Not content with unleashing packs of rabid, half-starved real-estate agents onto Hong Kong, Sun Hung Kai Properties is now trying to stuff cash into people’s pockets in an attempt to sell its grossly overpriced, horrid little apartments. The developer is offering 120% mortgages to enable existing home owners to pay off their current loans and ‘upgrade’ (I dread to think from what) to the company’s Park Yoho Venezia project in drab, distant and dismal Yuen Long.
Even a property agency boss expresses surprise at the ‘gamble’ suckers accepting the offer would be taking at a time when prices are set to continue falling.
Some onlookers question how a developer can get away with this when the HK Monetary Authority forbids banks to lend buyers more than 60% of a property’s value. The answer is that the HKMA doesn’t care about the folks who buy homes; if they bite off more than they can chew and end up in negative equity, that’s their tough luck. The HKMA’s only concern is the well-being of the institutions that make the loans. If banks lend 90% or 100% mortgages during a housing bubble, and then prices collapse, the financial system will be threatened.
The cool bit is that if the banks lend money to developers, who then lend it to over-extended buyers, there’s nothing to worry about because – serendipitously – the HKMA doesn’t classify that as mortgages. At the time the banks lend that money, it gets called something else, so everything’s fine. The people at the HKMA are incredibly highly paid because, unlike the rest of us mere mortal dimwits, they can comprehend such mysteries. (Basically, it’s about risk: provided the banks and our developer friends have unloaded it onto some poor schmuck trying to house and feed his family, everything is perfect.)
The 120% mortgage offer in itself serves as proof that the market is heading down, and should therefore, in a rational world, be self-defeating. People think of property tycoons as shifty, duplicitous types, but right now, Sun Hung Kai would not be making a more transparent and honest statement if it tattooed ‘Desperate!!! Gimme Gimme Now!!!’ on Raymond Kwok’s forehead.
And still… There will be takers.
I nearly made a knee jerk response to say at what interest rate are these 120% mortgage offers, but then common sense and old age got the better of me and I clicked the link to the Standard which basically illustrated interest rates at 2.5 times greater than I am currently paying for my Ho el on HK island. Anyone who falls for this snake oil confidence trick deserves entirely what they get as they are demonstrating a lack of understanding of the value or price of money.
Sorry hovel not Ho el.
120% of overpriced unit in declining market. Buyer cannot afford, and defaults. developer takes unit back and sues for balance outstanding. Defaulter cannot pay (or simply goes bankrupt, going rate about 14k to do so). Developer has to remarket unit, probably at lower price, probably lend on it to sell it, and yet take hit from first loss (not limited to the 20% top up).
Reminds me of the rubbish I get from HSBC – some breathless promo along the lines of “Mr Reductio, you have a $1,200,000 possible drawdown on your credit card. No interest for 3 months. Apply now for a $200 Maxims voucher.”
I actually don’t live too far from that development. It is probably a 15 minute bus ride to the nearest MTR station (Kam Sheung Rd), and the complex itself is basically surrounded by squalor/construction waste/pig farms. There is no shopping whatsoever in the immediate vicinity, but I guess you do have clear views to Futian District from the higher floors.
The buildings look pretty nice, I will say that. Mildly better than some of the other garbage that passes as “high end” in Hong Kong.
And this, incidentally, is why old buildings are left to rot. The developers will shove a firehose of loan money into your pocket to get you to buy a new flat, but if you want to buy an old one, the bank will go “we want 50% down and you have the pay the rest back in 5 years”. Consequently the only people who buy old flats are yuppie-hipster renovator-flippers (in fashionable neighbourhoods) and slumlords (in unfashionable neighbourhoods).
Walk round the centre of Yuen Long, look at the thousands of small shops, then come back and say how drab and dismal it is.
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There is, or ought to be, an H.M. Bateman cartoon: in a Starbucks, a man in the middle of a group is looking sheepish. A woman has covered her face with her hands, and is staring at him in horror through the cracks between her fingers. A man is covering his face with his tablet to hide his tears. A child, sobbing, is being comforted by her mother, who is looking angrily at the man as if thinking, “How could you say such a thing in front of my child?” A beer-bellied man, swollen with shock, has burst the buttons of his shirt. A woman, unnerved, is holding her cup against her ear and trying to drink from her phone. A man is clutching the keys of his mid-levels flat with an air of desperate possessiveness. The caption is, ‘The man who said he lived in Yuen Long.’
Don’t forget…confidence in the post ’47 HK real estate market may take a nosedive well before that date.
Oh-oh, all kinds of truthiness erupting in this here town…
What kind of name is Park Yoho Venezia? It sounds like it was thought up by a committee.
Thank god Hong Kong doesn’t have a subprime market…… ooops.
Add to the drab, dismal and distant is the fact that the place is surrounded by high tension wires and the view is a highway .