ogc163
Superstar
Jean Lius plan to buy a Hong Kong apartment was derailed by the 2008 global financial crisis. It was an opportunity lost as prices surged instead of dropping as they did in many of the worlds property markets, leaving the 32-year-old corporate banker still searching for an affordable home four years later.
I originally set my budget at HK$3 million, or $390,000, Liu said by telephone. Now thats barely enough for a down payment.
Lius plight is shared by homebuyers as far away as Canada, Switzerland and Norway as a flood of money supplied by central banks globally to prop up the financial system finds its way into markets regarded as havens from economic turmoil and Europes sovereign-debt crisis, pushing down borrowing costs and driving up home values. The U.S. Federal Reserve has held interest rates near zero since 2008 to stimulate the worlds largest economy, forcing faster growing economies such as Hong Kong to adopt a loose monetary policy that fuels inflation.
The Feds trying to save the day, yet its creating a lot of distortions both at home and internationally, Mickey Levy, chief economist at Bank of America Corp. in New York, said by phone. The Fed is understating the magnitude of these distortions, such as rising real estate prices and low bond yields, he said.
Investors in search of higher returns are moving into appreciating real estate markets benefiting from strong economies and stable governments not burdened by high levels of debt.
Booming Markets
In Canada, where government bond yields this week fell to the lowest level since 1950, home prices have climbed 34 percent since January 2009 to an average of C$369,339 ($362,204), according to the Canadian Real Estate Association.
Switzerland is as close to a housing bubble as its been in two decades, according to data compiled by UBS AG. Norwegian homeowners, whove seen property prices surge almost 30 percent since 2008, may face higher mortgage payments before the end of the year as the countrys central bank seeks to deflate a property bubble amid expectations that household debt will surpass 200 percent of disposable incomes next year.
Hong Kongs combination of record-low borrowing costs and a shrinking supply of new buildings caused home values to jump more than 80 percent since the start of 2009, according to the Centa-City Leading Index. In the 12 months through March, prices gained 5.4 percent, more than any other Asian market apart from India, broker Knight Frank LLP estimates.
Pricy Apartments
A two-bedroom, 700-square-foot (65-square-meter) apartment built in the last 25 years close to the Central business district would cost about HK$8 million, according to Midland Holdings Ltd., the citys biggest publicly traded real estate company. The typical down payment for homes of this value would be 40 percent, or HK$3.2 million.
Hong Kongs currency peg to the dollar robs the city of an independent monetary policy, with official interest-rate moves mirroring those of the Federal Reserve. Thats making it harder for Leung Chun-ying, Hong Kongs recently selected chief executive, to keep a lid on prices even as other Asian housing markets have fallen from their peaks.
Property values around the world were inflated by cheap credit at the end of the last decade, leading to housing bubbles in countries from the U.S. to Ireland and Spain. The collapse of those markets contributed to the 2008 financial crisis, prompting central banks in the worlds biggest economies to cut interest rates to record lows.
Economic Stimulus
Central banks in North America, Europe and Asia have spent more than $4 trillion, equivalent to the gross domestic products of the U.K., Australia and Singapore, on stimulus and asset purchases.
The Fed bought $2.3 trillion of mortgage and Treasury debt from 2008 to 2011 in two rounds of so-called quantitative easing, while the European Central Bank has granted more than 1 trillion euros ($1.2 trillion) in three-year loans to banks and the Bank of England has committed to 375 billion pounds ($582 billion) in bond purchases. On July 12, the Bank of Japan bolstered its asset purchase fund by 5 trillion yen to 45 trillion yen ($575 billion).
Reduced borrowing costs have failed to revive many housing markets. Property prices in about half of the countries included in Knight Franks global house-price index, including the U.S., fell in the first quarter from a year earlier. U.K. values were little changed while Ireland dropped 16 percent and Greece had a 9.8 percent decline.
