History may repeat in Hong Kong, beware the bubble: analyst

PRSEA | Jun 28, 2011

A seasoned property watcher has a dire warning when he looks at the current property scene in Hong Kong.

“I see history probably repeating itself and a correction looming large for the market,” said Koh Keng-shing, who has more than 30 years under his belt as a property professional.

During that time Koh was in charge of the professional services desk of First Pacific Davies (now Savills Hong Kong), and later served as valuation manager for consultancy Jones Lang Wooton (now Jones Lang LaSalle), according to the South China Morning Post.

His experience now tells him that a repeat of the 1997 market collapse could be in the future.

“Weaker than expected land auctions, tightened government measures on mortgage lending and increased land supply. Does that sound familiar?” asked Koh, noting those events foreshadowed the 1997 market collapse.

Currently running the real estate agency Landscope Realty, which he founded in 1995, Koh has been a member of the Royal Institution of Chartered Surveyors since 1990.

According to Koh a key turning point was the 9 June auction of the luxury residential site on Borrett Road.
The Borrett Road site sold at below market price estimates, and for Koh was a foreboding sign of things to come. The outcome recalled the trigger point for the 1997 market decline when a residential site in Wong Ma Kok, Stanley was sold on 3 June 1997 for HK$5.5 billion (US$706 million), 16 to 34 per cent below estimates and only 6 per cent above the opening bid.

Prior to the auction, sales volumes were regularly hitting record highs, but things quickly slid downwards, driven further by a government plan to increase land supply to increase the source of new homes to 85,000 per annum.

“Now, like then, we are seeing luxury home sales beginning to slow, even though prices remain high.”

On June 10, the government announced the launch of eight sites for sale, on which it expects developers to build 6,000 flats. The move coincided with an order from the Hong Kong Monetary Authority that banks should lend no more than 50 per cent on homes valued at above HK$10 million (US$1.3 million) (down from a cap of 60 per cent).

The authority for the first time also added tougher restrictions on non-resident borrowers. Momentum is also building for the government to revive its subsidised Home Ownership Scheme, suspended in 2002. Koh said the resumption of the scheme would shorten the cycle, bringing the correction forward into the second half of this year.

“Things have certainly taken a turn for the worse,” said Lee Wee Liat, head of regional research at Samsung Securities (Asia). The government’s willingness to resume building subsidised housing for sale, together with measures targeting foreign investment demand, showed a determination to cool the market down, he noted.
“A short-term correction is now possible,”

he said.

The latest data suggest a slowing in demand. Just 21 new homes were sold over last weekend — down from the 47 homes sold over the previous weekend, according to Samsung.

Secondary transaction volumes also fell to their lowest level so far this year, with just 21 flats sold at the 10 largest residential estates tracked by Midland Realty, down from 24 the previous weekend.

Developer Cheung Kong (Holdings) has lowered asking prices at its Uptown apartment block in Yuen Long by between 5 per cent and 8 per cent, putting new average selling prices in the range of HK$5,300 (US$681) to HK$5,500 (US$706) per sq ft, noted Lee in his latest research report.

But the pessimistic views are not shared by all industry players. Among the optimists is Nicholas Brooke, chairman of consultancy group Professional Property Services.

“Although the government intervention is likely to bring about some cooling in the short term, I think once this is absorbed by the market we will see renewed activity, albeit at a slower pace, in that the reality is that nothing has changed so far as the fundamentals are concerned,” Brooke said.

“I honestly do not foresee a bursting of the bubble as many describe it, but rather a gradual calming of the market as result of the combination of government intervention at both the supply and demand end of the equation, as well as a function of the likely hike in interest rates.

“The market will probably plateau by mid-2012 and there may be some downward adjustment thereafter, but I do not see this as major, given the wide international interest in Hong Kong real estate as a long-term investment medium,” he said.

Quote of the Week

“Don’t aim at success. The more you aim at it and make it a target, the more you will miss it. For success, like happiness, cannot be pursued; and it only does so as the unintended side effect of one’s dedication to a cause greater than oneself or as the by product of one’s surrender to a person other than oneself. Happiness must happen and the same holds for success: you have to let it happen by not caring about it. I want you to listen to what your conscience commands you to do and go on to carry it out to the best of your knowledge. Then you will live to see—in the long run, I say!—success will follow you precisely because you had forgotten to think of it.”

