Hong Kong property owners are counting their money. Real estate prices are rising like a skyscraper overlooking the South China Sea -- standing at a 12-year high.
The Hang Seng Property Index has actually been leading Hong Kong stocks, the Hang Seng Index.
Some observers evoke memories of the Japanese real estate bubble, along with the continued deflation of residential and commercial U.S. real estate market. But at least for now, the rich on "the mainland" (China) and real estate companies are still buyers. In a recent article headlined "Property Novices Drive Hong Kong Prices Higher," The Wall Street Journal reports:
"Sino-Tech International Holdings Ltd. stunned investors by announcing that it was 'diversifying into the property sector,' buying a luxury three-story residence in Hong Kong's swank Peak district for more than...(US$36 million) in cash, one of the biggest sums ever for a property here.
"...property prices are back to where they were during the city's biggest bubble, a speculator-driven run-up that burst with dire consequences during the 1997-1998 financial crisis."
Bloomberg adds: "Mainland money has...helped fuel a 45% jump in prices of Hong Kong luxury homes last year." The same article also reports one Hong Kong official warning of "a bubble." The chief regional economist at Credit Suisse Group AG is also quoted as saying, "'The mainland's hot money today is blowing a property bubble in Hong Kong that is similar to the one seen around 1997...'" In mainland China itself, measures are being proposed "to control speculative buying." (Reuters)
U.S. real estate investors have already learned that prices are not always a one-way street. Today, you can find properties selling for 50% off the peak prices even in quiet suburban Atlanta, not to mention speculator hot spots like Las Vegas.
Japanese investors learned their lesson, too. After the country's property bubble burst in 1991, commercial real estate fell as much as 75% toward the end of the '90s. Some years ago money manager Bill Fleckenstein wrote that when "the big bubble in Japan occurred in the real-estate market...folks...talked about the Nikkei at 40,000 and how absurd it was. It was absurd, but the Nikkei was only dragged higher because of the complete madness in real estate, which was far more absurd." (MSN Money)
Here's a funny thing about bubbles: Whether in the U.S., Hong Kong, or anywhere else, it's hard to imagine an end to the "good times" when a bubble is still building. Most people don't believe there is a bubble in the first place! Even objective measures of investor psychology like Elliott wave analysis fail to convince the bulls that a turn may be around the corner.
What does Elliott wave analysis tells us now about the Hang Seng Properties Index and Hong Kong stocks?
The April issue of Elliott Wave International's Asian-Pacific Financial Forecast gives you answers to both questions -- and much more. You're also "kept in the know" about severalAsian-Pacific financial hubs, including China, Japan, India and Australia.
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