Friday Asia Digest: Over 1 Mil Poor in Hong-Kong, Obama Win Boosts Asian RE Stocks

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A shocking review of living conditions in Hong-Kong, Asia’s financial hub and one of the world’s most expensive real-estate markets, reveals that over a million residents are living below the poverty line – making less that 3,500 HKD (450 USD) per month – while property prices are now 107% higher than in 2008, and 26% more than the previously recorded historical high the city-state achieved in 1997.

Various cooling measures, as mentioned in previous digests, have done little to stem the steep rise in prices, with Hong Kong leader Leung Chun-ying singling out the re-emergence of cage homes – wire mesh hutches stacked on top of each other – and cubicle apartments of no more than 35 square feet (pictured on right), priced at $40 per foot – as he announced the latest in a series of strict regulations on foreign buyers of residential properties – a special Buyer’s Stamp Duty (BSD) for non-local residents – 15% tax applied to all residential property transactions for all but permanent residents of the city-state.

Leung, who took over as chief executive on July 1, has been butting heads with billionaire property developers, who some analysts say could turn on the leader. Hong-Kong is viewed by many as being monopolized by mainland Chinese property developers and high ranking officials holding top-class properties bought at very high prices – power-houses who will fight every inch of the way to ensure this particular bubble keeps on inflating – and seemingly blind to its effect on the people of the city, as well as to its all but imminent impending burst.

Knight Frank, in a new report, claims that Hong-Kong as well as several other Asian rapid- trajectory property markets, have no choice but to continue imposing measures, limitations and stricter regulations to curb speculations in the coming years – new home sales volumes in Singapore hit all an all-time record year to date in 2012, with prices continuing to edge up on a quarterly basis. In Indonesia the government has tried desperately to cool the property market, including introducing a loan-to-value cap of 70% in July. But even this didn’t stop house prices increasing 1.2% in Q2 across the country, or condos in Jakarta from seeing a growth of 16.7% year on year.

Obama’s Re-Election Strengthens Asian Property Stocks

In sharp contrast to the doom and gloom, above, US president Barack Obama’s re-election has translated into gains for Hong-Kong developers, which has spurred expectations that a weaker dollar will send more money flowing in – perhaps in such sums that would be able to support property prices longer. Chinese property developer Evergrande, who’s shares are also traded in the Heng-Seng stock exchange, jumped 9.3% to its highest close since mid-July, in its best day in 5.5 months.

Global Gossip

* Following close on the heels of this rise in share prices, however, Asia bond risk, on the other hand, is set for the biggest weekly increase since the end of October, due mostly to increased concerns that the U.S. may go over the so-called fiscal cliff. Investor attention is now turning to the 1.2 trillion USD of automatic spending cuts in 2013 if Congress can’t agree to reduce the country’s deficit. The world’s biggest economy may suffer a recession should that take place, according to the Congressional Budget Office.

* CapitaLand, the Singaporian property giant, is pumping more and more billions into mainland China, 38% of its assets in China at the end of September – firmly supporting the estimate that gross domestic product is expected to grow at 8.1% next year, up from a projected 7.7 this year. CapitaLand’s strategy is to target the masses and the upper-middle class market through shopping malls, apartments for sale, and mixed-use developments for office, mall and residential use. The company’s management took about 15 journalists and analysts on a five-day tour of some old and newly opened properties in Chengdu, Chongqing and Beijing (pictured below) last week.

* In Australia, more and more funds turn to property, despite prophecies of an impending crash as the current mining cycle grinds to a halt – Knight Frank said total superannuation assets increased by about 50 billion AUD in the year to June 30, with the rate of savings set to receive a boost from the increase in compulsory contributions. ”With the allocation to property anticipated to rise above 10% by 2014, there is significant scope for superannuation funds to boost exposure levels to real estate,” said Knight Frank head of research and consulting, Matt Whitby.

(Partial list of sources – “Property Wire“, “CNBC”, “IPIN Global“, “Asia One“, “Bloomberg“, “Sydney Morning Herald“, “The Globe and Mail“)

(Picture 1 – Hong-Kong Slums / Ray Devlin, Picture 2 – Beijiing at Night / Herry Lawford)

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About Author

Ziv Magen (G+) is an Australian, and has been living alternately in Japan and Australia for the past decade. "Born and bred" an IT project manager, he has made the transition to full-time real-estate investing several years ago, and subsequently opened a buyers' and proxy agency - assisting others in remotely capitalising on Asia's booming property market.

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