~ Viktor Frankl

Bohemian Rhapsody

“Bohemian Rhapsody” is a song by the British rock band Queen. It was written by Freddie Mercury for the band’s 1975 album A Night at the Opera. The song has no chorus, instead consisting of three main parts: a ballad segment ending with a guitar solo, an operatic passage, and a heavy rock section.

When it was released as a single, “Bohemian Rhapsody” became a huge commercial success, staying at the top of the UK Singles Chart for nine weeks and selling more than a million copies by the end of January 1976. It reached number one again in 1991 for five weeks following Mercury’s death, eventually becoming the UK’s third best selling single of all time. It topped the charts in several other world markets as well, including Canada, Australia, New Zealand, Ireland and The Netherlands. In the United States the song originally peaked at number nine in 1976; however, it returned to the chart at number two in 1992 following its appearance in the film Wayne’s World, reviving its American popularity.

Rolling Stone ranked it as the number 163 on their list of “The 500 Greatest Songs of All Time”.

Johor property market to shine

Johor property market to shine
Written by Chua Sue-Ann
Wednesday, 04 May 2011 11:57

KUALA LUMPUR: As multi-billion ringgit investments in Johor’s Iskandar Malaysia take shape, property players and investors are increasingly positive that the Johor property market is poised for a golden era after a sluggish decade.

KGV-Lambert Smith Hampton executive director Samuel Tan is among those convinced that Johor Bahru and Iskandar Malaysia’s property scene are on the cusp of a change of fortune.

“The past 10 years have been miserable. When we look at Kuala Lumpur’s property market, we are full of envy,” Tan told a media briefing in Johor Bahru last weekend.

Although property values and demand have a long way to go before they catch up with the hot real estate markets of Kuala Lumpur, the Klang Valley and Penang, Tan said the narrowing gap in values provides investors good upside potential.

Although total transaction volume for properties in Iskandar Malaysia remained constant over the years, he said, the transaction value and demand have been on the uptrend, particularly since 2H10.

Data from the National Property Information Centre (Napic) show that the transaction volume in Johor in 4Q10 more than doubled to 5,147 units from 2,105 in the preceding quarter.

Significantly, the transaction value nearly tripled to RM1.13 billion in 4Q10 from RM397 million in the previous quarter.
Continue reading Johor property market to shine

Buying Insurance

This is a post by d.o.g. from the ValueBuddies forum.


There are a few basic types of insurance available to the consumer:

  • Life Insurance
  • Hospitalization & Surgical (H&S) Insurance
  • Disability Income
  • Critical Illness
  • 1. Life insurance

    This pays upon death or total permanent disability (TPD). It can be for a limited term i.e. 5, 10, 20 years etc, or it can be for the insured’s lifetime (whole life).

    Term insurance is very cheap because it only covers the actual risk of death/TPD. Since it is pure insurance, all the premium paid is an expense and cannot be recovered. It is very useful for paying off liabilities that have a reasonably clear expiry date e.g. children graduate from university (age 25), aged parents pass away (age 100) etc.

    Another reason term insurance is so cheap is because it’s a commodity – you are either dead or not dead (produce death certificate) and you are either TPD or not TPD (produce doctor’s certificate). So the insurers cannot try to mislead you with smoke and mirrors or fancy names. Delaying payout will just hurt their own reputation and future business. So they are forced to compete on price, which is a great benefit to consumers.

    Term policies are usually structured so that the payments are level during the life of the policy. However, since the age of the insured will affect the odds of death/TPD, the premiums will be calculated based on the aging of the insured during the policy. A term policy of any given duration will be more expensive for an older person than a younger one.

    Whole life insurance essentially splits the premium paid into 2 portions: a small part actually pays for term life insurance (and is not recovered), while the bulk of the money is invested on your behalf by the insurer. Over time, the invested money grows, while the actual insurance coverage declines. The sum of the invested money and the remaining insurance coverage forms the “sum assured”. This is not seen by the consumer – the internal offset is calculated by the insurer and only the sum assured is shown to the consumer. By the time the consumer is old e.g. age 65 there is actually little or no insurance coverage left, only the investment sum.

    Endowment plans are dressed-up whole life plans where even less of the money pays for insurance. They are basically an investment product masquerading as insurance. Education plans are just endowment plans with a nice name.

