德意志銀行午宴暨座談會分享(續)

老闆王文彥先生早前獲德意志銀行邀請為一個午宴暨座談會擔任主講嘉賓，談談對近期樓市轉淡、市場轉勢在即的各種看法及對來年後市的預測。下文為德意志銀行為座談會所撰寫的總結文章節錄之(二)：

Key takeaways from luncheon with Mr. Denny Wong

Deutsche Bank Markets Research

Tony Tsang (Research Analyst)       Jason Ching, CFA (Research Analyst)

Turning point has emerge                                                                                        

Mr. Wong sees an end to the HK property upturn that started in 2003

We hosted a Hong Kong property luncheon with Mr. Denny Wong, co-founder and director of Centaline, and received good feedback. Overall, Mr. Wong is seeing an end to the uptrend in HK residential prices that started in Aug 2003. Currently, the positive pillars (like limited new supply, weak USD/HKD, and purchases by mainland Chinese) that supported rising property prices have mostly faded, and there are now an increasing number of negative factors affecting the HK property market. Mr. Wong believes that the HK property market is entering a downturn, if it has not already. Mr. Wong expects a property price correction of at least 40% from current levels. As a professional property investor, Mr. Wong believes that the timing of property purchase is more important than the ability to purchase, and that now is not a good time to buy property, but is a good time to sell. And as a property cycle normally lasts for at least 10 years, a good time to enter the property market is still likely quite a few years off.

The following are the key takeaways from the luncheon:

On new supply in the HK residential market:

1) According to the HK government, the amount of potential new supply is about 83,000 units for the next 3-4 years, about 28% higher than the 2012 level.

2) That means at least 20,000 units of new supply per year, 70% higher than the average level per year in the past 10 years.

3) In the past three years (2012-14), the amount of new starts was 58% higher than the annual average in 2007-11.

4) Among the 83,000 units of new supply, about 70% have an effective area of less than 70sqm.

5) In addition, there are also land parcels that have already or will soon complete land premium payment or completed the land tender process, and such parcels could provide an additional 11,300 units.

6) Mr. Wong is confident that the HK government, currently led by Mr. CY Leung, can achieve and likely exceed the new supply targets.

7) With the Chief Executive election coming soon, Mr. Wong believes that Mr. CY Leung will continue to put more effort into the property market and to address the housing needs of the general public. Hence, there will likely be upside surprises in the new land supply number in future years.

On housing demand:

1) Externally, the HK economy will be affected by the weak economic outlook in the world and also in China.

2) The supporting pillars of the HK economy are all weakening – falling exports, falling tourist arrivals, falling retail sales, falling stock markets.

3) The HK government is reminding home buyers to exercise caution when buying property, and the HKMA is also warning home buyers on potential interest rate hikes.

4) HKMA said that restrictions on first home purchase will be relaxed first when the property market starts to turn. HKMA has tightened mortgages in the past few years, and Sep 2015 is the first time HKMA has mentioned potential relaxations.

5) Mr. Wong’s impression is that the HK government is sending out signals to the general public not to buy property now.

6) Mr. Wong believes that US interest rates will start to rise in early 2016 at the latest.

On the latest transaction volume in the HK residential market:

1) The latest transaction volume in the HK residential market is hovering around the low point since 1997.

2) In 2013 and 2014, total transaction volume in the HK residential market was around 50,700 and 63,800, respectively, both well below the 1997 level (of 172,700) and the 2010 level (of 135,800).

3) In addition, the ratio of primary transactions to total transactions is at a new high since 2005, reflecting a weak secondary market and weak total housing demand at current property price levels.

4) According to Mr. Wong, the low transaction volume is mainly a result of the tightening measures of the HK government, which have been successful in cooling down housing demand when new supply needed time to catch up.

On the relationship between the primary market and secondary market:

1) When supply is lower than demand, new home prices are normally 20% higher than secondary home prices. However, in the past year, the gap between primary prices and secondary prices has continued to narrow, and now there are an increasing number of instances in which new home prices are lower than secondary home prices in the same area, especially after taking into account the discounts and rebates offered by the developers.

2) The trend reflects developers' cautious outlook on the property market.

To be continued…