Bright Spots
There were some bright spots. Luxury homes in London, New York and San Francisco have all performed better than housing as a whole as investors have competed for a limited number of properties for sale in these financial and technology centers.
The flow of investment into markets seen as havens is prompting governments to intervene to cap rising prices that are punishing local buyers and threatening to create new bubbles.
Hong Kongs Leung pledged to do more to boost public housing when he took office on July 1. His predecessor, Donald Tsang, tried to rein in prices by asking banks to raise the minimum down payments for some properties and levying a higher tax on homes bought and sold within two years.
Other Asian governments have been more successful at slowing their real estate markets. Home values in Singapore gained 2.7 percent in the first quarter from a year earlier, compared with an increase of 4.6 percent in the fourth quarter.
Subsidized Loans
The country has been trying to damp demand since 2009, when the government barred interest-only loans for some housing projects and stopped allowing developers to subsidize loan repayments on unfinished apartments.
Chinas efforts to stem a surge in home prices is prompting mainland Chinese to seek investments abroad. The government increased down-payment requirements and mortgage rates for some apartments and limited the number of homes a family is allowed to buy. Prices surged 32 percent in the two years after the government responded to the financial crisis with 4 trillion- yuan ($628 billion) stimulus package in 2008.
Two interest-rate cuts and more favorable terms for first- time buyers are again putting upward pressure on values in China. New home prices increased for the first time in 10 months in June, according to SouFun Holdings Ltd. (SFUN) (SFUN), the countrys biggest real estate website owner.
Competing Buyers
Hong Kong homebuyers like Liu are losing out as investors from the rest of China push up prices. Buyers from the mainland accounted for about 54 percent of new home sales by value in Hong Kong in the third quarter of last year, according to Midland Holdings. The share fell to 37 percent in the first quarter, the Hong Kong-based broker said.
I told myself to wait until the market pulls back, but it never seems to, said Liu, whos now prepared to pay as much as HK$4 million for a two-room apartment. Its been very frustrating.
Qiushi Zhang, a 25-year-old graduate from the University of Toronto, convinced his parents in the Chinese city of Wuhan to purchase a two-bedroom condominium at Cityplace, a development along Torontos waterfront.
People have money in mainland China, but they dont have good investment options, Zhang said by phone.
Canada is regarded by investors from China, Singapore and India as a relatively stable and affordable place to seek returns on real estate, said Debbie Cosic, a founder and partner of In2ition Marketing Insights. The Mississauga, Ontario-based brokerage markets new homes for developers.
Canada Shelter
Cosic said her firm saw strong demand for properties in Toronto on a road show to Shanghai, Hong Kong and Singapore in October. Individuals looking to build a residential-property portfolio are increasingly viewing the Canadian city as an alternative to London and New York, she said by phone.
Its a safe country. The banking system didnt melt down, she said. At the back of their minds theyre always thinking: If I need to get out or I need to move money, this is my perfect way.
Canadian home prices advanced 6.8 percent in the first quarter from a year earlier, Knight Frank estimates. That compared with 6.3 percent increases in Norway and Switzerland.
Bank of Canada Governor Mark Carney sees rising household debt as posing the greatest threat to the countrys financial stability, after the countrys banks lowered mortgage rates this year to a record low.
Constant Rates
Carney has kept the central banks benchmark lending rate at 1 percent since September 2010, the longest period without a change since the 1950s. The central bank began lowering the rate in 2008 to shield the economy from the financial crisis.
The ratio of household debt to disposable income reached about 154 percent in the first quarter, higher than the U.S. figure of 141 percent.
In Europe, homebuyers in Switzerland and Norway are paying the price for having two of the regions most stable, prosperous economies as a spreading sovereign-debt crisis on the continent fuels cross-border investment.
The Swiss National Bank imposed a ceiling of 1.20 Swiss francs to the euro in September, while the Norwegian krone has gained 25 percent against the single currency since January 2009. The need to prevent their currencies from rising even more, combined with cuts by the European Central Bank, has prevented Switzerland and Norway from tightening monetary policy to avert a property bubble.
