〈Asian Post, August 4, 2018〉Financial tightening has crippled mainland property investment overseas this year to its lowest level since 2015, even as flows into Hong Kong outperformed to emerge as the only bright spot.
The mainland's outbound real estate investment in the first six months dropped 37 per cent to US$9.9 billion, its lowest level since 2015, according to Real Capital Analytics and property services firm Cushman & Wakefield.
In the second quarter, investment slumped 45 per cent year on year to US$4.3 billion. Last year, mainland investors deployed US$42.2 billion overseas, a 10.3 per cent rise on 2016, despite government scrutiny and capital controls.
Analysts said overseas property investment had been falling since mid-2017. This year, however, the decline intensified mainly because of domestic financial tightening.
"Previously domestic institutions and developers mainly relied on back-to-back loans from domestic banks to do overseas deals, but since this year this business is increasingly difficult," said Jason Zhang, head of China outbound investment and advisory services at Cushman & Wakefield.
"Tighter funding onshore also pushed Chinese investors, especially developers, to focus on residential projects that generate immediate cash flow," he said.
Nonetheless, investment towards Hong Kong has largely held up, accounting for 80 per cent of total outbound investment in the second quarter. First-half investment increased 23 per cent year on year to US$6.58 billion. Hong Kong accounted for six of the 10 largest deals in terms of value.
The city's office sector remained the most favoured among mainland investors, accounting for 88 per cent of investment in Hong Kong.
〈China Daily, August 4, 2018〉One of the largest developers are cutting prices for the first time in many years to help speed up the unloading of their stocks of new apartments. If you think that signals the tipping point of the crazy housing market, you could be in the minority.
Results of a Citibank survey released last Thursday showed that 70 percent of the respondents said they believed housing prices will continue to rise in the next 12 months. The survey conducted by University of Hong Kong’s Social Sciences Research Center for Citibank polled more than 500 people by phone in June.
Of course, the economic environment has changed quite a bit since then. But the enthusiasms of the prospective homebuyers, especially the younger generation, have not waned.
A recent survey showed that the majority of the respondents, all in their 20s and 30s, said that their goal in life is to buy a home. Among this group, many said they would not have any second thought about asking their parents for financial assistance to pay the down payments in securing mortgage loans from banks.
So it seems that the developers were right in saying that the demand for housing by prospective homebuyers in Hong Kong is “inelastic”. But they also recognize that affordability has its limit, which is defined by the availability of easy credit.
Recent studies have shown that many homeowners who bought their properties in the past several years are paying up to 80 percent of their monthly household income on mortgage payments. An increase in interest rates from their current low levels could make it difficult, if not impossible, for them to hold on to their properties.
〈The Standard, August 3, 2018〉Patrick Wong, Bloomberg's senior industry analyst of AP real estate, predicts Hong Kong's home prices will surge 15 percent this year, with a moderate growth rate in the second half due to more new launches and potential rate hikes.
Wong pointed out that home prices in Hong Kong rose by 13.8 percent in the first seven months of this year, faster than market expectations.
There will be a correction within 5 percent if the pressure on the stock market increases and interest rates continue to climb, Wong said, adding that the interest rate hike will have slight impact on property prices in Hong Kong, unless the prime rate rises by 1 percent.
Developers may slow down construction pace to avoid vacancy tax especially if the market weakens. The luxury homes market is most affected, as the tax involved will be a huge number. But for now, the vacancy tax is still having a psychological impact on the overall property market and developers are looking for ways to deal with it, such as introducing preferential measures.
Commenting on the mainland market, Wong predicts it will develop steadily in the second half of the year. Shenzhen has just introduced property market regulation, while the central government still implements strict policies on the housing market, especially for first-tier cities. The Sino-US trade war also has an impact.
〈China Daily, August 2, 2018〉Although homes prices continued their upward trend in June for 26 consecutive months, the rate of increase had slowed from the previous month, prompting market analysts and real-estate agents to forecast a mild price correction in the coming months.
Citibank was most direct in its forecast, projecting a 7-percent fall in average homes prices for the rest of this year. Such a prediction contradicts with the results of a recent survey in which 70 percent of the respondents said they believed that prices would continue to go up.
Their confidence, obviously, is not shared by property agents who noted the sharp decline in transactions in the secondary housing market. Market data compiled by Ricacorp — one of the largest real-estate agents in town — showed a 42-percent drop in sales of secondary-market homes last week.
Ricacorp Head of Research Derek Chan reportedly said that sellers were willing to accept lower prices to clinch sales, while more buyers were adopting a wait-and-see approach.
Many politicians and social analysts have attributed the apparent turn in the market to a combination of factors, including the proposed tax on empty new flats and the government’s much publicized housing plan to build more homes for sale to the public at below market prices.
〈Asian Post, August 1, 2018〉Hong Kong's soaring housing market is beginning to show signs of fatigue and is expected to be overtaken by mainland cities in terms of price appreciation in the years to come, according to investment bank DBS.
Prices would not rise meaningfully in the second half, and slower growth rates would be the norm for the next decade in light of the already high prices, said Carol Wu, the head of China and Hong Kong research at DBS Bank.
"Our prediction of 5 to 10 per cent price gain this year has already been reached," Wu said. "Hong Kong's home price growth will decelerate, rising at no more than 2 per cent a year on average until 2030, a rate similar to inflation, [if] the growth in [gross domestic product] per capita does not rise beyond expectations."
DBS also said property price growth in Singapore, Beijing and Shanghai would slow by 2030, and would lag asset appreciation rates in lower-tier mainland cities such as Changsha, Wuhan, Qingdao and Guangzhou. Properties in these cities would triple in value by 2030.
For example, Wuhan's housing price to GDP per capita ratio was only about 10 per cent last year, while Hong Kong's had peaked at 36 per cent, Wu said.
Hong Kong was also placed second behind Shenzhen in the bank's Asia mega cities ranking. In terms of economy, Tianjin, Nanjing, Wuhan and Hangzhou are expected to narrow the gap, such that by 2030 they will match the current size of Singapore and Hong Kong.
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