Is bear market confirmed for HK? 20221031

The observation that HK housing is in a downcycle has become consensus of late, after the CCL reaches a new low last week from the triple top dating as far back as 2019 (see green line in Chart 1). Cumulatively the index is now down 12% from the Aug 2021 high:

Chart 1: Home prices denominated in various currencies

But across the world, investors will always think about returns in their own currencies, and therefore, an 'objective consensus' of a true bear market in any asset price is only formed when the bulk of observers around the world see the same down trend that the base currency investors also sees.

So in order to find out whether the HK home prices are truly in a bear market by consensus (Chart 1 does not seem to suggest that is the case), let's take a look at the index as denominated in a few main jurisdictions:

a) the collective non-USD community (as proxied by DXY);

b) the EU community (as proxied by Euro);

c) the Brits (as proxied by GBP); and

d) gold bugs (as proxied by the price of gold).

HK still in bull market to world at large

From the point of view of the developed world population (as the USD index is represented by six liquid currencies, see Chart 3), however, the drop in HKD (blue line in Chart 2) terms is not corroborated by the price as measured by DXY the USD index:

Chart 2: Home price in non-USD terms still trending up

In fact, the non-USD price index is still very much heading up, from the longer term view (green dotted lines) to medium term view (red dotted lines), to even the shorter term time horizon (blue dotted lines)! What this suggests is that for the average OECD investor, HK property is still a rising asset.

Chart 3: make up of the DXY - 6 currencies

Home prices even more bullish for Europeans

For the average person based in Euro, the upward momentum seems even stronger compared to DXY, and HK prices, thanks to the collapse in Euros in the last few months, seem to be accelerating upwards within the red channel:

Chart 4: Euro investors may see HK prices accelerating upwards

Brits also feel the upturn?

Similarly, with the recent precipitous drop in the value of the Pound, the HK home price index will appear to the average Blighty investor to be positively surging even, after HK first started pulling away from a very correlated pairing between the HKD and GBP denominated indices which pretty much shadowed each other since our data started in 1981:

Chart 5: HK prices look strong to the British Pound investor

The much weaker pound post Boris's premiership (botched Brexit plus zealous lockdowns?) ensures that the weak pound has provided a strong platform for HK assets to appear to go from strength to strength.

Gold the only currency beating HK property?

For those who believe in gold, there is good news - In Gold terms, the 1997 peak remains the unsurprised top for HK home prices, meaning that we may still be in a bear market when measured from the perspective of the precious metal:

Chart 6: Gold strong vs HK, but mini breakout underway?

Even though the price index has broken above a near term trading channel, as indicated by the red arrow in Chart 6, if war does flare up more next year, we think gold might reassert its dominance and the break up could reverse. Time will tell.

Strong currency imports deflation, which is not a bad thing now!

In normal disinflationary times such as most of the past 40+ years, being pegged to the USD is good for HK assets during times of weak USD, as Chart 7 illustrates - weakening or weak USD is generally accompanied by bouts of strong home price increases, and the reverse held true (mostly in the mid/late 90s):

Chart 7: weak USD good for home prices, and vice versa - will it be different this time?

However, could we be in a period similar to the early 70s or early 80s, when strong USD will suck liquidity away from HK and produce deflation? How does this contrast the current super high inflationary environment? Is the strong USD a blessing as it reduces the 'cost of living' crisis that would otherwise hit these shores?

A very interesting dynamic, not seen before in our brief monetary history for sure... The above study shows that, whilst we remain somewhat bearish on the outlook of the HK market, more needs to happen in the global currency markets before it is a true foregone conclusion...

The author would like to thank Lee Man Hin Carson from The University of Hong Kong majoring in Accounting and Finance for assisting in data collection, analysis, and drafting of this article.

