Thursday, October 30, 2008

Fear of the Unkown


Hong Kong has some notoriety for its property booms and busts, just have a look at the chart, to refresh your memory.

While changes in home prices are scary on the way down, you'll notice that Hong Kong lives. Better than that, they thrive (the stock market is up).

Not everything is the same or parallel (HK's market has some unique structural quirks), but ... you cannot help but wonder if 50 years of rising prices in the U.S. has created an unusually soft psyche on the issue of the resilience of economies in the face of price swings and the value of real-estate, in the long run.

These violent price swings are typical of Hong Kong. The property bubble before the handover saw prices rise 70% (54% in real terms) from Oct 1995 to 1997. Then there was a traumatic burst, coinciding with the Asian Crisis, and property prices fell 44% in one year (Oct 1997 to 1998). From the peak to the mid-2003 trough, prices fell 66% in nominal terms (61% in real terms).


February 25, 2005

According to the Hong Kong Monetary Authority (HKMA), the number of residential mortgage loans (RMLs) in negative equity declined from a peak of around 106,000 cases worth about 165 billion Hong Kong dollars (21.15 billion US dollars) in June, 2003, to 19,200 cases last December with an aggregate value of 33 billion Hong Kong dollars (4.23 billion US dollars).

The figure represented a decline of over 80 percent from the peak. Compared with last September, the number fell 24 percent.

The HKMA said the improving employment market strengthened borrowers' repayment ability and improved the quality of banks' consumer lending.

Chief Executive of HKMA Joseph Yam Chi-kwong said the negative equity number should drop further as the property price continued to rise and people kept paying their installments. He said negative equity had ceased to have much impact on the stability of the banking system

No comments: