Two months ago, we observed the record plunge in Hong Kong home sales when according to Land Registry data, a paltry 2,826 registered residential transactions were record, down 14.4% from October and what we thought was an amazing 41.7% less than in November last year. This was the lowest print in the history of the series.
Little did we know just how bad it would get just two months later.
As we said in our last check on the HK housing market, the weakness was sharp and widespread, with sales of new homes declining to a three-month low. In the primary residential market, the number of home sales also declined 26.4 per cent month on month to 1,023 last month, according to Centaline. The total value reached HK$8.97 billion, down 15.4 per cent from October’s HK$10.6 billion.
Latly we presented some comments from local analysts, who perhaps unwilling to accept the reality, remained optimistic:
“The fall in transaction volume and value for new home sales due to an absence of big project launches early last month,” said Derek Chan, head of research at Ricacorp Properties. He expects to see an obvious increase in sales of new homes this month given more major projects are due to be offered for pre-sale. Most of new projects launches will focus in the western New Territories ,” he said.
We concluded in early December that while “optimism is good… if and when this global housing luxury weakness mostly due to the withdrawal of the Chinese marginal “hot money” buyer crosses back into the Chinese border, all bets about the so-called tepid Chinese economic will be off, and since it will be just the moment when China resumes cutting rates, devaluaing its currency and maybe even officially (as opposed to the ongoing unofficial iterations) launching QE, that will be when one should buy commodities, as China does everything in its power to keep the house of $30 trillion in cards from toppling and sending a deflationary tsunami around the entire world.”
So far China has only devalued, and so far there has been no effect on boosting commodity prices; meanwhile the deflationary tsunami is just getting worse as a result of the BOJ entering currency wars most recently by launching NIRP last week.
Which brings us to the latest Hong Kong housing data, and we can now officially say that any optimism about Hong Kong is officially dead.
First, as the chart below show, January Hong Kong home prices tumbled the most since July 2013, and after a 12 year upcycle, prices are now down a whopping 10% from the recent peak just four short months ago. Some analysts expect prices to fall more than 30 per cent by 2017 according to SCMP.
In other words, the bubble has clearly burst.
But not only has the Hong Kong housing bubble burst, it has done so in spectacular fashion: as quoted by the SCMP, the local Centaline Property Agency estimates that totalHong Kong property transactions in January were on track to register the worst month since 1991, when it started compiling monthly figures. In other words, the biggest drop in recorded history!
Total transactions are likely to have hit 3,000, it said in a survey released on Sunday.With developers slowing down new launches, only 394 units were sold in the first 27 days of January, 80.3 per cent lower than the 2,127 deals lodged in December. Meanwhile, sales of used homes fell by a fifth to 1,276 deals in January.
A similar picture emerges from another survey by Ricacorp Properties, which shows 2,908 deals were lodged with the Land Registry in the first 28 days of January.
In other words, the market is in shock from the collapse in demand, and has effectively been halted until it regroups as sellers, clearly not desperate to chase collapsing bids, simply withdraw offers.
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