24 May 2019
Hong Kong's property market enjoys much higher valuation compared to that in New York due to several reasons. Photos: HKEJ, internet
Hong Kong's property market enjoys much higher valuation compared to that in New York due to several reasons. Photos: HKEJ, internet

Is HK property really worth more than that of New York?

We all know about Hong Kong’s sky-high property prices, but can we put a figure on what the market is worth in total?

According to the government’s Ratings and Valuation Department, the total rent which is collected and subject to rates will be HK$564 billion this fiscal year, involving a total of 3.11 million units, including residential, retail and commercial outlets.

Applying an average of 2.7 percent yield estimated by the government last year, Mingpao Daily believes the market value of the property will be about HK$20.6 trillion.

Now, take a look at New York city, where the market was worth just HK$6.7 trillion even though it has larger population compared to Hong Kong, and is also much superior in all respects, be it finance, art, fashion, technology, education or entertainment.

Using similar metrics, the Hong Kong market is worth 2.6 times more than Singapore, which is valued at HK$7.8 trillion.

Why are the prices so high here? Well, there are several reasons, including tight supply and a low-interest rate environment. More importantly, the rapid expansion of the local commuter rail network has also been one of the chief contributors to the rise in property values.

Hong Kong’s mass transit railway is much better and more efficient than the one in New York. Smooth rail transport and good connectivity has greatly enhanced property values — be it commercial or residential — in large parts of the former British colony.

New York has just one Manhattan, but Hong Kong has at least three districts — Admiralty, Causeway Bay and Mong Kok — that are ultra-busy commercial hubs.

And, if you haven’t already noticed, even the buses in the city are traveling faster than before. Time is indeed money in Hong Kong.

Terence Chong, an associate professor at the Institute of Global Economics and Finance at the Chinese University of Hong Kong, has noted that mainlanders helped prop up property prices in Hong Kong. With mainland tourists having doubled in number in five years, retail shops have seen their property values jump. Also, about 20,000 students come to Hong Kong for studies per year, boosting demand in residential areas surrounding the eight local universities.

Given all these factors, it is no surprise that property developers have a very high ratio among the ranks of are local billionaires. Macau casino king Stanley Ho once remarked that property tycoons are so fat that they can’t even put on their own socks. The total property value is almost 10 times the city’s GDP, compared with a ratio of 1.2 times in New York City and 3.4 times in Singapore.

This high property indicator did not surprise Dr Chung Kim-wah, deputy director of the Hong Kong Polytechnic University’s Centre for Social Policy. The academic also pointed out that 23 main districts in Tokyo were worth more than the entire United States of America 30 years ago.

Now, consider what happened: the Tokyo bubble burst and gave way to a 30-year economic stagnation for Japan.

Is there a lesson for Hong Kong, and should it bear in mind that what goes up must come down?

Well, the theory holds good in most cases but it may not work in Hong Kong, given the unique factors at play in the local property market.

As we have seen in recent years, prices will only move northward, offering no respite for the middle and low-income groups.

So, it will be more fun and good times for the property tycoons!

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EJ Insight writer

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