Real-estate transactions in Hong Kong have climbed sharply in recent days, fueled by the prospect of more quantitative easing in the US and despite last week’s fresh measures to cool the city’s property market.
Hong Kong’s average home prices have doubled over the last four years as rock-bottom interest rates encouraged real-estate speculation. Meanwhile, mainland Chinese investors, driven by a desire both to seek higher returns and to move their assets abroad, continue to snap up apartments in Hong Kong.
Ricacorp Properties recorded an 11 percent rise in transactions at 10 major housing complexes in Hong Kong over the weekend compared with the previous weekend. And on Tuesday, Midland Realty, one of the city’s biggest realtors, said that 35 major housing complexes in Hong Kong reported a 12 percent rise in transaction volumes for the week of September 10 to September 16 compared with the previous week.
New projects under development also continued to see strong demand over the weekend. Blue-chip Henderson Land Development Co., which is building the Double Cove complex in the New Territories, said Tuesday it is considering raising selling prices for the apartments by 5 percent after seeing robust sales.
Since 2009, Hong Kong’s government has launched many policy measures to slow the rise in home prices, such as raising transaction levies and boosting property available for housing development through more land sales. But the efforts have largely failed, as property investments remain attractive amid low interest rates and strong housing demand.
Because Hong Kong’s currency is pegged to the US dollar, the city’s monetary policy must closely mirror moves made by the Fed, which has maintained very low interest rates since the 2008 financial crisis. That means the Hong Kong Monetary Authority hasn’t been able to take monetary tightening measures to curb property demand.
So even though the HKMA on Friday unveiled its latest moves to tighten requirements for mortgages, it came as little surprise to analysts that property transactions actually went up. The new rules, which force bigger down payments and apply mainly to second mortgages, were timed for release just hours after the US Fed announced its latest bond-buying plan.
“A longer period of low interest rates under the [third round of Fed quantitative easing] is the dominant factor in heating up the city’s residential market. Hong Kong’s latest steps to tighten mortgage rules will only temper sentiment mildly,” said Ricacorp Chief Executive Willy Liu, adding that he expects home prices to rise 3 percent-5 percent this quarter.
“People are still eager to buy real estate to hedge inflation amid ample liquidity,” Liu said.
Barclays noted that the latest cooling measures are “unlikely to cause a meaningful price correction.” Still, it said Hong Kong authorities are increasingly signaling that they are unwilling to see property prices rise further.
Housing has been a major policy challenge for Hong Kong, a densely populated city of seven million. An influx of immigrants in the 1950s and 1960s prompted the government to develop one of the world’s most comprehensive public rental-housing programmes.
Today, nearly half of Hong Kong’s residents live in some form of subsidised public housing, with the remaining half relying on a private housing sector that is dominated by the city’s big real-estate companies.
Rising home prices have increasingly served as a flashpoint for local anger. Critics point to the administration’s earlier reluctance to restart a subsidised ownership plan, though the government ultimately bowed to public pressure last year.
Hong Kong’s new leader, Leung Chun-ying, took office in July and has pledged to place long-term housing planning as a policy priority. He said he will focus on building more public rental housing for low-income families and helping middle-income families to buy their own homes.
In addition to Friday’s moves, the city’s government under Leung has unveiled various measures over the past three weeks to rein in property prices, including boosting land supply and rezoning some sites to residential use.
It also launched a programme to set aside land to build homes that could only be bought by local permanent residents, marking a symbolic step toward limiting the influx of buyers from mainland China.
Still, home prices are likely to rise further as demand for property remains strong. “Given the lack of other investment tools amid the weak local stock market, buying property is still a smart bet,” said Raymond Yeung, a senior economist at Australia & New Zealand Banking Group.
Some analysts suggest an across-the-board restriction on foreign purchases of Hong Kong property, though the government would need to overcome significant resistance from the city’s politically powerful developers to take such a drastic step.
Category: Hong Kong