The property market has retreated by anywhere between 25% and 30% since the first quarter of 2008 (depending on which sector of the market you are looking at). The local stock market has retreated even more (down by more than 50% from its high). Rents are also coming under pressure and falling. With every pundit and analyst in town forecasting lower prices, I decided it would be a good time to take a look at some properties.
After looking at a number of properties in the Mid-levels, I was struck by a number of factors:
1. rents have declined only a little less than capital values - yield expansion has been very limited (and I suspect that whatever yield expansion has taken place will be offset by longer vacancy periods);
2. genuine vendors are willing to accept some discount to their asking prices - but not much. This is an improvement over the common experience of raising asking prices the moment you expressed an interest in a property;
3. bait and switch advertising is all too common. A property will be advertised at a low price but when you ask to see the property, the agent will say that the vendor is not serious and show you a similar property at a higher price;
4. there are still plenty of owners in fantasy land asking prices which are at or above last year's highs;
5. motivated vendors are scarce. I hope that this will change as leases expire and vacancy rates increase and rental levels fall below the previous levels. Given the very low interest rates and the abundance of liquidity in Hong Kong, this may take a while.
It is still very much a buyer's market and I am in no hurry to buy anything unless is is a very good deal.