Photographer: David Paul Morris/Bloomberg

Hong Kong Existing Home Prices Rise to Record, Defying Curbs

  • Low borrowing costs, pent-up domestic demand also drive market
  • Prices have rebounded 16% since bottoming out 11 months ago

Hong Kong’s existing home prices have climbed to a record, fueled by a surge in demand from local buyers and investors despite taxes and mortgage curbs designed to rein in prices.

The Centaline Property Centa-City Leading Index, which tracks sales in the secondary market, rose to 147.74 for the week ended Feb. 19, surpassing the previous high of 146.92 reached in September 2015. The index has rebounded 16 percent since home prices bottomed at the end of March.

“The market is hot right now, not only end users but investors have also come back,” said Wong Leung-Sing, associated director of research at Centaline Property Agency. “The government says interest rates will rise and the supply will increase and there’s no need to buy now, but nobody believes that.”

The record prices come at a sensitive time for Hong Kong leaders ahead of a vote next month to elect a new chief executive for the city. Housing costs have dogged current chief Leung Chun-ying over the course of his five years in power, with measures including new taxes in November so far failing to tame soaring property prices.

The city has the world’s priciest property market, with home prices rising 370 percent since a six-year slump ended in 2003. The lack of affordability has stoked discontent and has lessened Hong Kong’s competitiveness with other Asian financial hubs like Singapore, which is popular among expatriates for its less expensive housing.

Mainland Buyers

High stamp duties targeted at all but first-time local buyers were the centerpiece of the government’s push to finally cool the housing market. New home sales as a proportion of total sales climbed from 10 percent in 2010, before the government first began demand-curbing policies in 2012, to more than 30 percent last year, official statistics show.

“I am surprised by end users’ enthusiasm about getting into the market,” said David Ji, Knight Frank LLP’s head of research and consultancy for Greater China. Prices in 2017 could fluctuate by plus or minus five percent, he said.

The government attempts to bring prices down by releasing more land for sale have also backfired, as land prices have kept rising due to aggressive bidding by Chinese developers anxious to build up land banks in Hong Kong.

For example, a unit of HNA Group Co. last month outbid Hong Kong developers including Cheung Kong Property Holdings Ltd. with a HK$5.5 billion ($709 million) offer for land in the former Kai Tak airport area, its third such purchase in as many months.

Mainland buyers have also been flocking to Hong Kong as a combination of surging prices and property curbs on the mainland make the city a more attractive alternative.

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