Hello Russ, I have no beef with the stats as claimed by the good Mr Yam. I do have some flavorings that may highlight his dish.
(a) Wages are down about 30% across the board over the past 40 months;
(b) The HK property market, defined by our top-end apartments and centrally located offices/retail shops, fell around 60% in USD/HKD terms from peak price in 1997, and had stablized in 2000.
Nice apartments now yield around 7.2% (top locations, best views) and can be financed at 2.5% mortgage rate.
Nice, popular, centrally located B-grade office premises have fallen by around 78% from peak price.
The fact that values (as opposed to commercial rent) did not fall substantially during the 3 financially deadly months of SARS last year indicate that the worst may be behind us, barring out-of-the-blue downward spike powered by some events.
I have it on good authority that had the SARS episode which left hundreds of thousands of people without income lasted a few weeks longer, the bankruptcy mortuary would have been filled to bursting.
During those dark days, most commercial landlords reduced the rent by up to 50% during that time, and many employees of travel related businesses reported to work but were making do without pay.
On this basis, one would certainly hope that property deflation is behind us ;0)
(c) The mainland boom, and the resultant tourists loaded with moolah visiting HK has helped matters on the retail side.
(d) The fact that anyone can buy any asset in HK in the amount of HKD 6.5 mm (7.8:1 USD) can obtain residency is attracting much interest, not only from China mainland but even from the USA.
(e) Multi-currency savings account is routine in the typical HK family's banking setup, and as many have overseas residency, especially in Canada, Australia, and New Zealand, many had considerable savings denominated in those currencies. As HK dollar had taken a beating along with the USD from the stronger currencies, the folks with the right kind of money is in fact looking at real estate bargains denominated in HKD.
(f) The recent China H-share bubblet has boosted sentiments and allowed many to earn undeserved gains.
So, yes, deflation could be over, or may be simply on a ledge, and as usual, has nought to do with any government initiatives or brilliance, except that they were wise enough to stay mostly out of the free market's way.
HK made it this far in OK shape, considering, and I attribute it to (a) high local savings pool, (b) worldwide liquidity flood, (c) China boom, and (d) USD devaluation.
Even so, the drubbing has been horrific.
I am wondering how California would fare through a similar episode ;0) They who have perpetual wars to fight, Mars to go, SUVs to tank, and missile defenses to dream up.
Chugs, Jay |
