The US Federal Reserve raised its benchmark interest rate by 0.25 percent last week, and its chairwoman Janet Yellen implied that the market should expect three more rate increases next year.
Even though most Hong Kong banks have yet to follow suit and raise interest rates, many investors and prospective homebuyers are very much concerned about the implications of the recent and upcoming US rate hikes on home prices in the city.
Nonetheless, many real estate developers, especially those from the mainland, seem highly bullish about Hong Kong’s property market.
The HNA Group, a leading Chinese developer, just bought two premium residential plots in the Kai Tak area for HK$14.249 billion, beating all market expectations and suggesting that the company is highly optimistic about the city’s property market growth over the next few years.
And perhaps the group’s optimism is well-founded. According to a progress report on the government’s long-term housing strategy published on Tuesday, the administration can only build roughly 236,000 public rental housing (PRH) flats over the next decade, falling short of the original target by almost 44,000 units.
It indicates that PRH flats will remain in short supply over the next decade, thereby further exacerbating the housing shortage in the city.
To be fair, even though Chief Executive Leung Chun-ying has the lowest approval ratings compared to all his predecessors, we should still give him some credit for all his efforts over the past four years to resolve the housing shortage.
The question is, did his efforts pay off?
Not quite, actually. Despite his so-called “spicy measures”, property prices have continued to soar over the past few years.
The skyrocketing home prices have also produced a side-effect: while home prices are getting more and more expensive, new homes are getting smaller and smaller.
As a result, many young couples have worked so hard and managed to save enough money to buy their own flats, only to find that their “new home” is just as big as a parking space.
These “mosquito-size homes” are expected to be the new norm in the housing market.
With just six months left in his term of office, no one probably expects CY Leung to unleash another round of tough measures to curb property prices and increase land supply.
And no matter who succeeds him, alleviating the housing shortage and making housing affordable again will definitely be the most pressing issue for the next government.
This article appeared in the Hong Kong Economic Journal on Dec. 21.
Translation by Alan Lee
[Chinese version 中文版]
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