Hong Kong Residential Cooling Trend
By Vincent Ng, Waymark Hong Kong
Published March 20, 2010
Home prices jumped 27% last year as Hong Kong emerged from recession and funds poured into the city from Mainland China, amid the still-mushrooming credit boom at the time. Protests are becoming increasingly vocal in both cities that home prices are outrageously high, in particular for the emerging middle class. The Hong Kong area’s asset market remains vulnerable to international capital flows.
The Hong Kong Monetary Authority said that monthly residential property transactions fell to about 9,000 in December, from more than 11,000 during September. All of Hong Kong’s property transactions, not only residential, are falling gradually, but noticeably. Many potential buyers are in a wait-and-see mode to determine the extent of the downturn, the overall global economic picture, and market adjustments in real estate kick in. The government has recently shown signs of a willingness to increase land supply in this sea-locked, extremely hilly, city – with so much land virtually construction uninhabitable.
The New Territories, north and adjacent to Mainland China and Shenzhen, have the most room for expansion, when compared to Kowloon and Hong Kong Island, which are almost fully occupied by most urban planners’ studies and land conservation limits. Land auctions were held in December in the New Territories, previous industrial sites, long since moved to China. Still a number of large plots of old farmland remain up for grabs in the search for limited, but vital real estate development in Hong Kong. Even to the point where several years ago the new international airport had to be constructed on filled in sea water bays – one of he great engineering feats in the modern era.
The monetary authority has further been stepping up its rhetoric, repeatedly warning banks about offering competitive mortgage rates. The government has instituted extended loan programs at fixed rates to assist lower income home buyers in an attempt to subdue rising prices. There are increasingly mixed views in the analyst community relative to the overall outlook for Hong Kong’s property markets. There is still a pent-up demand and lower interest rate attractiveness that might keep pricing on the rise in the area of 10-12% for the next year or more. While others worry about some kind of auto pilot market correction yet this year, mainly due to an outflow of funds from Mainland China, as Beijing begins to tighten monetary policy.