Saturday, November 01, 2008

Bank valuations lowered (again)

The latest on-line mortagee valuations available on HSBC's website have been reduced again. This is the second reduction in the last two months. For the properties we own, the drawdown from the peak valuations set in the first quarter of this year ranges from 19% to about 6%. As a generalisation, the more expensive properties have shown the biggest percentage declines and the smallest properties the lowest percentage declines in value. Recent sales data from Centaline suggests that the HSBC valuations are reasonably close to market values.

I have no intention of buying another property this year as (i) I think that the market has potential to fall further and (ii) my wife and I are each facing a period of job uncertainty and we wish to keep a cash buffer against the possibility of unemployment. I will hold off. However, when I do start buying again, I may well look outside Hong Kong to markets in the UK, Australia or New Zealand where falls in the value of property and falls in the currencies combine to make a more attractive investment proposition. Of course, investing overseas has its own issues, but if the return is there, it may well be worth it. As an added factor, at the rate the JPY is appreciating in response to the unwind of the carry trade, using a JPY mortgage to purchase a property in one of the markets hit hard by the credit crisis offers the prospect of making money on the mortgage as well.

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