In Hong Kong, property prices remain sky-high, despite the challenges

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In Hong Kong, property prices remain sky-high, despite the challenges

Despite an exodus of expats, the loftier end of the market is especially hot, with luxury real estate rents increasing for the showtime time since the end of 2019, say holding analysts.

My apartment in Hong Kong'southward Mid-Levels district cost HK$l meg (S$8.6 million) but walking from i terminate to the other takes just ten steps. It will probably be the nigh expensive belongings – and hopefully the smallest – I ever live in.

I know how much my landlords paid for information technology because, when signing the lease in January, the estate agent asked if I wanted to sneak a expect at the buying deeds. I took a photograph of all the zeroes (a satisfying corporeality in Hong Kong dollars) and then that I wouldn't convince myself that I had misremembered.

The apartment is on the 42nd flooring with views of Victoria Harbour and the Hong Kong skyline, simply at about 500 sq ft it is barely larger than a hotel suite. I am often reminded by friends that it is considered large in this city.

Hong Kong has for 11 years been ranked the world's least affordable housing market place, according to an annual study by recall-tank Demographia. The median price of a dwelling house is more than 20 times the annual median household income, four times the ratio at which a identify becomes "severely unaffordable".

Firm prices take doubled in real terms over the by decade and reached record highs this twelvemonth, according to an alphabetize by Hong Kong holding agency Centaline. Unsurprisingly, the rate of owner-occupied homes is low at 51.5 per cent of households, co-ordinate to government information, but slightly college than Germany (46.v per cent) and far lower than the U.k. (64 per cent) and Japan (61 per cent).

Rents are the highest in the world and take increased by almost 3-quarters since 2010, far outpacing wages. The average monthly rent for a 900 sq ft property is well-nigh United states of america$4,000 (S$five,400), only narrowly lower than in San Francisco, co-ordinate to Expatistan, whose data is used to rail the cost of living by institutions such as Deutsche Bank.

Nearly eight per cent of people live beneath the poverty line, defined in Hong Kong equally having an income of less than one-half the median, but 8.vii per cent have internet assets of HK$10 one thousand thousand or more, according to Citibank. Co-ordinate to the 2022 Forbes rich list, Hong Kong had the sixth-highest number of billionaires.

Subdivided flats the size of car parking spaces, known as "coffin homes", occupy the same cramped city heart equally pricey luxury apartments. A new market for "nano apartments" has sprung upward because of the lack of infinite. In 2019, these apartments of 260 sq ft or less accounted for xiii per cent of domicile sales.

Private housing in Tsuen Kwan. (Photo: iStock/Wong Chun Yip)

Hong Kong has had more than than iii years of political and social upheaval. Housing was among the frustrations that formed the roots of the city's protests in 2019. But so far the protests and, more than recently, the pandemic have had little impact on prices.

After a slight dip in confidence at the commencement of 2020, equally the pandemic prompted fears the urban center would be striking as hard as during the SARS crisis in 2003, sales are booming. Martin Wong, head of research for greater Communist china at Knight Frank, predicts that there will exist more 70,000 residential transactions this year, which would be a record since 2012, and a five to eight per cent increase in residential property prices.

The high end of the market is especially hot. Luxury property rents – homes that are more than than 1,000 sq ft and command prices of more than HK$30,000 per sq ft – increased by ane.4 per cent in the second quarter of 2021, according to JLL, the starting time quarterly rising since the cease of 2019. In May, a five-bedroom house on The Acme – a sought-later address that looks over cardinal Hong Kong Island – leased for a record US$2.5 million a year.

Foreigners relocating to Hong Kong for work have long contributed to keeping prices high, fuelled past the large budgets of multinational corporations to business firm their expatriate employees. But Hong Kong's strict coronavirus travel restrictions and volatile political situation hateful more people are leaving and fewer arriving: Its population brutal ane.2 per cent final year, the largest decline since the government started records in the 1960s. Visa approvals for foreign workers dropped to virtually 10,000 in the start ix months of this year, more than 75 per cent downward from the number for the whole of 2019.

The state of affairs has already thrown up quirks. In some cases, senior lawyers and bankers who are staying behind in Hong Kong while their families relocate to their dwelling countries, where travel restrictions are less prohibitive, are moving in together to save costs. Some expat families are being forced to relocate from desirable hillside and beach locations to closer to the city subsequently their corporate housing budgets were slashed equally companies reined in expenses during the pandemic.

Wealthy Chinese entrepreneurs have for years buoyed Hong Kong'south high-end property marketplace, seeing it as a safe oasis to park coin. It has been a particularly attractive investment because of the low interest rates that come from Hong Kong's currency existence pegged to the U.s. dollar. But at present, more than ever, all gaps are being plugged, manor agents say, by an increase in Chinese coin.

