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Cooling Measures... for Hot Small flats

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  1. #1

    Cooling Measures... for Hot Small flats

    Cooling Measures... for Hot Small flats

    New property cooling measures will see higher down payments for Hong Kong buyers
    Friday, 27 February, 2015

    Hong Kong Monetary Authority Chief Executive Norman Chan Tak-lam today announced measures to cool the city's property market after the prices reached what he called an all-time high.

    Speaking at a press conference on Friday afternoon, Chan said that residential properties under the HK$7 million mortgage ratio would be capped at 60 per cent having previously been set at 70 per cent - meaning prospective buyers would need bigger down payments.

    The HKMA also reduced the maximum debt servicing ratio - the monthly repayment of the borrower as a percentage of monthly income from 50 per cent to 40 per cent for borrowers who are buying a second residential property for self-use.

    Furthermore, as part of measures, the maximum debt servicing ratio - the monthly repayment of the borrower as a percentage of monthly income - will be cut from 50 per cent to 40 per cent for all non self use properties.

    Chan said: "The new measures may affect buying plans of first time buyers. But the authority always tries to strive to achieve a balance between the need to tighten mortgage financing to protect banking stability and the desire to minimise negative impact on genuine end-users, especially the first time buyers".

    Further measures to cool down the property market would come “hard and fast” when they are needed, Financial Secretary John Tsang Chun-wah said earlier on Friday morning.
    ==
    > MORE:
    http://www.scmp.com/news/hong-kong/a...market-cooling

  2. #2
    SMALL FLATS have had an easy ride so far, and this may change that.

    Had speculation in some properties become too fierce?
    These was some press mention like that in the least few days

    1/ Pundits blow hot and cold over small flats - Feb. 26, 2015

    Homebuyers looking to ride on a rising market are advised to put on their safety helmets.

    After an almost year-long rise in small-flat prices, people are starting to debate whether and when the market is going to turn, especially as homebuyers are taking on mortgages recklessly.

    "Since developers are rushing to build smaller flats, their prices will be brought back in line with the wider market over time," said Lee Shau-kee, Henderson Land (0012) chairman.

    But sparking the talk was a post by a veteran property investor Jacinto Tong Man-leung, who warned "small-priced flats could bust in three months." Tong's reputation as a housing market bull made the remarks more alarming.

    > Pundits blow hot and cold over small flats - The Standard

    2/ Li dismisses small-flats 'burst theory' - Feb. 26, 2015

    Prices of small homes cannot drop too much as they fit most family needs, according to tycoon Li Ka-shing, who still sees a demand for them.

    "The two-bedroom flats of about 400 square feet are very common for families ... and are more affordable," the Cheung Kong Group chairman said at a company results press conference yesterday.

    "There should be a market even in the long run as long as the economy is stable.

    "As for very small-size flats, it depends on the demand and supply ratio. It is hard to say if the supply will increase substantially. Currently, the supply is not enough."

    His son and deputy chairman, Victor Li Tzar-kuoi, said the market will adjust itself when the current trend leads to insufficient supply in large units.

    "We have seen these cycles many times," he said.

    The senior Li advised: "For the young who can afford buying a flat, which is for their own use, they should do it."

    His view on homebuying was more affirmative than his previous comments. He explained that surging labor and construction costs, as well as continuing inflation, will drive up prices.

    > Li dismisses small-flats 'burst theory' - The Standard

  3. #3

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    So why only release 16K small units into the market for 2015? Aren't about 22k needed for equilibrium.

    news.gov.hk - Categories - Infrastructure & Logistics - Land sale plan unveiled

    It looks like they want to reduce transaction but keep property prices rising.

    Fewer will get burnt badly but many will feel richer.

    Oh Dear. Following the tried and trusted Western ideologies again...

    Last edited by East_coast; 27-02-2015 at 10:41 PM.

  4. #4

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    It really is time to draw a line in the sand and at least talk about capital gains tax payable by owners on all investment property bought as from now. The talk itself will send a few speculators to the exit. Further talk of a 50%+ capital gains tax would gradually send most speculators to the exit. Homes are for living in, first and foremost, not be treated as a gambling chip.