‘We never lost interest’: Asian family offices buy into crypto 20221027

Your author in media : [FT - ‘We never lost interest’: Asian family offices buy into crypto]

William Langley and Chan Ho-him in Hong Kong, 26 Oct 2022

Family offices in Asia are buying into cryptocurrencies, despite months of market turmoil, as weak returns from their traditional portfolios make digital assets attractive.

The interest from investment managers suggests there are still new buyers of cryptocurrencies such as bitcoin and ether, after a boom in digital asset prices during 2020 and 2021 turned to a bust.

Several family offices and wealthy individuals in Hong Kong said this year’s decline in digital asset prices had to be set against the poor performance of local equity and property markets.

After experiencing volatility in the first half of the year, cryptocurrency prices have recently plateaued, prompting speculation about whether they have bottomed out. Investors said the assets remained an appealing hedge against wider market ructions.

“We never lost interest in [crypto],” said Keith Wong, chief executive of Winland Wealth Management, a Hong Kong-based multifamily office. “We see it as diversification and a separate asset class.”

A survey of 30 family offices and wealthy investors in Hong Kong and Singapore, published by KPMG China and crypto group Aspen Digital on Monday, found that 92 per cent of respondents were interested in digital assets, with 58 per cent already invested and 34 per cent planning to do so.

More than 60 per cent of the respondents were family offices or individuals managing assets worth between $10mn and $500mn, said the report.

Bitcoin, the world’s largest cryptocurrency, has dropped about 70 per cent from its peak in November 2021 and has been trading between $18,000 and $25,000 since June. Ether, the next largest coin by market capitalisation, is down about 60 per cent per cent year to date.

However, Hong Kong’s traditional asset classes have also suffered this year, with the city’s equities underperforming US and European stocks. The benchmark Hang Seng index is down more than 30 per cent this year, hit by geopolitical tensions and repeated Covid-19 lockdowns in mainland China.

The city’s housing market has slumped to its lowest level since the 2008 financial crisis following years of coronavirus restrictions and successive interest rate rises.

“All [my] friends with family offices are saying they have shifted . . . into other things like having an art portfolio . . . and cryptocurrencies as well,” said a wealthy investor in Hong Kong, adding that the property sector had been “really stagnant”.

The focus on family offices comes as crypto companies in Hong Kong are lobbying regulators on licensing requirements that will come into effect in March. The industry fears the rules will preclude access to retail investors.

“For the average high-net-worth individual . . . whatever people recommended in gold, you can chop it in half and allocate half of your precious metal to crypto, because that’s an easy way to hedge,” said Eric Wong, managing director of Bricks and Mortar Management, a Hong Kong-based multifamily office.

Hong Kong-based Raffles Family Office has set up a joint venture with crypto company Huobi Tech to service the “unmet” needs of ultra-wealthy families seeking to invest in digital assets. C Capital, the asset manager founded by Hong Kong tycoon Adrian Cheng, plans to raise about $200mn to invest in blockchain assets over the next 18 months.

Digital assets face a generational divide, advisers said, with crypto companies keen to tap into “old money” from individuals who are more resistant to the new asset class.

“For example . . . the other day I was sitting with a family . . . the parents know nothing about crypto and the kids are asking about it,” said Winland Wealth’s Wong.

In the long run, this intergenerational dynamic will bring more crypto buyers “from the elderly side of the population pyramid”, said Bricks and Mortar’s Wong.

https://www.ft.com/content/5646ce04-ff09-4230-a35b-e46529545a4f

General Disclaimer - where quoted in media reports, your correspondent does not exercise control on editorial policy and therefore what appears in the publication may not coincide, or even rarely, contradict your correspondent's views...

