Hong Kong home prices are inching towards record highs once again. Here's how this perennial issue can be tackled

Hong Kong home prices are inching towards record highs once again. Here’s how this perennial issue can be tackled

The latest housing price index – the Private Domestic Property Price Index – released by the Rating and Valuation Department in May has surged to 393.7, only 0.8 per cent lower than 396.9, the highest index point recorded back in May of 2019. Despite the challenges brought about by the Covid-19 pandemic, the transaction prices of second-hand residential property are peaking again.

The outbreak of Covid-19 in early 2020 and the ensuing lockdown restrictions in major global economies, as well as the uncertainty over central banks’ plans for monetary policy, once again hit real estate market sentiment. However, with the early containment of the pandemic in China and the introduction of public vaccinations in most advanced countries, signs of a gradual economic recovery were observed in Hong Kong, and both first and second-hand flats have seen brisk sales recently.

Although a limited supply of flats is still the main cause, quantitative easing, as formulated by central banks worldwide and spearheaded by the US, provides fundamental incentives for investors to purchase assets and to preserve wealth. This is also contributing to the rise of property prices.

Last year, the Hong Kong chief executive proposed an increase in the loan-to-value (LTV) ratio for bank mortgage lending for residential property in her Policy Address.

For flats with a value of HK$8 million (US$1.03 million) or below, the LTV ratio can be as high as 90 per cent, making these properties the target for most first-time homebuyers. Despite this proposition, the supply side has failed to meet the rebound in demand. According to data from the Buildings Department, just 6,704 private domestic flats commenced construction last year, down 47 per cent year on year, not to mention no new projects were commenced in December last year.

It is therefore clear that, despite the government’s recently formulated long-term housing policy, a crippling imbalance between housing demand and supply still lies ahead for Hong Kong citizens.

Increasingly, more people believe that the later they buy, the more expensive flats will be. In recent years, a widening disparity between the purchasing power of citizens, property prices and the economy has been observed. Apart from the sustained liquidity driven by central banks worldwide, restricted long-term land supply in Hong Kong is an underlying key factor that keeps pushing up property prices.

From a macro perspective, global property prices, including those in the UK, the US, Australia and New Zealand, have rebounded since March due to extensive monetary stimulus programmes and the development of vaccines.

New Zealand, one of the countries least affected by the pandemic, led the world with an annual property price growth of 22 per cent, which was met by the government’s efforts to quash property speculators through the removal of tax incentives. New Zealand is aiming to reduce the growth rate to 0.9 per cent by June next year.

Meanwhile, Singapore led the Asian property market with an annual gain of 6.1 per cent, followed by South Korea and Japan. The rise of global Covid-19 vaccination rates will pave the way for Hong Kong’s property prices to rise further, as well.

Yet, it seems that there is no silver lining as far as solving the high housing price problem goes. While transitional housing and rental subsidies are utilised to meet urgent needs, in the long term, the deep-rooted housing problem can only be eased by speeding up land development and subsidised housing, increasing plot ratios in the New Territories, as well as stimulating public-private partnerships for housing development.

As corroborated by Demographia’s International Housing Affordability survey for 2021, Hong Kong has been the world’s least affordable housing market in terms of property prices for 11 consecutive years, with a median housing price 20.7 times the median household income.

Hong Kong still lacks a forward-looking comprehensive plan on land and housing. It is hoped that the government can devote more time to the issue and put forward coherent policies to solve the high property price problem. Options such as the development of 1,400 hectares of brownfield sites and the utilisation of small plots on the fringes of country parks for development can be further studied with the aim of increasing and revitalising Hong Kong’s land supply and fulfil housing targets in the near future.

Chiu Kam-kuen is international director and CEO of Greater China at Cushman & Wakefield

News Related

OTHER NEWS

Market selloff: Investors lose Rs 5.31 lakh crore in two days

Representative image Investors’ wealth has tumbled by Rs 5,31,261.2 crore in two days of equity market decline amid a bearish trend overseas. Sliding for the second consecutive session on Monday, ... Read more »

Dow sheds 500 points on fears of contagion from China real estate

Stocks slumped on Wall Street Monday in a broad sell-off that extends an already weak streak for major indexes. Worries about debt-engorged Chinese property developers — and the damage they ... Read more »

Working full-time and mothering part-time: why do so few women do it?