    Last edited by ray98; 27-02-2015 at 11:24 PM.
    shri likes this.

  5. #5

    Maybe people expected SOME measured to be imposed, we saw a drop rather than a surge in the Centaline index this week:

    [Centa-City Leading Index] 136.2
    0.73 %

    For those who Sell-on-Rumor, and Buy-on-News, might find this announcement less shocking than it might have been, and start buying next week.

    Centaline index: http://hk.centadata.com/cci/cci_e.htm
    Last edited by OffThePeak; 28-02-2015 at 12:16 AM.

  6. #6
    Quote Originally Posted by East_coast:
    It looks like they want to reduce transaction but keep property prices rising.
    ...

    The Govt's Intent : Delay buyers

    The HK govt is increasing the supply of land for flats - maybe too slowly - but this is underway. And developers will be launching many new projects with many new flats. For example, SHKP has a new project coming to Nam Cheong (just three stops from HK Station, in Central), which will offer x,xxx* new 1BR flats. There are many other Projects with small flats on the drawing boards. So eventually, the apparent "supply imbalance" will be solved. So cooling off the market now, in a way that will save people from losing money on their flats is a good idea. Lower maximum Loan-to-value will do that, since fewer people, and especially geared speculators, will be able to afford flats, at today's fancy prices. They will be forced to wait until later, when they can build more equity.

    By borrowing less, flat purchaser will also be less-exposed to higher interest rates, which may be coming sooner than some buyers think.

    =====
    *I could not find the figure in my notes, but I did find this article from Oct. 2014:
    "Developers Squeeze out Tiny Flats" - SCMP headline
    "Small is beautiful as builders rush to tap into the lucrative market after soaring rents and home prices force shift from bigger luxury projects"
    + Many Launches: Cheung Kong (165.sf, MtV.1), Henderson (High Pl.,166.sf), CK(177.sf,MtV.2)
    + Rising rents are forcing people into tiny flats
    + Flats below 430.sf rose by 6%, from $4.9mn, to $5.2mn, in 5 mos to August
    + As more and more small flats are built, it is become less easy to rent larger flats
    + The new trend is a reversal of an earlier trend of selling large flats (1,000sf+) to mainlander buyers
    + Developers have decided that small flats can earn more, and carry less risk
    + It is also easier for buyers to get mortgages on small flats - often up to 90%


    SHKP will be launching many more tiny flats at Nam Cheong, starting from 165.sf living space
    + Planned to be 3,400 units
    + The 165sf. excludes kitchens, balconies, utilities, partition walls,
    + So studios will be 300 sf, and 1-BR flats about 400 sf
    + SHKP has also applied to convert four projects in NE NT to smaller units

    One person households will account for up to 18% of the HK population in 10 years, compared with 15.2% in 1981. And 2-person households are expected to rise from : 25% (2011) to 29% (2012)
    Last edited by OffThePeak; 28-02-2015 at 07:14 AM.

  7. #7

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    I guess the anti-property wise guys on the sidelines will be further postponing their purchases for another year then.


  8. #8

    Yeah. Maybe.
    And eventually they will be right

    Ideal Peak : 2016 +/- One year, per the 18 year Cycle


  9. #9
    Can't afford a Flat?
    Then don't buy it, says John Tsang.
    In a "stark message" picked up by the SCMP.
    The changes were needed "to protect the city's financial system should interest rates rise."


    (I suppose that is a proper concern of the Financial Secretary... But he might have also mentioned the govt's intent to get prices lower, by introducing more supply. And of the cyclical influences, that people may not be thinking about now.)

  10. #10

    ODD comment in today's Standard

    Mortgage tightening dampens flat sales - pg. 8

    "Rents could also edge higher as some end users cannot afford the down payment and would shift from owning to renting..."

    What??
    Are we supposed to imagine that such people are floating in space, and they only impact the market when they decide to rent? And if the home-they-do-not-buy disappears from the market?

    Obviously, if they RENT instead, they do not buy a property, but someone else buys it instead, and then moves OUT of rental accommodation, freeing up that unit for someone else to rent.

    The think of Estate Agents is so narrow and stupid, it defies explanation

    Last edited by OffThePeak; 02-03-2015 at 12:12 PM.

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