Hong Kong Eyes Property Market
HONG KONG (AP) _ Bobby Lee and Joyce Shum had been waiting for a chance to pounce into the real estate market since Asia’s economic downturn rattled Hong Kong.
With property prices in the investment-crazed metropolis down by as much as 60 percent from their peak last August, Lee and Shum thought they could reap a handsome profit when the market recovers.
Finally, the couple signed away $65,000 of their life savings for a down payment on a $436,000, 500-square-foot apartment in a posh new development called Laguna Verde.
They came out of the sales office beaming, hoping they got their timing right on one of Hong Kong’s most pressing questions: Has the property market finally bottomed out?
``I feel so lucky that we could buy this flat. It’s like winning the lottery,″ said Shum, 30, a handbag merchant.
Just a few months ago, anybody who had bought a new apartment in Hong Kong might have felt like a big loser.
After prices spiraled out of control, the bubble finally burst and property values went into freefall as Asia’s economic crisis combined with a government drive to increase the housing supply.
Interest rates rose as Hong Kong’s currency came under speculative attacks, and thousands of people who bought apartments before the downturn got stuck with higher mortgage payments on properties that had halved in value.
The sharp decline was frightening to people in an economy heavily dependent on real estate values.
Property prices are exorbitant in small, mountainous Hong Kong because buildable land is extremely scarce. The market accounts for one in 10 jobs and roughly a third of the economy.
Lately, the market has shown signs of stability, with some developers inching prices higher and trying to talk things up. Meantime, big banks cut interest rates slightly this week, luring buyers back into the market.
Developer Cheung Kong (Holdings) sold all of the 583 apartments in the Laguna Verde development in just a few hours Saturday. People who didn’t get in line quickly enough left the sales office empty-handed.
``I think the prices are about right. I want to buy something before prices go up again,″ said Christine Ting, an accountant who already owns a small apartment but wanted a second property. She was turned away after waiting for 1 1/2 hours.
But some analysts warned the apparent revival is a mirage. Alan Dalgeish at SG Securities (HK) Ltd., predicted prices could plunge another 20 percent to 30 percent as the economy worsens.
``The reality is unemployment is rising, disposable income is contracting, and credit risk is increasing,″ said Eugene Chung, a strategist at Warburg Dillon Read (HK) Ltd. ``Under this scenario, how can property prices rise?″
Many buyers are ignoring the naysayers.
The conventional wisdom in Hong Kong suggests people should hoard up real estate, then wait for prices to rise as the economy expands. In the heyday of the last boom, some speculators would pay up to $128,000 just for the option to buy a new apartment.
``We have extra money in the bank, so we thought, ‘Why not?’ The Chinese like to put money in real estate because of the security,″ said Peter Ma, 50, owner of a toy factory in Tianjin, China, who just bought an apartment for $641,000.