【施政報告】王震宇 寬免買樓辣稅難吸大量海外專才 20221020

 

【Now財經台】《施政報告》提出向外來人才退還買樓額外印花稅，不過，未有提及其他樓市「減辣」措施，地產建設商會表示失望。

《施政報告》提出，推出一系列措施更積極搶企業及搶人才。合資格人士在香港住滿7年並成為永久居民後，可申請為仍持有的物業退還已繳付的買家印花稅(BSD)及新住宅印花稅(NRSD)。

以1個樓價1000萬元的住宅物業為例，原本非本地居民須繳交樓價15%的BSD，以及15%的從價印花稅(AVD)，涉及300萬元稅款。不過，即日起簽署的買賣協議，當他們成為香港永久居民，只需承擔跟港人一樣，按「第二標準稅率」計算的3.75%印花稅，之前多繳的部分，即約262萬元可申請退回。

地產建設商會對《施政報告》沒有進一步為樓市「減辣」感到失望。

地產建設商會執委會主席梁志堅說:「(政策)幫不到樓市，有些失望。即使有人願意買樓也好，如果要滿7年才退還，即是做了與沒有做沒有太大分別，買樓住照樣要(支付)是完全沒有意思。」

有分析認為，措施不會突然吸引一批人士來港，亦不會影響樓市。

Bricks & Mortar Management主席王震宇說:「很多時過了4、5年後，才會決定考慮成為永久居民，你問很多外籍人士都會這樣回答。這個(政策)只會令到他們來港工作少了1個負面因素而已。」

王震宇認為，除按揭壓力測試，所有妨礙自由市場的樓市「辣招」都應該撤銷。

訪問來源：NowTV【施政報告】

NowTV Chanel 331

特此鳴謝

NowTV 記者：Sarene Ho

攝影及剪接：NowTV Production Team

請前往作者YouTube頻道觀看更多視頻: 王震宇宇論 Yulun

【樓市指南針】施政報告房屋範疇 20221019

 2022年10月13日

【Now財經台】

直播訪問內容：

1. 政府指，為了招攬人才合資格外來人士，在港置業居港七年並成為香港永久性居民後，可就已購入並仍然持有的首個住宅物業申請退還買家印花稅及新住宅印花稅。此政策吸引力如何？

2. 有業內人士指；有關調整稱不上「撤辣」，對其他推行十多年的「辣招」未有鬆綁亦感到失望。你會如何解讀政府維持「辣招」的舉措？

3. 當中有何利弊？是否真的很擔心「撤辣」令樓市升溫？

4. 包括你在內，不少分析已認定樓市處於下行周期。現時「辣招」維持亦未見有其他刺激樓市的政策；你對今年餘下時間及明年樓市前景有何最新看法？整體樓市買賣會否進一步萎縮？

5. 相比中小型住宅，豪宅前景是否更暗淡？

6. 施政報告公布前，元朗有新盤開價見到首批單位折實呎價重返2018年的水平；又提供「漸進式按揭」計劃。你會如何評估發展商短中期的賣樓壓力？推盤及定價策略會有何變化？

訪問來源：

NowTV【樓市指南針】- NowTV Chanel 333 Trading Hour

特此鳴謝

NowTV 記者：Karmen Lee

攝影及剪接：NowTV Ingest & Production Team

請前往作者YouTube頻道觀看更多視頻: 王震宇宇論 Yulun

2022 HK policy address speech - Pro property and pro industrial 20221019

Key points of the policy speech are as follows:

a) all out attracting talent to HK - a must do given the loss of 140k population in the past 2-3 years, this is contained in divider a) below;

b) more drive for family office hub as well as other small measures of business support see divider b);

c) housing bad policy continues - i) plundering private market share with every rising PRH/HOS supply, resulting in every higher private home prices and ever more public housing slaves - what a missed opportunity! ii) displacing brownfields into new built industrial - likely insufficient vs demand; iii) private supply low, but development process shortening. see divider c);

d) major speeding up of infrastructure build out - mostly roads and rails, very positive and lots of opportunities opening up for the smart property investor see divider d).

