Hong Kong Property Prices Increase at Fastest Pace in 5 Years

Yoursz.com Wed, 07 Mar 2018 16:21:20 GMT

The Hong Kong real estate market is moving forward at its fastest pace in over half a decade, continuing to drive many Chinese property investors to seek investments overseas, while encouraging others to participate in the active and frenzied market. 

Growth for the year, across-the-board, reached 15.8% an impressive over the previous year. In just the month of December, capital values in mass residential districts increased by 1.3% [1].

Hong Kong real estate prices have put property purchases outside of the reach of many first-time investors and ordinary people, reaching record highs for the foreseeable future.

Hong Kong Growth in 2017

According to a Financial Times report from July 2017, Hong Kong witnessed a record $17 billion in sales in the year’s first half. The average new home cost $1.8 million [1].

The average was toward the higher end due to a handful of luxury villas costing close to $100 million. The report goes on to state that the majority of sales are middle-to-small apartments far below $10 million [1]

Some of the most popular real estate purchases are from couples seeking small and cost-affordable flats, which has encouraged new developments such as T Plus, a multi-level condo property offering 12 square meter studio spaces.

Concerns About Housing Supply

One of the biggest concerns in the market has been the challenge with meeting housing supply goals and the inability to control prices to improve accessibility. Many major property consulting firms and experts expect prices to increase a substantial 5 to 20 percent in 2018 [2]

Government efforts to control prices with increased regulations and taxes have not proven to be effective. Other measures have included eight separate rounds of mortgage tightening since 2009. 

Public housing construction is lagging behind its target by about 15 percent, while the 10-year housing supply target of 460,000 units remains a “huge challenge” according to a recent government report [2].

Continual Rises

Denis Ma is the current Head of Research at JLL Hong Kong (Jones Lang LaSalle). He leads a team of researchers in analytics regarding Hong Kong’s real estate market, providing essay reports, investment techniques, and analytics. 

In a recent 2018 World Property Journal report he stated, "Despite being at record high levels, we expect housing prices to continue to move higher as we enter the New Year [3].”

He goes on to suggest that two key elements are signaling continual price increases. The first is the strong sales in government land. Secondly, stock market growth is expected to further propel its momentum into the real estate market [3]

Ma says that he and his team expect a 10% rise for 2018 and a possible 20% rise, given market conditions for the first half of the year.

If this is reached, it would truly be unprecedented. His sentiments are also echoed by other leading professionals in the market. A Bloomberg report with Knight Frank LLP, global real estate consultant, expects more conservative increases of 5% to 8% in traditional home markets and luxury markets, respectively. 

Raymond Ho, a deputy senior director of residential development and investment at Savills, is also confident of further value increases. “Now it is very hot, because of the hot money rushing in. There is more record-breaking coming.” 

The Hong Kong real estate marketplace continues to remain one of the highest priced and most active in the world. Although the activity has driven increased international investment and high returns are expected, many Chinese property investors have preferred other global markets that are not nearly as saturated.


References

1. https://www.ft.com/content/9206350c-6c62-11e7-bfeb-33fe0c5b7eaa 
2. https://www.thestar.com.my/business/business-news/2017/12/29/hong-kong-property-market-shatters-price-records-for-13th-straight-month/ 
3. http://www.worldpropertyjournal.com/real-estate-news/hong-kong/hong-kong-property-market-monitor-2018-jll-hong-kong-condo-prices-2018-hong-kong-home-sales-report-2018-denis-ma-10719.php 
4. http://fortune.com/2017/11/27/hong-kong-housing-market/