Hot hot hot, and why property is still cheap in Hong Kong

Its pretty damn hot in HK right now, And I mean both the weather AND the property market.

People are making good use of the pools on Park Island and the ocean and beachs at Ma Wan, and agents are doing well for themselves selling to property to eager buyers who seem to be of the view that demand for property in HK is going to rise in the coming months and years ahead.

Property prices are at record historical prices, but this is of course also the case in many other major cities in the world, whether Sydney, London, Berlin, New York, Shanghai. 

Many experienced property analysts who have seen prior cycles believe that the fundamental conditions need to support a new boom over the next few years are firmly in place. Looking at the Centadata property graph below, many are expecting a new peak to get up to 200 on their price graph by the end of 2018 as the market starts to accelerate.

Hong Kong Property Price Graph 2017
This weekend we saw may buyers, (probably a significant number being mainlanders) eagerly lining up to buy a development in Tsuen Wan from developer Cheung Kong, called Ocean Pride.

Hong Kong Buyers Line Up To Buy Apartments in HK
It seems there is no limit to the cashed up buyers in fast growing China to stake their claim in Hong Kong. And this risks condemning Hong Kong residents to becoming wage-slave renters for life. Which in turn means many HKers, and expats, are now doing their best to get in to secure their futures.

And as history has shown, every time HK has had a dip in prices, the market has bounced back stronger than ever.

Interest rates in HK remain super attractive. Back in 1997 when we had the last massive correction, interest rates got to around 11% pa, and it was around 4 times more expensive to pay the mortgage on a property than it was to rent. That, clearly, was a bubble. 

Contrast that to now, and rates are less than 1% and it is around twice as expensive to rent as it is to pay a mortgage. So it seems, indeed, that while HK property might seem expensive, its actually very cheap right now.

China still had an amazing GDP rate of around 6.5%. And a billion or more people! HK's unemployment rate is less than 3% (basically full employment as far as economists are concerned), and HK was recently rated at the most competitive country in the world for business. Combine these factors with a growing population, all squeezing into HK, with cashed up immigrants and geographically limited land supply, and one can certainly see why prices are on their way up.

Also, though it may not seem so, right now the vast number of apartments are owned by end users. Back in 1997, the vast majority were owned by speculators. 

Hong Kong is also one of the most under-leveraged property markets in Asia. More than half of all owner have no mortgages at all, and of the other half who do have mortgages, the average have more than 50% paid off. These are truly stunning numbers, and again give a lot of support to the belief that a property boom may be ahead.

How do park island residents feel about the current property climate? I have spoken to some owners who maintain their primary reason to buy was simply for the good quality of life Park Island offers, and that any wealth they have gained is just the icing on the cake. Others, often those of Chinese origin, say matter of factly that property always goes up in HK, and that from a young age it was instilled as a family value and expectation that one should own property. Those who really impress me though, as those expats who have bought or who are buying. They really are not from Hong Kong, but have made Hong Kong their home. And if things continue, they will surely be "set up for life" if they ever decide to leave. Good luck to them!




Comments

  1. I remember coming to HK as a young journalist back in 1993. I bought a little place on Staunton Road, and let me tell you prices seemed as scary then as they did now. As I get ready to move to NZ in the future, I can say the last 20+ years have been very good to me and when I sell up I will be set for life. I have no doubt that the new generation of young hungry mainlanders buying now will also be sitting very pretty in 20 years to come. Can only imagine what prices will be then.

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  2. Jake Venderkemp from SCMP also says property in HK is undervalued.

    http://www.scmp.com/property/hong-kong-china/article/2096953/hong-kongs-property-bubble-long-way-bursting

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  3. Thanks for the article in the SCMP above. Its an interesting viewpoint. I am inclined to agree with it.

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  4. your basically telling us what we know / fear deep down. Oh and by da way by the time u read this the prices of an property will be even higher too. its hard work of any person that gets u in the market and from there you build yourself up the property ladder. this is the Hong Kong way that may of you expats will never truely understand. we really worked hard for our property and to get into the market and anyone new will need to do this too if u want to live here in your own apartment.

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  5. Coming from perspective of poor person it looks expensive for us. But for many regular HK people we also know we need to keep the property and not sell it as the China people will surely pay more and more. So we need to do what we can to buy and then hold it. We worked hard in the past for our property and it is our home and we will not risk ever it being sold to China people and then we cannot buy again. So this means the prices will keep up and up more.

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