The property market remains hot after the Fed rate hike, with new property sales, launched one after another and sold out in the blink of an eye. Many foresee that the property market will keep rising, while others think that the property bubble is going to burst soon.

In my opinion, I don’t think we can or need to predict the trend of the property market by itself. That is because from what I observe, the property market basically follows the movements of the stock market. Don’t believe? Compare the Centre-City Leading Index (CCI) with the Hang Seng Index then.

Centa-City Leading Index chart. Source: http://www1.centadata.com

Centa-City Leading Index chart. Source: http://www1.centadata.com

hang seng index

An important observation is that the stock market is always a step ahead of the property market. When the stock market bottomed out and rebounded, the property market followed suit. When the stock market crashed, the property market tumbled right after.

So basically, there are signs that you can look out for

Apparently, the Hang Seng had hit a bottom in 2016 to around 18,000 points before it rebounded. At that time, I had been alerting investors that HSBC Holdings offered a dividend yield of nine percent.

That was also when I saw the stock market hit the 95-percent pessimism line (according to my own technical analysis methodology). It turned out that not long after the Hang Seng Index had bottomed out, the CCI saw a rebound too.

Looking back, the current stock market and property market bull run started in early 2016. Prior to that, the stock market had gone through a great rally and crashed heavily in 2015. Note that not long after the stock market crash, the property market registered a plunge as well.

(Property) Investors should watch the stock market closely

In other words, we can see that the property markets has crashed with the stock market in 2015, then bottomed out and rebounded with the stock market in 2016. In actual fact, its performance had followed that of the stock market for many years.

Thus, instead of spending time and effort studying the property market, why don’t you just look at the stock market instead? Currently, both are on a rising trend, but once you see the stock market crash, I am guessing that the property market might do the same shortly after.

Why is the property market affected by the stock market then? When the stock market crashes, many investors are unable to pay a margin to their brokers to leverage funds in their accounts, or to pay margin call. When faced with financing difficulties, some would sell their property to “put out fire”.

After the market rally in 2015, news of “huge property discounts” flooded the media, thanks to desperate property owners trying to sell houses to attain capital.  When such news broke out, those who initially wanted to buy property stopped buying, and property prices started to drop.

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