Date
24 January 2017
Many new families in HK are settling for studio flats due to various constraints. Miss Hong Kong Louisa Mak (inset), meanwhile, has been forced to continue living in her parents’ home. Photos: HKEJ, Facebook
Many new families in HK are settling for studio flats due to various constraints. Miss Hong Kong Louisa Mak (inset), meanwhile, has been forced to continue living in her parents’ home. Photos: HKEJ, Facebook

Why the HK property ride is getting wilder

Sometimes I wonder if God isn’t amused at the funny real-estate market in Hong Kong.

Among the various investments, residential properties are now considered to be one of most resilient and defensive assets in the city – no matter how small, how far or how inauspicious the units might be deemed to be.

Over the weekend, Sun Hung Kai Properties (00016.HK) sold all units on offer at the Tung Chung residential project Century Link II. The developer will now raise the prices of the remaining units by 3 percent.

Elsewhere, Kowloon Development (00034.HK) has sold 90 percent of flats at a mini-unit project in Hung Hom. And even the relatively expensive Aspen Crest at Diamond Hill, a project of Far East Consortium (00035.HK), has seen more than half the units already taken up.

Overall, most of the homes sold by local developers were small units, ranging from studios to two bedroom apartments, priced in the HK$3 million to HK$6 million range.  

At Aspen Crest, meanwhile, a nice two bedroom unit went for as much as HK$12 million.

Now, where in the world can you find such solid buying power even though prices of most other assets have come off sharply since the summer?

While the private market is holding up well, demand for public housing continues to be strong.

We’ve learnt that a record 88,000 people applied for the Express Flat Allocation Scheme, which as its name suggests, will shorten waiting time for the leased units.

Home-seekers were not put off by talk that some of the units under the scheme are not very desirable, and that some may bring a history of unpleasant incidents such as homicide or suicide in the area, or carry ‘haunted house’ stigma.

Those who lined up are apparently focused on just getting some living space – no matter how unpleasant it might be.

Not everyone can afford to pay more for a spacious, convenient and problem-free flat. 

Even Miss Hong Kong Louisa Mak Ming-sze has complained that if she were to move out of her parents’ home, she will face a lot of financial issues. 

One of the prizes for Miss Hong Kong had been a mainland property unit, but recently the prize was downsized to a car. That is why the Cambridge-graduated Miss Hong Kong this year couldn’t move out of her family home, unlike her predecessors.

Now the question is: what lies ahead overall for locals?

Hong Kong people have seen enough stock market crashes to know that such events present an opportunity to pick up other assets relatively cheap.

Well, think about the half-a-million-dollar Amoy Garden units on sale after SARS in 2003 and HK$2 million dollar two-bedroom units in Tseung Kwan O after the financial tsunami in 2008.

If you are not buying, at least you should think twice about selling, given the prevailing prices in the east part of Kowloon and New Territories.

Hong Kong has outperformed Asia and the world for the price of its property, which was up 21 percent in the first half of this year, according to Knight Frank.

By comparison, Singapore fell 3 percent during the period, not factoring in a 10 percent currency devaluation. In other words, Hong Kong residential price outperformed Singapore by at least 30 percent.

This has prompted some people, including an awarding-winning UBS analyst team, to wonder if the price rise can sustain.

The black sky scenario, UBS suggested, was a 20 to 30 percent correction in the property market. One should remember 1997 when there was a bubble followed by a five-year phase of painful negative equity.

You have been warned!

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BK/JP/RC

EJ Insight writer

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