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Record Price for H.K. Public Flat Signals `Unreasonable Prices'
A 26-year-old government-built apartment near one of Hong Kong’s busiest shopping areas sold for a record price per square foot, underscoring concerns that home prices in the city are becoming unaffordable.
The 420-square-foot (39-square-meter) home in the Sham Shui Po area of the Kowloon district was bought for HK$1.98 million ($255,000), or HK$4,714 per square foot, said Buggle Lau, chief analyst at property broker Midland Holdings Ltd., citing Land Registry records.
The government on Aug. 13 raised down-payment ratios and said it will increase land supply amid concerns a bubble is forming in the property market. Hong Kong’s home prices have surged about 45 percent since the beginning of 2009 on record low mortgage rates and the influx of wealthy mainland Chinese buyers, according to Centaline Property Agency Ltd.
“Home prices in general are at quite unreasonable levels and this transaction is a reflection of that trend,” said Nicole Wong, a Hong Kong-based analyst at CLSA Ltd.
The government is closely monitoring the property market and may introduce further measures to contain prices if they continue to escalate, Ming Pao on Sept. 1 quoted Financial Secretary John Tsang as saying in written replies to questions from the paper.
Scarce Apartments
The unit in the Lei Cheung Uk Estate was sold in late July and doesn’t reflect the impact of the latest government measures to curb prices, according to Midland’s Lau.
“If you look at Hong Kong’s urban area it is getting more difficult to find private apartments selling for under HK$2 million,” said Lau. “The price paid in this transaction is more about the location. I don’t think the buyer is in for a quick profit.”
Prices of units smaller than 40 square meters in the Kowloon area rose 26 percent in July from a year earlier, according to Rating and Valuation Department figures.
About 30 percent of Hong Kong’s 2.5 million residential apartments are public rental units, according to Midland’s Lau. The government began selling some apartments originally built for rental to lower-income earners at selected projects after the property market crashed in 1998.
Those who bought public rental units must pay a land premium to the government when they resell, with the amount subjected to valuation at the time of the transaction.
To contact the reporters on this story: Kelvin Wong in Hong Kong at kwong40@bloomberg.net
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