A parent has promised his son to take him to a train exhibition today, but then the boss calls. There is an emergency at work. What should that conscious parent ... Read more »

Collapse in faith: Behind Chinese firm Evergrande's cash crunch

Anxious investors, employees and suppliers describe a scramble inside teetering Chinese property giant Evergrande, in a crisis that has shaken public trust as it struggles to tide over a liquidity crunch. ... Read more »

Interview| Logistics poised for growth, says Gateway Distriparks CMD Prem Kishan Gupta

Prem Kishan Gupta, Gateway Distriparks’ Chairman And Managing Director The logistics sector is poised for growth in 2021-22 after recovering from the impact of COVID-19, and ready to handle the ... Read more »

Amrapali case: Authorities say they would suffer losses of over Rs 7,500 crore if SC does not recall interest rate cap order 

NBCC is the project management consultant for the Amrapali projects and is responsible for the quality and timely completion of work (Representative picture) Noida Authority and Greater Noida Authority informed ... Read more »

Apple India Private Limited renews lease for three floors in Mumbai's BKC for five years

Office rentals remained stable across the major office markets in India in Q2 2021. Apple India Private Limited, has renewed its lease for 15,925 sq ft of commercial space spread ... Read more »

FNV comes with a leveling wage requirement: 100 euros per month for all employees

The lowest incomes in particular should receive a substantial wage increase next year. The FNV trade union will demand a gross wage increase of 100 euros per month and an ... Read more »

China's regulator widens pilot scheme to attract red chip companies to raise funds at home in Shanghai or Shenzhen

China’s securities regulators are rolling out the red carpet for technology and strategically important companies to raise capital onshore, expanding the scope of a 2018 pilot scheme for so-called red ... Read more »

Govt bonds can fetch additional over $30 billion fund if allowed inclusion in global indices: Report

Government bonds |PC-Shutterstock An American brokerage has said if the Indian government allows its bonds to be included in the global indices, the much-anticipated move can fetch an additional $30-33 ... Read more »

Low-interest rates to boost housing sales, benefit affordable & mid-segment homebuyers: Experts

Several banks such as State Bank of India (SBI), Kotak Mahindra, Bank of Baroda (BoB), and Punjab National Bank (PNB) have announced low-interest rates for housing loans, and real estate ... Read more »

Sebi fines 8 entities for fraudulent trade in Videocon shares

Markets regulator Sebi on Monday penalised eight entities for fraudulent trading in shares of Videocon Industries Ltd. The entities are Acuity Merchants Pvt Ltd, Godavari Commercial services Pvt Ltd, Kaberi ... Read more »

Rakesh Jhunjhunwala offloads additional 98,094 shares in The Mandhana Retail Ventures

Ace investor Rakesh Jhunjhunwala has offloaded additional 0.44 percent equity stake in The Mandhana Retail Ventures, the textile and garments manufacturer. The stock gained 1.03 percent to close at Rs ... Read more »

Energy price cap to stay, business secretary declares after crisis talks over gas price hike

Business Secretary Kwasi Kwarteng says the measure "protects millions of consumers" and that he reiterated to those involved in the discussions "the need for us all to prioritise consumers". Read more »

Rusal will set terms to resume bauxite shipments in Guinea when probe is completed

Earlier on Monday, two freight trains owned by Rusal collided in Guinea. As a result, one person was killed, five were injured Read more »

Energy price crisis, the return of print newspapers and a booming tech sector

Listen to “An energy crisis, the return of print newspapers and a booming tech sector”. Surging wholesale gas prices mean a number of suppliers are on the brink of collapse ... Read more »

Gold prices steady at Rs 46,282/10 gm ahead of US Fed meet; silver slips Rs 1,417 a kg

Gold prices were trading weak at Rs 46,282 per 10 gram in the Mumbai retail market amid a lacklustre global trend and a firm dollar. The downside was, however, capped ... Read more »

US stocks tumble 1.5% at open amid Evergrande turbulence

Major US stock indices tumbled at the start of trading Monday as traders braced for the fallout from the expected collapse of debt-plagued Chinese property giant Evergrande. The benchmark Dow Jones ... Read more »

Russian oil reserves to suffice for 30 years with current production level

According to Russia’s geological holding Rosgeo, there have been less new reserves discovered than in the previous years Read more »

'Keep your fingers crossed' strategy leaving smaller energy suppliers out in the cold

Politicians and regulators have encouraged switching, fuelling the rise of firms that could undercut bigger players when wholesale prices were low - but they are coming a cropper now that these prices are rising sharply. Read more »

DHFL lenders to get payment from Piramal this week

(File Image: PTI) Creditors of Dewan Housing Corporation Ltd (DHFL) will receive the money within three working days from Piramal Capital and Housing Finance Limited after the latter won a ... Read more »

Freshworks expected to list on Nasdaq on September 22 under symbol 'FRSH'.

