Timing in the market can be hit or myth for buyers

Psychology of ownership may work against home-seekers when the data suggests caution

PUBLISHED : Tuesday, 14 May, 2013, 12:00am
UPDATED : Tuesday, 14 May, 2013, 3:33am

Is it the right time to buy? A reader raised this question when he read the news that Frederick Ma Si-hang, a former secretary for commerce and economic development, recently bought a unit at Pacific View in Tai Tam for HK$35 million, about a year after he sold his flat in Magazine Gap Road in Mid-Levels.

Ma's purchase lifted the reader's hopes for the market outlook, partly because he believes Ma is recognised as a veteran investor.

More importantly, the reader is similar to many Hong Kong home seekers, who have an irrepressible urge to own a home. The urge, I believe, comes from certain myths about home ownership. One is that if you rent, you are throwing money away. Another myth is that a mortgage is a form of enforced saving.

Of course, history tells us that buying a home in Hong Kong has always been a path to wealth. So, any changes in price trends and veteran investors' buying decisions will pique the interest of potential buyers.

Renting doesn't give you a good feeling. Last week, a friend looked for a rental unit. Without any recreational facilities and on a noisy street, a unit with 357 square feet of saleable area in an ancient building in Wan Chai was being offered for an asking rent of between HK$13,000 and HK$14,000 a month. For a two-bedroom flat with a better environment, such as in Kornhill in Quarry Bay, one would have to pay HK$15,500 to HK$18,000 a month, according to the latest transactions tracked by Centaline Property Agency between April and early May.

From the flat owner's view, the rent is not too high. The latest transactions in Kornhill, according to Centaline, were between HK$5.36 million and HK$5.65 million, so the rental yield of the Kornhill unit is just 3.47 per cent on the basis of a monthly rent of HK$15,500 and selling price of HK$5.35 million.

Centaline Property Agency's Centa-City Index, which tracks secondary home prices at 100 housing estates, showed that prices fell 0.28 per cent in the week to May 10 from the week before. The index showed prices had fallen about 4 per cent since the government announced the doubling of stamp duty on residential and non-residential transactions valued at more than HK$2 million.

Piers Brunner, chief executive for Asia at property consultancy Colliers International, said earlier that the cooling measures by themselves were not strong enough to drag down home prices. However, greater supply and higher interest rates might.

Provided that Chief Executive Leung Chun-ying can deliver what he has pledged - provide land for 67,000 homes in the coming years - the new flat supply will come on to the market at about the time the interest rate trend reverses.

There are probably good reasons for the mentioned reader to consider holding back his buying decision. However, our home-buying decisions have more to do with our psychology than with the numbers.

Ironically, history tells us that most of the homebuyers who followed their urges - rather than the numbers - made the right move, taking into account the boom of the past 10 years. Do you want to bet that history will repeat itself this time?

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