Demand for Hong Kong properties continue to climb

Home prices in Hong Kong are escalating despite the government’s attempts to curb the rapid and steep climb.

OneKaiTak1Photo credit: www.onekt.com.hk/

Buying a resale private property from the secondary market has become difficult due to the heavy stamp duties levied by the Hong Kong government on open market homes in an effort to curb rising property prices and a ballooning market. Stamp duties for first-time local buyers are particularly high and the move has slowed down activity in the secondary market considerably. Instead, it has created a demand for new homes in the primary market. Since homes in this market are sold directly by the developers, they are able to adjust home prices according to market demand and requirements, sometimes even offering incentives and discounts.

In the first month of 2016, the demand for new homes fell by 76 per cent. In the same time this year, it rose by 48 per cent. A complete turnaround. With the current lack of interest and activity in the secondary market, developers are  ceasing the current window of opportunity by its neck and adjusting prices according to rising demand. And the demand is high indeed. At China Overseas Land & Investment‘s new residential project situated on the site of the old Hong Kong airport, One Kai Tak, all 188 units were sold out in a single day last month.

OneKaiTak3Buyers may ramp up their buying speed and fervency in the months ahead, as they pre-empt the possibility of the Hong Kong government implementing further curbs on the market, in particular on individuals who sell their properties to purchase new ones.

Bumps in Hong Kong’s property market

January registered the lowest sales of new and secondary homes in Hong Kong since 1991. Since September, housing prices have fallen 11 per cent. But considering the 370 per cent rise in property prices since 2003, the fall may not be as drastic in comparison.

Tai PoPhoto: Properties for sale in Tai Po, Hong Kong.

A recent land sale by the Hong Kong government went for almost 70 per cent lower than a similar sale last September. A 405,756 sq ft Tai Po land site was sold at HK$2.13 billion (S$382.6 million) last Friday to Asia Metro Investment. Most of the land sales buyers of late have been mainland Chinese developers. Hong Kong property agencies and developers are focusing their efforts on selling off existing inventory and have been offering discounts to bring in the buyers and investors.

There may be an increase in mainland Chinese-developed properties in future as they are often willing to take narrower margins in order to shift their money out of the country, especially if the yuan continues to devaluate.

Property industry experts are expecting home prices in the Hong Kong to fall 10 to 15 per cent this year, and are closely watching the signs from the weakening Hong Kong and China economies.

Who’s the most expensive of them all?

Hong Kong. When it comes to housing affordability. According to Demographia, a United States-based urban planning research unit, Hong Kong has emerged as one of the most expensive cities out of 367 metropolitan areas in 9 countries. Second on the list was Sydney, followed by Vancouver, Melbourne and Auckland. Singapore was 5th on the list.

Hong Kong property

Photo: Apartment in Viking Garden, Hong Kong 

In Hong Kong, median home prices are almost 19 times the median annual gross household income. It is the largest year-to-year increase in pricing over the 12 years in which the research was conducted. A small shoebox apartment below 500 sq ft would cost almost US$75,000 (or S$1.1million) in Hong Kong. That is almost double the price of such an apartment unit in Singapore. In the United States, only 9 metropolitan registered highly affordable housing prices, with San Jose, San Francisco, Los Angeles and San Diego being some of them. 14 other cities in the United States remained under the affordable level, with Buffalo, Cincinnati, Cleveland and Rochester tied in first place.

SF FlatPhoto: San Francisco apartment

With the US interest rates rising this year however, property analysts are expecting some change in the global property markets. Hong Kong’s property bubble may burst should the authorities do good on their promise to meet housing supply demand.

In Singapore, housing prices are 5 times that of the median annual gross household income. Although still considered ‘severely unaffordable’ under Demographia’s rating scale, HDB has been making efforts in the last couple of years to increase supply and reduce demand for public housing. For now, the price of a new HDB flat is still $150,000 to $180,000 lesser than a resale unit in the same area.

 

Hong Kong’s property scene veer towards Commercial

Buyers and investors in Hong Kong’s property market seem to be veering towards commercial as residential property prices decline.

Mongkok Office hOng KongPhoto credit: Office18.com

Offices are at the top of the list as Chinese companies continue to seek out spaces and sometimes even entire buildings. Hong Kong is a city popular with Chinese corporations who hope to elevate their brand globally by having offices in the country. As the economy in China begins to slow, many companies are looking outside of the country for higher returns.

Home prices on the other hand, are not faring as well. Residential property prices are expected to fall by up to 20 per cent within the next couple of quarters. This may impact overseas investors who have previously purchased properties in Hong Kong. But the falling prices may be good news to those who are hoping to snag a few more properties in the city. Investors may very well take the opportunity to purchase and hold on to these  assets whose value might rise in the future not too far away.

Upper East Hong Kong CondoPhoto credit: GoHome.com.hk

There is however certainly no lack of new property launches in Hong Kong; with apartments in Mong Kok, Aberdeen and Yuen Long, just to name a few.