4/4/2018-7

Buying Houses to Counter Capital “Two Heads"

Holding too much cash is not a good investment strategy. Although “cash is king”, facing the dilemma of “double reduction” in cash purchasing power, it is as if we are not looking for an ideal investment tool to counterbalance. Even if the real estate investment, such as residential property, does not have a high rate of return, it still has the ability to appreciate. Therefore, the funds that have flowed into the property market have not stopped.

In the Asian financial crisis in 1997, the market was tightly funded. Many people believed in “cash is king." But after the frantic quantitative easing triggered by the global financial tsunami in 2008, it was another situation. In the face of the challenge of inflation and the “double-mindedness" of the depreciation of the US dollar, the purchasing power of the US dollar is simply “boiling over the water."

The Hong Kong Census and Statistics Department announced that the overall inflation rate and the underlying inflation rate were all 3.1% in February this year. The increase was 1.4 percentage points higher than that in January, mainly due to the emergence of the Lunar New Year for two years in different months. In the first two months of combined calculations, the overall inflation rate was 2.4%, and the underlying inflation rate was 2.3%. Hong Kong’s inflation appears to have a warming trend.

Trump Disrupts Policy Global Financial Fluctuations

After the United States raised interest rates by 0.25 percent in March, it failed to reverse the weakness of the US dollar. After the exchange rate fell by about 10 percent last year, it remained “explosive" at the beginning of the year. Just after the first quarter ended, the dollar exchange rate devaluated by 3.28%. If calculated in terms of US purchasing power, after deducting 2.3% of inflation in Hong Kong and depreciating 3.28%, a total of 5.58% was evaporated. The United States has not raised the interest rate for many times and it has not been able to make the US dollar stronger, and there has been no shortage of exchange rate prices.

After the Lunar New Year holidays, Hong Kong’s overall property market price has risen steadily, and the primary property market has been steadily improving, reflecting investors casting confidence in the property market. In the first quarter, the property market performed quite well. As President Trump disrupts world politics and measures continue to emerge in an endless stream, the global financial market is subject to abnormal fluctuations, which is detrimental to long-term investment in the United States and Europe. Although the measures will also affect China and Hong Kong, the political and economic situation in the two places will be stable and long-term investments will be reversed. U.S. debt has been highly restricted in raising interest rates, and has strengthened confidence in purchasing Hong Kong buildings.