Customer engagement software maker Freshworks is expected to list on Nasdaq on September 22 under the symbol ‘FRSH’. Freshworks, one of the most anticipated SaaS IPOs of 2021, plans to ... Read more »

Indian mills hold off on signing new sugar export deals as local prices jump

Indian mills are holding off on signing new sugar export contracts for the upcoming season as a rally in domestic prices to a 4-year high widened the gap between local ... Read more »

Exclusive Interview | Bad bank a step in the right direction, says Morgan Stanley's Sumeet Kariwala

It’s been a rollercoaster ride for India’s banking sector since the start of Covid-19, although there has been a raft of measures by the government and the Reserve Bank of ... Read more »

New IPOs to help add $400 billion to m-cap in three years, India to be the 5th largest market globally: Goldman Sachs

Representative image New initial public offerings (IPOs) will help add $400 billion to the overall market capitalisation over the next three years, an American brokerage said on Monday. The estimate ... Read more »

Hong Kong developers plunged into turmoil amid concerns Beijing targeting property firms, six firms lose US$11 billion in market value

Hong Kong’s property developers have been left reeling after a sell-off purportedly attributed to the Chinese government’s injunctions for them to serve the national interest drained 6.75 per cent from ... Read more »

Airwallex's valuation soars 54 per cent over six months to US$4 billion after raising US$200 million in latest funding round

Airwallex, the fintech unicorn backed by Tencent Holdings and tycoon Li Ka-shing’s Horizons Ventures, said its valuation has soared to US$4 billion following its latest round of fundraising led by ... Read more »

El Salvador buys 150 more bitcoins, President Nayib Bukele says

(Representative image: Reuters) El Salvador has bought 150 more bitcoins, President Nayib Bukele announced, taking the Central American country’s holdings of the volatile cryptocurrency to 700 coins. “We just bought ... Read more »

RBI announces Rs 15,000 crore bond sale under G-SAP 2.0

Representative image. The Reserve Bank of India (RBI) on September 20 announced the open market purchase of Government of India securities under the G-sec Acquisition Programme (G-SAP 2.0) and simultaneous ... Read more »

Cadila Healthcare unit inks pact to sell two brands to Integrace

Cadila Healthcare on Monday said its subsidiary has inked a pact with Integrace Pvt Ltd to sell two brands — Mifegest and Cytolog. Zydus Healthcare Ltd, a wholly-owned subsidiary of ... Read more »

Adani Ports gets CCI approval for acquisition of 10.4% stake in Gangavaram Port

Representative image Adani Ports on September 20 received approval from the Competition Commission of India (CCI) to acquire a 10.4 percent stake in Gangavaram Port in  Andhra Pradesh. “Commission approves proposed ... Read more »

EPFO added 14.65 lakh net subscribers in July, went up 31.28% over June

The Union Cabinet on July 14 approved a hike in DA and DR from 17 percent to 28 percent with effect from July 1, 2021. (Source: ShutterStock) Retirement fund body ... Read more »

Li Ka-shing-backed Israeli biotech start-up's test to distinguish bacterial and viral infections wins US FDA approval

MeMed, an Israeli biotech start-up backed by Hong Kong tycoon Li Ka-shing’s Horizons Ventures, on Monday said it had gained approval from the US Food and Drug Administration (FDA) for ... Read more »

Climate risk is starting to worry banks and regulator: Rajeshwar Rao, RBI Dy Gov

Reserve Bank of India Deputy Governor M Rajeshwar Rao said Climate change and its impact is increasingly being acknowledged as a key risk driver for the financial system by governments, ... Read more »

For now, junior employees will need to invest 10% in own mutual fund schemes: SEBI

The Securities and Exchange Board of India (SEBI) on September 20, 2021, said that its skin-in-the-game rules can be applied in a phased manner for the junior employees of the ... Read more »

Countries need to harmonise vaccine certification on priority: Adar Poonawalla

SII chief executive officer Adar Poonawalla Countries across the world need to harmonise vaccine certification on priority, Serum Institute of India (SII) CEO Adar Poonawalla said on September 20, amid ... Read more »

Explained | How the container crisis poses major liquidity challenges to SME exporters

An international shortage of shipping containers is affecting the exporters globally. Moneycontrol examines what led to the shipping container shortage, how is it posing liquidity challenges to exporters, particularly those ... Read more »

UK may review its new COVID travel policy for India: Sources

(Representative image) The UK’s decision to treat fully vaccinated people arriving from India as ‘unvaccinated’, may be reviewed. Sources within the government told Moneycontrol that the matter will have to be reconsidered ... Read more »

Director of Nicole Kidman's Nine Perfect Strangers series hopes it helps psychedelic therapy go mainstream ‘for the salvation of humanity'

This article contains spoilers. Midway through Hulu’s limited series Nine Perfect Strangers, created by David E. Kelley, the guests at a luxurious wellness retreat on a remote stretch of the ... Read more »

Crude oil price tumbles 2% on selloff in commodity and equities; Brent trades below $75/bbl

Crude oil prices slid below Rs 5,200 per barrel on September 20 on appreciating dollar, the selloff in equity markets and commodities, production normalising in the Gulf of Mexico, and ... Read more »