Date
23 May 2017
The Belcher's, a high-rise development in Western Mid-levels, is priced at HK$21,000 per square foot on average. Property prices in Hong Kong continue to climb despite government cooling measures. Photo: HKEJ
The Belcher's, a high-rise development in Western Mid-levels, is priced at HK$21,000 per square foot on average. Property prices in Hong Kong continue to climb despite government cooling measures. Photo: HKEJ

Why the property market will cause more headaches

Shanghai’s A-share market may have outperformed the Hang Seng Index in the first three months of 2015, but there is one indicator where Hong Kong has trumped the mainland by a big margin.

According to the Global House Price Index from real-estate consultancy Knight Frank, Hong Kong topped the world with a 19 percent year-on-year growth in residential prices in the first quarter.

By comparison, China, along with Ukraine and Cyprus, figured in the bottom three with a negative annual price growth for the period. Housing prices in China were down 6.4 percent in three months to March.

Lack of supply was the chief reason for the price acceleration in Hong Kong, said Knight Frank, which also put popularity of smaller apartments due to affordability constraints as a second reason.

The stellar property price rise in the city came even as housing markets in many parts of the world were lackluster.

About three-quarters of the countries tracked by the index recorded either flat or only slightly positive annual growth in prices. The global overall index was up a mere 0.3 percent, the weakest growth in three years.

By contrast, Hong Kong showed a consistent uptrend over the past year. Mortgage-tightening measures announced in February failed to slow down the market.

Now, let us look at what some leading local property veterans had predicted earlier regarding the residential property price prospects.

A quick peek into news archives tells us that almost all of the experts had been wrong in their forecasts.

This includes former Sun Hung Kai Properties managing director Thomas Kwok Ping-kwong, who predicted in February 2014 that the second-hand property market could fall 10 percent because of the government tightening measures.

Centaline Property chairman Shih Wing-ching also said last year that prices in the first-hand market could correct by much as 20 percent.

In July 2014, UBS warned that Hong Kong residential property market might face a 15 percent correction due to a potential rate hike this year. That did not happen either.

Rather than go by what the so-called experts predict, it might be better for us to judge things for ourselves based on what is happening around us.

It has been reported that a group of 10 young students from Hangzhou walked into a Hong Kong property agency late last Friday and signed up rental agreements for three units of Sha Tin Centre the very next day.

These youngsters, believed to be students who are seeking admission to the Chinese University of Hong Kong, are paying HK$13,800 per month for tiny 288-square-foot apartments, representing a premium of between 6 percent and 15 percent over the prevailing rate.

Not only did they offer HK$48 per square foot, which is equivalent to the price levels at the Waterfront and other luxury units near Kowloon Station, they also paid a year’s rent in advance to secure the units, reports say.

The higher rents are just a reflection of the current demand-supply situation in the city.

As we regularly receive such reports, along with news of fresh records being set in prices of small apartments on the secondary market, we don’t really need any property expert to tell us which way the market is headed. 

With supply expected to remain tight and demand from mainland buyers showing no signs of fizzling, Hong Kong’s property market could scale new peaks.

While it will be good news for landlords as they will see a further jump in their net worth, it spells more gloom for the vast majority of locals and the middle classes.

Realizing the home-ownership dream will only get harder for the average Joe. 

– Contact us at [email protected]

BK/JP/RC

EJ Insight writer

EJI Weekly Newsletter

Please click here to unsubscribe