CNBC Writes: Hong Kong luxury home buyers queue amid talk of last hurrah

 

People often tell me that it is impossible to spot the bubbles in financial markets. They claim that if Mr. Greenspan or Mr. Bernanke can’t spot the bubble, then neither can they. Well, understand something. Mr. Greenspan and Mr. Bernanke are responsible for creating bubbles that will hurt the US Economy for decades to come, not spotting them.

With that said, bubbles are incredibly easy to spot.  Case and point, the Hong Kong real estate market.

In a shopping mall in one of Hong Kong’s prime retail districts, more than 100 people wait patiently to take a lift to the sales floors – not to buy luxury bags or clothes, but high-end apartments with price tags of up to $4.4 million.

Foster Lee, a 30-year-old banker, was among the lucky ones who won the chance to buy a unit after a ballot in which more than 1,600 people signed up for just 80 luxury units on offer.

Wow, 1,600 applicants and 100 people fighting over $4.4 million apartments. Most likely a very small “luxury” apartment.  Do I even need to say anything else?

Signs on the ground point to a clear pick-up in demand from local and Chinese buyers, thanks in part to steep discounts offered by developers to offset higher stamp duties imposed a year ago to cool prices that have jumped 120 percent since 2008.

“You see that people who earn less than you have caught up with you because they bought then. It’s like a girl you liked got married,” Lee said.

Greed and “if everyone is doing it so should I” psychology has set it. This happens during last stages of a bubble. Everyone knows the prices are unsustainable and most people can’t afford it, yet prices keep going up and people keep buying based on psychological factors alone. Yet, when the fuel of psychology runs out, the drop is always sharp.

Last weekend, long queues at one project prompted developer Hang Lung Properties to postpone pre-sales and change the first-come, first-serve rule to a ballot system, in which more than 400 buyers competed for just 80 units priced from HK$8 million to HK$15 million ($1.93 million). Read The Rest Of The Article Here

Bottom line is, bubbles are easy to spot.  The hardest part comes when one has to open their eyes and see things for what they truly are. 

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