Predictions on Properties & Commodities

Properties:

Global properties are going down, worst in UK and Aus... They are way too leveraged before, even more so than USA. Now they will see years of declining to come.

HK is no much better, although the newspaper may tell you we are much healthier financially than 1997.

My prediction for 2008: HK property price down 20%, with very low volume.

Reasons: HK people are less leverage this time and most medium to low price flats are mortgaged at a affordable level. Those high end are doomed, as they rise too much and the real demand: rich bankers and overseas workers, are declining fast.

However, due to the fact that people are less leveraged this time, flat owners will NOT be willing to sell their flat at a much lower price. The buyer, on the other hand, expect the price to go down further.

End result: Very low volume, as sellers unwilling to lower price, buyers no want to buy yet. Transaction prices will lack indicative power, and difference between transactions will be great, as some sellers who need cash quickly will accept huge discounts.

Commodities:

This time is "different" !?

Well, that is a very common sentence in the finance world. However, I do think the recession this time is different from the previous few recessions. In the recession in 1991, 1997, 2001, only one sector was collapsing. This time, it is the banks that are collapsing, which affect everyone's pocket.

Let me explain in more detail:

Mines, oil wells, corn field... all need financing to start. The world have basically stopped to finance large projects like that, which means we will not se new gold mines, new iron mines or oil wells in the near future...

Adding to that, all countries are printing money now, which will come back to haunt us when economy finally bottoms. With no new supplies and demand coming back, all those new money will add inflationary pressure to commodities.

I am not saying commodities will rise any time soon, but this problem will be a drag for the recovering phase after this recession. so I expect this bear market will continue much longer than what most people are expecting...