I originally set my budget at HK$3 million, or $390,000, Liu said by telephone. Now thats barely enough for a down payment.
Lius plight is shared by homebuyers as far away as Canada, Switzerland and Norway as a flood of money supplied by central banks globally to prop up the financial system finds its way into markets regarded as havens from economic turmoil and Europes sovereign-debt crisis, pushing down borrowing costs and driving up home values. The U.S. Federal Reserve has held interest rates near zero since 2008 to stimulate the worlds largest economy, forcing faster growing economies such as Hong Kong to adopt a loose monetary policy that fuels inflation.
The Feds trying to save the day, yet its creating a lot of distortions both at home and internationally, Mickey Levy, chief economist at Bank of America Corp. in New York, said by phone. The Fed is understating the magnitude of these distortions, such as rising real estate prices and low bond yields, he said.
Investors in search of higher returns are moving into appreciating real estate markets benefiting from strong economies and stable governments not burdened by high levels of debt.
Booming Markets
In Canada, where government bond yields this week fell to the lowest level since 1950, home prices have climbed 34 percent since January 2009 to an average of C$369,339 ($362,204), according to the Canadian Real Estate Association.
Switzerland is as close to a housing bubble as its been in two decades, according to data compiled by UBS AG. Norwegian homeowners, whove seen property prices surge almost 30 percent since 2008, may face higher mortgage payments before the end of the year as the countrys central bank seeks to deflate a property bubble amid expectations that household debt will surpass 200 percent of disposable incomes next year.
Hong Kongs combination of record-low borrowing costs and a shrinking supply of new buildings caused home values to jump more than 80 percent since the start of 2009, according to the Centa-City Leading Index. In the 12 months through March, prices gained 5.4 percent, more than any other Asian market apart from India, broker Knight Frank LLP estimates.
Pricy Apartments
A two-bedroom, 700-square-foot (65-square-meter) apartment built in the last 25 years close to the Central business district would cost about HK$8 million, according to Midland Holdings Ltd., the citys biggest publicly traded real estate company. The typical down payment for homes of this value would be 40 percent, or HK$3.2 million.
Hong Kongs currency peg to the dollar robs the city of an independent monetary policy, with official interest-rate moves mirroring those of the Federal Reserve. Thats making it harder for Leung Chun-ying, Hong Kongs recently selected chief executive, to keep a lid on prices even as other Asian housing markets have fallen from their peaks.
Property values around the world were inflated by cheap credit at the end of the last decade, leading to housing bubbles in countries from the U.S. to Ireland and Spain. The collapse of those markets contributed to the 2008 financial crisis, prompting central banks in the worlds biggest economies to cut interest rates to record lows.
Economic Stimulus
Central banks in North America, Europe and Asia have spent more than $4 trillion, equivalent to the gross domestic products of the U.K., Australia and Singapore, on stimulus and asset purchases.
The Fed bought $2.3 trillion of mortgage and Treasury debt from 2008 to 2011 in two rounds of so-called quantitative easing, while the European Central Bank has granted more than 1 trillion euros ($1.2 trillion) in three-year loans to banks and the Bank of England has committed to 375 billion pounds ($582 billion) in bond purchases. On July 12, the Bank of Japan bolstered its asset purchase fund by 5 trillion yen to 45 trillion yen ($575 billion).
Reduced borrowing costs have failed to revive many housing markets. Property prices in about half of the countries included in Knight Franks global house-price index, including the U.S., fell in the first quarter from a year earlier. U.K. values were little changed while Ireland dropped 16 percent and Greece had a 9.8 percent decline.
Bright Spots
There were some bright spots. Luxury homes in London, New York and San Francisco have all performed better than housing as a whole as investors have competed for a limited number of properties for sale in these financial and technology centers.
