The property market has seen yet another year of massive upsurge in Hong Kong (2017); and now we are entering the 10th year post Global Financial Crisis and the property price in Hong Kong has more than doubled. Thanks mainly to the central banks around the world printing money and causing runaway inflation globally.
China too has been printing money like everyone else but just never make any announcements about it and I believe Xi Jin Ping understands that China’s blown-up balance sheet will need to be addressed at some stage. With the mid-term over and his powerbase at its strongest, he is now positioned to reign in the runaway economy and I believe he will let some air out. He understands that by doing so, there will be pain and a lot of casualties but he recognises that if they don’t do it things would get even worse when it blows up in an uncontrolled manner. With all of the political forays out the way, Xi will be focusing on weeding out a lot of inefficient state-owned enterprises (SOEs) and this would cause a fair bit of pain. 2018 will be the year when this takes place.
To predict where the property markets will go, one used to have to look at fundamentals and economic factors and other indices; in the last 10 years all we could do is try to second-guess what the federal reserve were planning or what the Chinese government will decide on and where the markets go are entirely controlled by man; a few men rather. If the federal reserve stopped printing money, Hong Kong property will drop like a stone and if they carried on we would carry on to enjoy upside; so one can no longer know by analysing historics, looking at fundamentals, etc. one had to understand what a few men who have their hands on the gear lever would do.
If everything continued in the same was as last year (e.g. loose monetary policy) 2018 will see another year of modest growth in property price maybe 5-10%; however I believe this is the year when China will pull back and some major defaults that the government will not save. Confidence will be eroded as such and we could see a run on the Renmenbi. Being in Hong Kong, I foresee that property market would decline around March 2018 and a decline/clean up in China’s runaway economy well on its way around September 2018. This although will cause pain for a few elites would be a welcome change for all of us proletariats out there.
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