Hong Kong Peak

Hong Kong housing prices are close to their peak and economically “unsustainable,” said Cusson Leung, managing director at J.P. Morgan Chase & Co.’s Asia Pacific equity research unit.

Price increases in the world’s most expensive home market have outpaced Hong Kong’s gross domestic product growth “significantly” since 2009, and any external shocks could trigger tighter liquidity in the city’s banking system, increasing home buyers’ borrowing costs, Leung said in an interview.

“I won’t buy,” said Leung, who expects that new home prices will remain unchanged this year. “If the bubble bursts, buyers will not only lose their own money, they will also lose all of their parents’ money.” Buyers have been using all of their assets as well as leveraging parents’ existing homes as collateral to help make residential property deposits, he said.

The resurgent housing market has posed a headache for Hong Kong’s leaders. After a short-lived dip, existing home prices have set new records in recent weeks. Still, the market isn’t immune to risk as the Federal Reserve has signaled it will continue on a path of interest-rate hikes this year.

New property projects prices have also heated up, with Cheung Kong Property Holdings Ltd. last week offering 40-square-meter flats in east Hong Kong island for at least HK$10.3 million ($1.33 million), Apple Daily reported. The amount could buy a two-bedroom, inner-city Sydney apartment with a car park, according to rental aggregator Domain.com.

Despite efforts by Hong Kong Chief Executive Leung Chun-ying to curb the rally in home prices, investors have found ways to breach barriers. Qualifying as first-time buyers and buying multiple new flats on a single contract is an option wealthy purchasers have pursued, enabling them to skirt a measure that would increase stamp duty to 15 percent for existing property owners. The government is considering ways to plug the loophole, the Hong Kong Economic Journal reported last week.

Closing ways to bypass measures would make the property market “less crazy,” while the government could increase supply by selling public flats under its rental housing program, Leung said.

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Spanish Speakers

For Venezuelan exiles with money, Madrid has become a home away from home.

Venezuelans are increasingly turning to the Spanish capital as a place to invest as their home country falls further into economic chaos and the political mood turns more sour in U.S. havens such as Miami. The number of Venezuelans arriving in Spain rose more than 50 percent in 2015, according to the Spanish statistics office, the biggest increase after immigrants from the Ukraine.

With its shared language, stable politics and a property market that’s still recovering from a six-year crash, Spain holds many attractions for wealthy Venezuelans seeking a shield their assets from economic disorder in their home country. The number of properties sold to Venezuelan nationals jumped 17 percent in 2016 according to Spain’s property register.

“The worse things get in Venezuela, the more they buy in Madrid,” said Alvaro Gonzalez de la Hoz, director general at the real estate unit of Petrus Grupo Inmobiliario, which specializes in selling and renting high-end properties in the upscale Madrid neighborhood of Salamanca. “They feel safe here, they like the quality of life, they speak the language — and they’re taking money out of Venezuela.”

Hit by sky-rocketing inflation and a surge in crime, Venezuela has descended into an economic pit.

Worst Performer

While Venezuela’s central bank stopped publishing inflation data in December 2015, the International Monetary Fund argues the nation has entered a spiral of hyperinflation with price increases seen rising above 1,600 percent this year. Similarly, figures for domestic product haven’t been updated in more than a year, although the Washington-based institution estimates the Venezuelan economy contracted 10 percent last year, making it the world’s worst performer.

A political crisis which has seen President Nicolas Maduro holding on to power in defiance of mounting opposition is contributing to the economic collapse. Against that backdrop, food and energy shortages are common.

Meanwhile, Caracas-based Grupo Sambil has spent 60 million euros ($64.8 million) upgrading a shopping mall in Madrid they acquired in 2012 and plans further investments in Spain including in real estate, said Director General Alfredo Cohen in an interview. Venezuela’s late President Hugo Chavez expropriated a shopping mall in Caracas owned by the family in 2008, announcing the move on his weekly television show.

“The country is going through a political and economic crisis, so diversifying
our product, which has been very successful back home — in fact we are still
headquartered in Venezuela — is a good idea,” said Cohen. “We don’t just do shopping centers, we’re also a construction company and we have the cash to invest if we spot a good opportunity here in Madrid.”

For luxury real estate agents in Madrid, the crisis in Venezuela has yielded a business opportunity.

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The Pinstripe and Bowler Club shares information with MF Solutions