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'The Arch,' a luxury residential development is seen in the Kowloon district of Hong Kong. Hong Kong's property market is predicted to show no sign of slow-down, according to recent industry data. (Mike Clarke/AFP/Getty Images)
Hong Kong residents are now paying up to HK$8 million (US$1 million) dollars for an apartment no bigger than a broom closet, but prices are set to boom even further.
Bloomberg reports that home prices will rise a further 15 per cent in the next 12 months, citing the regional head of property research for Asia’s leading independent brokerage and investment group CLSA Ltd.
Nicole Wong is quoted as saying that property purchasing in Hong Kong is a “painful trade” – people are driven to buy real estate at skyrocketing prices as demand remains high and supply low.
“Is Hong Kong real estate too expensive? Definitely,” Wong said in the Bloomberg report. “People who buy are making a painful trade. However, those who make a rational choice not to buy find themselves getting penalised because prices keep going higher. So in the end, they’ll go for a less rational choice because it’s less painful.”
Reports have indicated that Hong Kong’s property prices have been inflated by record-low mortgage interest rates and growing demand.
According to Centaline Property Agency Ltd, Hong Kong’s home prices boomed 11 per cent this year, up 42 per cent since early 2009. July has recorded the highest value in property since 1997, the agency says, with the average residential price reaching HK$20,642 per square foot.
“If you call it a bubble, it means you expect it to burst soon, but we don’t think that’s going to happen given that in the next 12 to 18 months the lack of new supply won’t change,” Wong said in the Bloomberg report.
Hong Kong has long maintained a reputation of having the glitziest property market, boasting sales of luxury apartments for staggering prices, commonly purchased by wealthy business tycoons from the tiny island, as well as overseas investors.
But since the 1997 hand over to Beijing it has also attracted thousands of Mainland buyers, eager to take a bite at the free market economy and secure their new-found wealth in a safe investment.
According to Centaline Land, a large Hong Kong property service company, Mainland buyers have accounted for 24.1 per cent of their business so far this year, compared with 18.1 per cent last year and 11.2 per cent in 2008.
For the last six months the total transactions of luxury flats valued at HK$10 million ($US1.29 million) or more were HK$11.9 billion (US$1.53 million), according to Centaline, reports the Global Times.
“Most Mainland buyers regard this as a good investment at a bargain price, because the Hong Kong property market is cold this year and the Mainland property market is experiencing a bubble,” said Huang Wen-hsiung, president of Centaline Land in the Global Times report.
Meanwhile, developers in Hong Kong are continuing pay top dollars for land, eager to add more properties to the market.
Last week, a rare residential site on Hong Kong’s prestigious Victoria Peak fetched US$1.33 billion at auction, reports AFP.
The plot of land at 103 Mount Nicholson Road, which offers a panoramic view of Hong Kong’s world-famous Victoria Harbour, was purchased by Nan Fung Group at this year’s fourth government land sale.
