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Real estate market cools as global stocks plunge

real estate market cooling

Following the sharp drop of the US stock market, Hong Kong stocks have plummeted 3,000 points since the beginning of February. An old friend of mine told me he’s using this opportunity to cover stocks, in hopes of lowering the cost of those he currently holds and to profit when the market eventually bounces back. However, those capable of cashing in on more stocks at the moment have to possess a lot of both capital and guts. I believe the reason my friend made such a move is because he probably has bought his stocks in large quantities at a low price, and that he’s optimistic about the future of the Hong Kong market. He could potentially make a killing when the market recovers after this adjustment period, and even if it drops again, he can sell off all his stocks without incurring a loss. Since I took a temporary leave from property buying, I too have purchased some Hong Kong blue-chip stocks. It seems to me stock profits are better than bank interest, and I can use it to adjust asset allocation and offset the negative impact of the devaluation of the Hong Kong dollar. However, being a stock newbie, I don’t plan on covering inventory at the moment like my friend; I will stay instead on the cautious side and sell off my stocks to avoid bigger losses.

My reason for sharing this story is to share the belief that when it comes to investment, you need to know your strengths and weaknesses, and never make desperate moves nor put all your eggs in one basket. The global equity market is likely to get more volatile in the future, so I expect that some funds will be transferred out of the stock market and into Hong Kong’s property market.

In the past few days, the local real estate market has suddenly cooled down, our surging period jolting to an abrupt end. This was probably because as the stock market plunged, many home buyers decided to delay their purchases in hopes of finding properties at lower prices later on.

For those seeking a personal home, the plummeting stock market can sometimes put home buyers in a better position to negotiate prices. Some may be compelled to buy more properties while the price is low for investment, just as my friend chose to purchase more stocks. If you plan to do so, make sure you have enough funds to take on such a risky endeavor, otherwise you’d be better off staying put.

The public seems to believe that a few months after the stocks take a plunge, property prices will subsequently drop. However, despite the US dollar sinking, RMB continues to surge in value, which gives me reason to believe that this time, the Hong Kong real estate market may not follow in the steps of the US stock market. My suggestion to home-seekers is to simply take a breather for now and start looking for options after the hectic Chinese New Year.

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