In summary - talent will not come unless we lift the lockdowns, but otherwise by and large a pro property speech with lots of bright spots, but sadly will not help affordability of housing, which is unsurprising given how entrenched the public-housing vested interest groups is!

below are extracts of the speech, emphasis are mine, with odd comments thrown in:

-----------------------------------------------------a) Talent------------------------------------------------------------

Attract Enterprises, Investment and Talents to Enhance Competitiveness

26. …new institutional setups and implement an array of new initiatives targeted at attracting enterprises, investment and talents:

establish the Office for Attracting Strategic Enterprises (OASES), led by the Financial Secretary, for attracting strategic enterprises …offering them special facilitation measures and one-stop services;

establish the Talents Service Unit, led by the Chief Secretary…formulating strategies to recruit talents;

set up Dedicated Teams for Attracting Businesses and Talents …reach out to target enterprises and talents and persuade them to pursue development in Hong Kong;

set aside $30 billion from the Future Fund to establish the Co-Investment Fund for attracting enterprises to set up operations in Hong Kong and investing in their business;

launch the Top Talent Pass Scheme;

enhance existing talent admission schemes; and

upon becoming permanent residents, apply for a refund of the extra stamp duty paid for purchasing residential property in Hong Kong.

27. The OASES will:

1. draw up a list of target enterprises …to reach out to and carry out negotiations with the enterprises;

2. measures covering aspects such as land, tax and financing that are applicable exclusively to target enterprises, and …tailor-made plans to facilitate the setting up in Hong Kong; and

3. provide the employees …one-stop facilitation services in areas such as visa application and education arrangement for their children.

Trawl for Talents

29. Over the past two years, the local workforce shrank by about 140 000. … We will:

1. launch the Top Talent Pass Scheme for a period of two years. Eligible talents will include individuals whose annual salary reached HK$2.5 million or above in the past year, and individuals graduated from the world's top 100 universities with at least three years of work experience over the past five years. …two-year pass …not subject to any quota. Individuals who graduated from the world's top 100 universities in the past five years and have yet to fulfil the work experience requirement will also be eligible, subject to an annual quota of 10 000;

2. streamline the General Employment Policy (GEP) and the Admission Scheme for Mainland Talents and Professionals (ASMTP), vacancies under the 13 professions in the Talent List with annual salary of HK$2 million or above, employers are not required to provide proof to substantiate their difficulties in local recruitment;

3. suspend the annual quota under the Quality Migrant Admission Scheme (QMAS) for a period of two years;

4. relax the Immigration Arrangements for Non-local Graduates (IANG) by extending the limit of stay from one year to two years …expand to cover the GBA campus of a Hong Kong university on a pilot basis for a period of two years.

5. enhance the Technology Talent Admission Scheme (TechTAS) by lifting the requirement for technology firms to employ additional local employees;

6. extend the limit of stay of employment visas … will be valid for a maximum period of three years; and

7. refund the extra stamp duty …become a permanent resident …can apply for a refund of the Buyer's Stamp Duty and the New Residential Stamp Duty paid for the first residential property purchased which they still own, while the Ad Valorem Stamp Duty at Scale 2 rates is still payable such that the overall stamp duty charged will be on par with that charged on first-time home buyers who are ordinary permanent residents.

30. waive the requirement of applying for an employment visa for more visitors participating in short-term activities in Hong Kong. …will expanding to more categories.

---------------------------------------------------b) Business Freebies--------------------------------------------

International Financial Centre

37. …strengthen asset and risk management – …to offer tax concession for eligible family offices. The target is attracting no less than 200 family offices to establish or expand their operations in Hong Kong by end-2025.

45. support the convention and exhibition (C&E) industry …new $1.4 billion scheme …to subsidise more than 200 exhibitions to be staged in Hong Kong over three years.

46. To provide further support for SMEs, we will:

extend concessions of government fees and charges –reduce 75% of water and sewage charges for non-domestic accounts for eight months from 1 December 2022 to 31 July 2023, subject to a monthly ceiling of $20,000 and $12,500 respectively per household. …provide 75% rental or fee concessions …tenants of government premises and eligible short-term tenancies and waivers under the Lands Department for six months from 1 January 2023 to 30 June 2023.

