Hong Kong Real Estate Transactions Plunge

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 gradually.”

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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