<<soft ... slow landing>>
worldmarket.blogspot.com
Thinking back on the Hong Kong experience with housing bubble in 1997-2000, without exaggerations:
- Monetary and price inflation rate (fueled by China and USA, via pegged currency that is still HKD) was higher than borrowing burden
- Every other street level shop on very many streets are real estate agencies
- Lots of pre-sales
- Enough folks able to sell their place in the queue waiting for sales allocation for cash
- Some banks specialize in mortgage debt only on parking space
- Folks start buying overseas as well, raging from London and Toronto far away to Vietnam and China nearby
- Parking spaces in residential buildings 30 minutes drive from CBD transacts for USD 80,000
- Small public traded companies announce purchase of 30 parking spaces, and watch share price increase, thus boosting borrowing capacity
- Real estate agencies go IPO
- The bell is tolled, trap door sprung, noose tightened, and rack cranked
- Volume dries up
- Some transactions still gets done, desperately
- Mortgage debt still increases
- All still under control
- Bottom drops out
- Lots of frauds and untruth come to light
- Legal profession gets busy, and forensic accountants make a mint
- A 'soft-landing correction' from peak to valley happens, of 60-80% depending on location
- Folks get despondent and upside down
- Real estate agencies disappear, along with retail shops, crushing rents, improving rental yields
- Department store retail sales clerks get busy on phone to drum up retail sales, treat folks nice for a change, offer to fix buttons and mend belt loops while customers window shop, and is served tea
- Nominal value of real estate stabilizes, and given that exchange rate was hard-pegged, take-home income takes a 40% scraping, while debt burden remain the same, pulverizing purchasing power
- A 'soft landing' happens, in a manner of speaking, semantics really, and a time of opportunity, for the few, dawns
Note: There are at least two ways to look at the situation in the Anglo nations with a possible housing bubble situation, that (i) the ultimate peak is not yet reached, because much financial engineering can still be put in place, and/or (ii) the real estate financing industry is not creative enough yet.
Reminder: The bottom is not in until and unless buttons can be sewn on for free, while belt loops are mended at no charge.
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