What goes up …
The sky will be falling in 2011 if some experts are to be believed
| Text : Elizabeth Kerr | Photo : www.thinkstockphotos.com |
Bubbles, bubbles, bubbles. Talk of a bubble in China means that cooling measures started in spring 2010 are likely to continue into 2011 according to the chairman of the Mainland’s largest developer. Great strides have been made, Wang Shi, chairman of Vanke predicted to the press recently. If the central government didn’t stand firm, China was looking at a market meltdown similar to Japan’s in the future. The market is going to slow to a creep in 2011 as it is, said Wang.
In Hong Kong, Hang Seng Bank executive director William Leung predicted mortgage lending (any bank’s bread and butter) applications and property sales are on the verge of a serious plunge — as much as 20 percent — as an effect of speculators being chased out of the market by the Hong Kong government’s own cooling measures. Transactions in December 2010 were already down 5 percent from the same period in November on the heels of implementation of the last round of regulations.
Those are heady, dire and frightening words all around for many property sellers and potential purchasers. Leung’s beloved mortgages approvals have not fallen off (yet) but if speculators vanish, so does the mortgage business (Hang Seng accounts for just over 15 percent of all mortgages, ranking number three in the SAR).
But is that really going to come to pass? Is the market going to tank? Should we all pray for the best and prepare for the worst? Maybe, but more likely it won’t come to that.
In its Global Market Perspective Real Estate Outlook for 2011 Jones Lang LaSalle stated that global direct commercial property investment, a market driver, volumes will rise by 25 to 35 percent over 2010’s levels and Asia-Pacific will lead the global surge in leasing and the real estate upswing in general.
With fundamentals so vital to property market sentiment, things look to be pretty calm here in Hong Kong and around the region; JLL called Asia-Pacific the “star performer” over slower moving, mature markets in Europe and North America. With regard to potentially tumultuous economic conditions in those regions, JLL’s report stated, “In contrast, Asia Pacific is on a stronger foothold and will continue to outpace the world economy, with regional economic growth in 2011 expected to be in the 6 to 7 percent range (excluding Japan). Robust growth in both China and India of 8 to 9 percent will power the rest of the region. Hong Kong, Australia and Indonesia will also maintain healthy rates of expansion.” It’s not all smooth sailing, though, and there could be some bumps in the road. “Currency appreciation is a concern, which could reduce competitiveness and affect trade and real estate capital flows. Asia Pacific is also facing inflationary pressures, which are pushing up interest rates across the region.”
For the most part forecasts are largely positive. What does all this mean for the residential market? If the trickle down moves the same way as it usually does — residential gets a boost from business moving in and bringing staff and making local hires, all of whom need homes — then it should be good news again. Stay tuned for a more in-depth look at Hong Kong in 2011 soon. Until then …
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