Date
19 October 2017
As housing prices have galloped at much faster pace than personal incomes, Hong Kong has become one of the most unaffordable cities in the world to buy a property. Photo: Bloomberg
As housing prices have galloped at much faster pace than personal incomes, Hong Kong has become one of the most unaffordable cities in the world to buy a property. Photo: Bloomberg

Why Hong Kong homes are ‘severely unaffordable’

Hong Kong’s housing affordability ratio was at 17 as of third quarter of last year, making it the most unaffordable cities to buy a property, according to the Demographia International Housing Affordability Survey.

What the data essentially suggests is that a family with median-level income would need to save 17 years income to be able to buy a flat of 45 square meters.

The ratio stayed high at 12 in the last quarter of 2014, putting the local housing market in the “severely unaffordable” category and far exceeding the tipping point of 5.1, according to the Demographia criteria.

Household income in Hong Kong has risen by around 6 percent per year over the last three years after the financial crisis. Meanwhile, housing price has soared at double-digit year by year. That means income growth has lagged far behind the housing price rally.

Capital inflow, another key factor underpinning high property prices, has become subdued recently.

Authorities have halted an investment immigration scheme, and the winding-down of the US quantitative easing program has made the Hong Kong dollar stronger alongside the greenback.

Also, the Hong Kong Monetary Authority has kept tightening mortgage rules since 2009. Homebuyers have to offer more as down-payment and also bear higher mortgage loan costs.

As the housing market has entered the over-bought territory, it could be very vulnerable to any market shift.

A meltdown of the bond market bubble or another financial crisis could have severe consequences. 

Adapted from an article published in the Hong Kong Economic Journal on June 18.

Translation by Julie Zhu

[Chinese version 中文版]

– Contact us at [email protected]

JZ/MY/RC

Hong Kong Economic Journal chief economist and strategist

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