global phenomenon...

longorshort's picture

Anyone shorting the AUD long term yet? I was considering 1.10 but never pulled the trigger.

apartofthings's picture

Pure fiat currencies are hard to predict. Bad fundamentals are one thing, but it's all relative to other countries who are also in the sh*t. And don't get me started on market interventions...

chump666's picture

1.07 handle has been taken out...normally the aud the sells to the 50ma. its a very supported currency till aust housing market. implodes  there were shorts from 1.10 to the 10ma


williambanzai7's picture

There seem to be two real estate markets in HK. One for speculators and one for normal people.

Two things drive the market, the chronic shortage of units in an expanding population and the hot Mainland money.

The hot money causes the developable land to be allocated to hot projects instead of affordable housing. This causes the whole market to trend up. But the ridiculous numbers you read about are Mainland Tycoons and companies buying up penthouses in the sky palaces.

Not a good time to be in the sky palace space.

Another odd quirk is how street level retail rent is impacted by real estate brokers looking to open locations. Many a dim sum joint has closed because of this.

chump666's picture

The China credit crunch should start in HK and spread to mainland Chinese banks - all from highly geared HK property, that traditionally can collapse to 60+% on a good day.

As far as the AUD, yeah it's a short of the century.  The AUst central bank will have to at least cut a repo rate to their banks on Asia bond/CDS/insurance markets widening.  Asia may be going into a very hard landing

chump666's picture

moron japan margin traders and japan funds are still bidding the aud...

1.07 handle got sold, hedge funds should pingpong sell gld and silver plus CAD and AUD.  may correction kicking in

longorshort's picture

How much are you short AUD if any?  If you do a very long term short 6 months to 2 years?  Which is a cheaper transaction, currency at 30x leverage or futures contracts?  Anyone have a way to calculate this?  That does allot of currency trading.  Maybee even option costs are cheaper way to trade this as a leveraged move.  Anyone have a tool or example based on current costs they can explain?

Coldfire's picture

This is very good news, but my landlord apparently didn't get the memo. Yesterday, she served me with a proposed 60% (that's sixty percent) increase in rent, the greedy twat. A subsequent survey of the market reveals a doubling in rent in most buildings (not sky palaces) over the past year. Asking rent - today - for a 400 gross square foot (probably 300 net) flat in the neighborhood is HKD40,000 (USD5,200) per month. Granted, that's the high-end of lunacy and not generally representative (yet). But still, with every third shop in Mid-Levels being a real estate agency/money laundry, the continued busing in of Mainlanders on real estate buying tours and ZIRP with no end in sight, you can see how things got here. Time for one of Hong Kong's periodic property crashes? Too fucking right it is. This bubble is murder.

longorshort's picture

Is there a better way than currencies to play a real estate crash in Hong Kong?  Also how big is the bubble in Singapore?  Anyone have some info on the bubble there?

Coldfire's picture

The Hong Kong stock market is a proxy for its real estate market, correlation >0.90. If you want to bet on a property market crash, short the Hang Seng.

freon guy's picture

The apartment I'm renting in Singapore sells for ~~ S$2000psf.  The landed properties throughout the island, particularly on Sentosa are even more ridiculously priced. 

longorshort's picture

So what is the easiest way to short Singapore housing market crash, through curency or what market vehicles/trades?  Very very serious question here.

chump666's picture

STI index, find prop shares.  You can short, or buy puts.  Asia is right in the middle of a inflation shitstorm.  Housing will pop.  Much rather short the AUST market, index and FX. 

slewie the pi-rat's picture

prices are sticky.  in HK.  money is tighter.  ^margin^upskie^, BiCHeZ!^

freebo's picture

Having recently moved to Aus we rent a 2 bed appartment in Sydney 100m2 - not luxurious but cost its owner $1.2 (AUS),  (1.3 USD) - we pay $800pw rent, not a great yield! Ave salary is $65k...

RE Market is crazy here example in my suburb - http://www.domain.com.au/Property/For-Sale/House/NSW/Pyrmont/?adid=2008971839


chump666's picture

Australia and China/HK/Singapore/Taiwan are the only housing markets that haven't corrected.  China and Australia on a tandem bubble - a housing 'tulip' bubble. 

Bring up their stock markets All Ords and Shanghai A/B...no explanation needed.

So a massive correctuion is due, timed for June/July/August. 

PulauHantu29's picture

The RE Idiocy infected Aus when the banks began jealously eyeing the States ZERO down/NINJA policies (and the fat commissions/bonuses of flipping lots of newly constructed boxes).

Even when the buying madness slowed somewhat (when house prices paused at median price of about $520,000) the Aus gubberment copied the States--Monkey See, Monkey Do Style-- and gave a tax credit. However, they handed out $16,000 in tax credits instead of the measley $8k here in the States.

Yes, an UberBubble pervades the Land Under and soon to become a MegaBust imo.

Jovil's picture

Exter's Inverted Pyramid of Assets is enlightning and shows the relationship of assets putting them in their proper order of importance.