----------------------------------------c) Housing Madness Continues-----------------------------------------

63. The Steering Committee on Land and Housing Supply and the Task Force on Public Housing Projects …submitted …reports. set the following key strategies and targets:

1. introduce the new Light Public Housing (LPH), with about 30 000 units to be built in the coming five years; [ed: only bureaucrats know how to create more complex structures over already bewildering complicated infrastructure]

2. increase public housing production by about 50% in the coming five years (from 2023-24 to 2027-28);

3. cap the waiting time for PRH immediately. …6 years and shorten it to about 4.5 years in four years' time (i.e. in 2026-27);

4. saleable area of all subsidised sale flats completed from 2026-27 onward will be no less than 26 square metres [ed: public housing becoming ever more luxurious and ever larger – no longer a safety net];

Private Housing Supply

66. …the demand for private housing in the next 10 years will be 129 000 units. …providing no less than 72 000 residential units in the next five years. [ed: private ownership is now an after thought in the bureaucratic housing steam roller]

69. …plan to make available land in Yuen Long and Hung Shui Kiu for development of multi-storey industrial buildings from next year, with lease conditions requiring a certain portion of floor area to be set aside for leasing to the affected brownfield operators below market rent.[ed: supply will be much less than displaced brown field site GFA by far, good for industrial property]

70. Tseung Kwan O (TKO) Area …provide 50 000 residential units with the first population intake in 2030 at the earliest. [ed: not a pleasant district – ultra high density dormitory town]

71. To substantially compress the time required for land production, we will:

1. streamline statutory procedures – …bill to amend the Town Planning Ordinance, the Land Resumption Ordinance, the Foreshore and Sea-bed (Reclamations) Ordinance, the Roads (Works, Use and Compensation) Ordinance and the Railways Ordinance, as well as amendment to the Schedules to the EIA Ordinance …the time required …reduced from at least 6 years to 4 years, …large-scale projects from 13 years to 7 years, of which the time for the EIA process will be compressed to within 18 to 24 months;

2. …charging land premium at standard rates for redevelopment of industrial buildings. …extend this approach, [from] only industrial buildings and in-situ land exchange applications in NDAs, to cover agricultural land in the New Territories located outside NDAs to compress relevant workflow; [ed: will speed up industrial revitalisation speed]

3. …lowering the compulsory sale application thresholds for private buildings aged 50 or above but below 70 from 80% to 70% of ownership, and further to 60% for those aged 70 or above. For industrial buildings in non-industrial zoning, the threshold will be lowered to 70% of ownership for those aged 30 years or above; [ed: great for industrial, bad for minority private ownership rights]

----------------------------------------------------d) Infra Galore-----------------------------------------------------

Drive Development by Transport Infrastructure

76. The six major transport infrastructure projects are:

1. Northern Metropolis Highway – It will facilitate east-west connectivity in the New Territories North between Tin Shui Wai in the west and Kwu Tung North in the east via San Tin;

2. Shatin Bypass – connecting Tai Po and Kowloon West …relieve traffic pressure on Tolo Highway;

3. TKO-Yau Tong Tunnel – …third road tunnel at TKO [for] TKO Area 137;

4. Hong Kong-Shenzhen Western Rail Link – Hung Shui Kiu with Qianhai [ed: long shelved but now back on track];

5. Central Rail Link – …12th railway line will connect Kam Tin in Yuen Long with Kowloon Tong via Kwai Chung, alleviating pressure on the carrying capacity of the Tuen Ma Line; and

6. TKO Line Southern Extension –TKO Line southwards to TKO Area 137,.

77. …Kwu Tung Station of the Northern Link will be commissioned in 2027, …the Tung Chung Line Extension, Oyster Bay Station and Tuen Mun South Extension commencing next year.

78. …projects under planning, including Route 11, Tsing Yi-Lantau Link and Tuen Mun Bypass, as well as improvements to Lion Rock Tunnel.