The flow of investment into markets seen as havens is prompting governments to intervene to cap rising prices that are punishing local buyers and threatening to create new bubbles.
Hong Kongs Leung pledged to do more to boost public housing when he took office on July 1. His predecessor, Donald Tsang, tried to rein in prices by asking banks to raise the minimum down payments for some properties and levying a higher tax on homes bought and sold within two years.
Other Asian governments have been more successful at slowing their real estate markets. Home values in Singapore gained 2.7 percent in the first quarter from a year earlier, compared with an increase of 4.6 percent in the fourth quarter.
Subsidized Loans
The country has been trying to damp demand since 2009, when the government barred interest-only loans for some housing projects and stopped allowing developers to subsidize loan repayments on unfinished apartments.
Chinas efforts to stem a surge in home prices is prompting mainland Chinese to seek investments abroad. The government increased down-payment requirements and mortgage rates for some apartments and limited the number of homes a family is allowed to buy. Prices surged 32 percent in the two years after the government responded to the financial crisis with 4 trillion- yuan ($628 billion) stimulus package in 2008.
Two interest-rate cuts and more favorable terms for first- time buyers are again putting upward pressure on values in China. New home prices increased for the first time in 10 months in June, according to SouFun Holdings Ltd. (SFUN) (SFUN), the countrys biggest real estate website owner.
Competing Buyers
Hong Kong homebuyers like Liu are losing out as investors from the rest of China push up prices. Buyers from the mainland accounted for about 54 percent of new home sales by value in Hong Kong in the third quarter of last year, according to Midland Holdings. The share fell to 37 percent in the first quarter, the Hong Kong-based broker said.
I told myself to wait until the market pulls back, but it never seems to, said Liu, whos now prepared to pay as much as HK$4 million for a two-room apartment. Its been very frustrating.
Qiushi Zhang, a 25-year-old graduate from the University of Toronto, convinced his parents in the Chinese city of Wuhan to purchase a two-bedroom condominium at Cityplace, a development along Torontos waterfront.
People have money in mainland China, but they dont have good investment options, Zhang said by phone.
Canada is regarded by investors from China, Singapore and India as a relatively stable and affordable place to seek returns on real estate, said Debbie Cosic, a founder and partner of In2ition Marketing Insights. The Mississauga, Ontario-based brokerage markets new homes for developers.
Canada Shelter
Cosic said her firm saw strong demand for properties in Toronto on a road show to Shanghai, Hong Kong and Singapore in October. Individuals looking to build a residential-property portfolio are increasingly viewing the Canadian city as an alternative to London and New York, she said by phone.
Its a safe country. The banking system didnt melt down, she said. At the back of their minds theyre always thinking: If I need to get out or I need to move money, this is my perfect way.
Canadian home prices advanced 6.8 percent in the first quarter from a year earlier, Knight Frank estimates. That compared with 6.3 percent increases in Norway and Switzerland.
Bank of Canada Governor Mark Carney sees rising household debt as posing the greatest threat to the countrys financial stability, after the countrys banks lowered mortgage rates this year to a record low.
Constant Rates
Carney has kept the central banks benchmark lending rate at 1 percent since September 2010, the longest period without a change since the 1950s. The central bank began lowering the rate in 2008 to shield the economy from the financial crisis.
The ratio of household debt to disposable income reached about 154 percent in the first quarter, higher than the U.S. figure of 141 percent.
In Europe, homebuyers in Switzerland and Norway are paying the price for having two of the regions most stable, prosperous economies as a spreading sovereign-debt crisis on the continent fuels cross-border investment.
The Swiss National Bank imposed a ceiling of 1.20 Swiss francs to the euro in September, while the Norwegian krone has gained 25 percent against the single currency since January 2009. The need to prevent their currencies from rising even more, combined with cuts by the European Central Bank, has prevented Switzerland and Norway from tightening monetary policy to avert a property bubble.