    Insurance-linked products (ILPs) are even more blatant investment products where as little as 1% of the money is actually used to buy insurance initially so the insurance cover is laughable, usually only 125% of the invested sum. Since your investment sum is already 100% of this amount you are only buying an additional 25% of insurance cover. More insidiously, as you get older the sum deducted for life insurance (mortality charges) goes up, so less and less of your money is invested. When you are very old the mortality charges increase exponentially and exceed your investment returns, so the total value of your investment will decline rapidly.

    I have discussed term, whole life, endowment and ILP policies together because they offer varying combinations of insurance and investment. Unless you are totally incompetent at investing AND cannot find the discipline to invest in a low-cost index fund, the most sensible ratio is 100% insurance and zero investment i.e. completely separate insurance and investment.

    2. Hospitalization & Surgical (H&S) Insurance

    This pays hospital bills. Qualifying expenses are paid up to the limit specified in the policy. There is usually both an annual limit and a lifetime limit. Beyond these the consumer must pay, first out of Medisave and then out of pocket.

    There are Shield-type plans offered by the local insurers that serve this function. The premiums can be paid out of Medisave. The limitations are that they all set a minimum bill size (excess) before the policy kicks in, and the qualifying amount is only partially reimbursed, usually 85%. So for small bills the consumer pays everything out of Medisave and his/her own pocket. Some insurers offer a rider, payable only by cash, that can pay the 15% co-payment, or cover the excess. Talk to an insurance broker if you are not clear.

    There are also other non-Shield plans that do not require an excess and can pay 100% of the bill, but the premiums must be paid by cash.

    H&S premiums go up as you get older to reflect the increased likelihood of hospitalization as well as the increased bill size. The Shield-type plans have lifetime coverage versions available. IMHO everyone should buy the most coverage they can afford, because (a) it’s paid from Medisave which cannot otherwise be used, and (b) coverage can be reduced in future if premiums go up, but is almost impossible to increase if illnesses strike.

    3. Disability Income

    This pays when you are unable to work for any reason, or when you are disabled and can only earn a fraction of your former wages. The policy kicks in after a set period, usually 60 days, and pays a percentage, often 75%, of the difference between your new wage and your old one. It will pay until you are 65. So if you earn $3,000 at age 30 and are suddenly struck down and become a quadriplegic, after 60 days the policy will kick in and pay $2,250 per month until you are 65.

    This type of policy is very useful because few people finish their working life without any type of extended absence from work. So if you get into a car accident and are out of work for 6 months, you only lose 2 months of income instead of 6. In the worst case when you become a vegetable, your policy will cover your long-term care until you are 65. It is also of the greatest value at the point when you need it most – at the start of your career when your only asset is your ability to work.

    Policies differ by waiting period, percentage of reimbursement and last payment. Obviously the cheapest policies will have longer waiting periods e.g. 90 days, lower reimbursement e.g. 2/3 and earlier last payments e.g. age 50.

    However, it is not easy to find a good disability income policy. Some of the insurers have revised their policies for the worse. So read the fine print carefully.

    Some insurers offer a “hospital income” policy which pays you a set sum for each day you are in hospital. This is basically an inferior version of disability income, since it only pays when you are in hospital and not when you are at home recovering. The sums are typically about $100 per day which will not cover the hospital bill, and there is no payment when you are recovering at home. Use H&S to cover the hospital bill, and use disability income to replace lost income. A hospital income policy is basically a waste of money.

    4. Critical Illness

    This policy pays upon diagnosis of the onset of any one in a set list of 30 “dread diseases”. The local insurers now use a common pool of definitions for the diseases, so it is no longer possible to shop around for the most lenient insurers. However, different insurers have different diseases in their set of 30 e.g. some may have lupus (for women) while others may not. Note that the required diagnosis can be very specific. If it says “2 or more artery blockages” and you get a heart attack involving 1 blocked artery, tough luck, there will be no payment. Once payment is made the policy expires. Some policies allow multiple claims, but this is obviously a marketing trick – you have already paid for the higher coverage in your premiums.

    Since it is rare to get a dread disease without going to hospital, it is debatable whether critical illness coverage is truly useful. It CAN be useful for miscellaneous expenses like a wheelchair or a maid, but these can often be self-insured from savings. It may be OK to not have critical illness coverage. It is not OK to go without H&S coverage.

    Critical illness policies come in both term, rider and whole life versions. The rider is basically an extra premium on top of an existing policy that gives the critical illness coverage. Again, if you decide to buy a critical illness plan, it is probably best to buy term. That way you get the most coverage for your dollar.