"If you inquire effectually the luxury developers they will immediately say at that place are more tenants who originate from mainland Mainland china," said Joseph Tsang, Hong Kong chairman of JLL. "So while one office of the expat earth is having its budget cut or leaving Hong Kong, at that place are people coming to fill up upward the gap."

China's stricter uppercase controls in recent years have made it more hard to move large amounts of greenbacks over the edge, merely non impossible, and at that place are many legitimate ways for Chinese business organization owners to earn money in Hong Kong. About half of high-end property transactions in the territory are made by foreigners, mostly from mainland People's republic of china, estimates Wong.

The Hong Kong skyline as seen from Victoria Tiptop. (Photo: iStock)

This is likewise partly down to Hong Kong's prohibitive mortgage rules that cap borrowing at 50 per cent for properties of more than than HK$x million. This ways my landlords, who are from the mainland, had in theory to stump up at to the lowest degree U.s.a.$3.ii one thousand thousand in cash to purchase the apartment.

Now mainland Chinese greenbacks is buoying the upper stop of the leasing market too. "The capital controls from China are being tightened but people still want to live in proficient locations with a practiced living environment, and then hence we're seeing more Mainland china entrepreneurs and corporates entering into the leasing marketplace instead of buying," said Tsang.

Carrie Lam, Hong Kong's leader, has been under pressure to increase the supply of homes since the protests. In Oct, she unveiled plans for a "Northern Urban center" to house two.five million people in the New Territories district. The project – which will have 20 years to complete – is aimed at relieving the chronic housing shortage past attracting people to live in a less crowded part of Hong Kong.

It volition as well become a tech hub close to the border with the Chinese urban center of Shenzhen, habitation to China'due south biggest tech giants such as Tencent. But the long-term plan is unlikely to accept any impact on citizens' living weather for at present – although some analysts have already predicted it could increment house prices in the area.

The trouble for Hong Kong is that it doesn't take a lot of spare land. About 75 per cent of the territory is protected or too mountainous to build on. Equally a consequence, construction in adult areas seems to be relentless. Information technology is a mutual sight to see new apartment blocks existence built in the gaps betwixt ii existing towers in an impressively efficient use of space but with piffling regard for the views from residents' windows.

However demand is far outstripping supply, even with ascension prices. The scarcity of land means that buying belongings is viewed as a long-term game. "Information technology's still crazy. If there are 100 units in a new building being constructed, it'south normal for it to be more than ten times oversubscribed, and it volition take to go to lucky draw allotments," said Eunice Tenh, who has been a property agent in the metropolis for more than 15 years.

News that the Hong Kong border with mainland Mainland china volition reopen by June 2022 is already boosting the market, estate agents say. In Nov, just days after the border annunciation, an flat on Mount Nicholson in Hong Kong Island sold for HK$640 million, or HK$140,800 per sq ft, a record in Asia.

"The major Hong Kong developers are all very optimistic about the market," said Tsang. "Hong Kong is still seen as the Monte Carlo of Cathay."

Buying GUIDE

Hong Kong is at present technically open to non-residents who are fully vaccinated, but anyone relocating or visiting must quarantine at their own expense in a hotel room for 21 days if travelling from 25 countries, including the Us and UK, or 14 days from almost everywhere else. The exception is mainland Communist china: Visitors from some provinces can travel without quarantine, although there is a strict limit; most vaccinated visitors from China must quarantine for vii days.

Hong Kong has imposed tough mortgage requirements to attempt to control prices – to piffling outcome. Buyers must put down at to the lowest degree forty per cent of the value, and in that location are steeper rules for buyers from abroad. Mortgage applicants whose income is mainly derived from outside the territory face a maximum loan-to-value of 40 per cent for backdrop over HK$10 1000000 and 50 per cent beneath that cost.

To put off overseas speculation, Hong Kong has introduced an additional stamp duty for buyers who are not permanent residents, which is a flat rate of 15 per cent of a property's value.

WHAT YOU Tin can Purchase FOR…

HK$45.8 million

A three-bedroom flat on Macdonnell Route in Mid-Levels Central, a short bulldoze from the Central Business Commune. The property includes an additional maid's room, balcony and parking space. For sale with Knight Frank.

HK$55 million

A four-sleeping room, three-bathroom house with a individual pool and garden in a quiet hillside location. At that place is also a maid'due south room, three parking spaces and mountain views, likewise as a partial bounding main view. On the market with Knight Frank.

HK$i.two billion

A detached four-bedroom business firm on Isle Road in Deep H2o Bay, in the southward of Hong Kong Island. Built in 2009, the property has a roof terrace with views of the bay and hills. Available through Christie's International Real Estate.

Source: Fiscal Times/ds

In Hong Kong, property prices remain sky-high, despite the challenges

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