Friday, 4 February 2011

Economics: 2011 Hong Kong Housing Market Forecast?

Image from overseaspropertymall.com
What interests me these days is how the feng shui masters and investment firms predicts the stock market and housing market in the Year of the Rabbit.
Image from The Star

An article from the Standard reports that Credit Suisse Securities predicts "The Hong Kong benchmark may jump as much as 23 percent to hit 28,900 this year, fueled by the banking and property sectors." Another article from Forbes says that Credit Suisse also predicts that "Hong Kong’s surging property market could jump by another 30% this year."

Now, when looking at the numbers, they all sound great to the investors and terrible for the non-investors, but if we look at the English language perspective, words such as "may" and "could" tell us that these are just possibilities and so it "may or may not happen" and "could or may not happen". (<= Focus on the pairs of modal verbs.)

The basis of the argument has been the same for years, saying that the market has
  1. excessive liquidity (meaning too much hot money) due to ...
  2. excessively low interests rates,
  3. a weak US dollar that is ...
  4. being pegged by the Hong Kong dollars

Some analysts will add that ...
Centa-City Leading Index
Image from CentaData
  1. Hong Kong government's intervention in the residential properties is ineffective,
  2. The government will not and cannot bear the consequences of a hard landing of any kind,
  3. The supply of new properties is far less than the huge demand,
  4. It is reasonable for the Centa-City Index CCI and the Centa-City Leading Index CCL to overtake the peak set in July 1997 due to ...
  5. the depreciation of the Hong Kong dollars and all the reasons listed above.

Image from seigniorage.de
Some analysts may be confident that the current high price situation will persist, and the supporting reasons will remain supportive, but I took a closer look at any one of these reasons and asked myself,

  1. Aren't all these reasons linked together as one? Just what is the chance for all these reasons to remain unchanged in the following year or two?
  2. Is there any one of these reasons political? If just one is political, then there is a good chance it will be affected by public voices because ultimately, the main role of the government is to serve its citizens and governments do that in exchange for political stability and prosperity. With Hong Kong's housing topping the world (according to Savills), surely this financial topic is becoming more and more political.

George Soros
Image from Wikipedia
So when will this housing bubble burst? I have no prediction of my own, but there is always a different reason, and it is usually one that no one can foresee......

1997 : Asian financial crisis, arguably led by the Quantum Fund owned by George Soros
2003 :  SARS, Severe acute respiratory syndrome
2009 : Financial Tsunami hits Hong Kong
2015: ??????????

What will this time be in 2015? Fruit for thoughts!

My guess is when the hot money leaves Hong Kong. Why will the money leave Hong Kong? This article might give some enlightenment.

Vocabulary:
hard landing -- (n) [C] A term used to describe an economy going into recession as the government attempts to slow down inflation.
depreciation -- (n) [U] when something loses value

Resources:
Mainland Chinese Spur Hong Kong Property Boom @ YouTube
http://www.youtube.com/watch?v=_SgXvlvDT6Q

Benchmark seen soaring to 28,900 @ The Standard
http://www.thestandard.com.hk/news_detail.asp?pp_cat=1&art_id=107709&sid=31137746&con_type=3

Hong Kong’s Red Hot Property Market Set To Soar Even Higher @ Forbes
http://blogs.forbes.com/robertolsen/2011/02/01/hong-kongs-red-hot-property-market-set-to-soar-even-higher/

Centa-City Index CCI and the Centa-City Leading Index CCL
http://www.centadata.com/cci/cci_e.htm

Hong Kong housing world's most expensive - Savills @ Reuters
http://www.reuters.com/article/2011/01/28/hongkong-property-idUSTOE70R06D20110128

Asian Financial Crisis  @ Wikipedia
http://en.wikipedia.org/wiki/1997_Asian_financial_crisis

Quantum Fund @ Wikipedia
http://en.wikipedia.org/wiki/Quantum_Fund

George Soros @ Wikipedia
http://en.wikipedia.org/wiki/George_Soros

SARS @ Wikipedia
http://en.wikipedia.org/wiki/SARS

Financial Crisis @ Wikipedia
http://en.wikipedia.org/wiki/Financial_crisis_(2007%E2%80%93present)

China’s Wen pledges to curb property speculation, add more low-cost homes @ China Business News
http://cnbusinessnews.com/chinas-wen-pledges-to-curb-property-speculation-add-more-low-cost-homes/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed:+chinabusinessweek+(China+business+news)

http://www.investopedia.com/terms/h/hardlanding.asp
http://dictionary.cambridge.org/dictionary/british/depreciation