    IMHO the order of priority for insurance expenses should be:

    1. H&S
    2. Disability income
    3. Term life (if there are liabilties that need to be paid)
    4. Critical illness (optional)

    It may sound obvious, but people who do not have dependents should not buy ANY life insurance since nobody will be financially worse off if they die. Likewise there is no point buying life insurance on the life of a child, because the death of a child does not result in economic loss (emotional loss yes, but money can’t make up for that).

    Also, VERY IMPORTANT: make sure that whatever H&S and critical illness policies you buy are GUARANTEED RENEWABLE, not just renewable. The reason is that H&S policies that are merely renewable (not guaranteed) will obviously not be renewed once you make a claim i.e. your coverage is one-use only. The insurer may also decline to renew your critical illness coverage if you fall ill, even if you don’t make a claim. Such “renewable” plans are MUCH cheaper and the agent may try to sell you one on the basis of affordability. DO NOT TAKE IT. Only buy GUARANTEED RENEWABLE plans.

    Finally, remember that by law all regulated financial products in Singapore, including insurance, must come with a 14-day “free look” period during which you can cancel the purchase and get all your money back. No questions asked, 100% refund. So you can change your mind – but do it quick!

    mrEngineer wrote:Lastly, I believe all the agents I have met have wasted my time by trying to sell me life policies. Where should I go to look for term policies? Should I go to the insurance company directly? Any recommedations from forumers?

    I personally use an insurance broker. An insurance broker represents many different insurers so you can pick and choose the policy that best fits your needs. Because some insurers e.g. Great Eastern and AIA only use exclusive (tied) agents, you won’t be able to buy their policies from an insurance broker. So you may need to talk to 3 people (one broker and 2 tied agents) if you want to get a complete overview.

    If you are short of time then at least talk to the insurance broker. At the least, even if you can’t get the best policies, you will avoid the worst policies.

    The Guest House

    This being human is a guest house.
    Every morning a new arrival.

    A joy, a depression, a meanness,
    some momentary awareness

    Welcome and entertain them all!
    Even if they’re a crowd of sorrows,
    who violently sweep your house
    empty of furniture,
    still, treat each guest honorably.
    He may be clearing you out
    for some new delight.

    The dark thought, the shame, the malice,
    meet them at the door laughing,
    and invite them in.

    Be grateful for whoever comes,
    because each has been sent
    as a guide from beyond.

    – Jelaluddin Rumi (Sufi poet, 1207-1273)

    List of Singapore Private Companies Offering Storage Space

    1. Extra Space
    Hotline: 6304 3200
    Extra Space IMM Jurong Building
    2 Jurong East St 21
    #02-71 IMM Building
    Singapore 609601
    Tel: 6304 3208
    Fax: 6491 1244
    Email: [email protected]
    Extra Space Clementi Ave 6 West Coast
    No. 1 Clementi Loop
    Singapore 129808
    Tel: 6304 3211
    Fax: 6491 1245
    Email: [email protected]

    2. Store-It! Self Storage

    Pasir Panjang Road Facility
    Harbourside 1
    1 Boon Leat Terrace
    Singapore 119843
    Tel: 6271 2762
    Fax: 6271 2393
    Email: [email protected]

    3. Lock and Store
    37 Keppel Road (opp. Singapore Railway Station)
    #01-03 Tanjong Pagar Distripark
    Singapore 089064
    Tel: 6325 7351
    Fax: 6224 9041
    E: [email protected]

    4. Big Orange Self Storage and Warehouse Solutions Singapore


    Big Orange Corporate Office
    74B Tras Street, Singapore 079013
    Tel: 1800 ORANGE = 1800 244 6726
    Email: [email protected]

    Big Orange at Woodlands
    14 Woodlands Loop, Singapore 738363
    Tel: +65 6590 3761
    Email: [email protected]

    Big Orange at Bukit Batok
    5 Bukit Batok Street 22, Singapore 659583
    Tel: +65 6590 3762
    Email: [email protected]

    Big Orange at Hougang
    111 Defu Lane 10, Singapore 539226
    Tel: +65 6590 3763
    Email: [email protected]

    Big Orange at Tampines
    37 Tampines St 92, Singapore 528885
    Tel: +65 6590 3764
    Email: [email protected]