HK Island home prices hit record
Peggy Sito and Paggie Leung
Prices of second-hand flats on Hong Kong Island have hit a record high, bolstered by improved sentiment and limited supply.
But some analysts predict the steady climb may not continue.
The Centa-City Leading Index, a weekly measure of home prices from Centaline Property Agency, shows home prices on Hong Kong Island edged up 1.37 per cent week on week to 112.3 during the week of March 26.
It surpassed the previous peak of 111.88 in the week of June 5, 2011.
The index is based on a complex formula that takes into account different areas of the city and different flat sizes. The index uses July 1997 as the base period, when its value was equal to 100.
Patrick Tsang, sales director of Centaline, gave an example of how rapidly prices had risen.
He said the average price of flats at Taikoo Shing in Quarry Bay - a popular housing estate on Hong Kong Island - had climbed to HK$10,400 per square foot at the end of March from HK$9,500 per sq ft at the year end of last year.
Wong Leung-sing, Centaline's senior associate research director, said property prices had surged over the last few months partly because the European Central Bank had pumped more than Euro1 trillion (HK$10.14 trillion) into the banking system.
'People do not want to hold cash, and some richer Hongkongers have switched to buying property, which can better preserve their wealth,' Wong said.
Noting that demand for property in Hong Kong has been strong, he expects the overall index, which includes transaction prices for the entire city, including Kowloon and the New Territories, to reach its highest point by the end of this month.
Nicole Wong Yim, regional head of property research at brokerage CLSA, said that in the past decade, the number of households earning more than HK$40,000 a month had jumped at a faster pace than the supply of new flats.
'Hong Kong Island is home to more people in the middle- and high-income groups, so it's not surprising that prices hit a record high first,' Wong said. 'But looking forward, I don't think home prices will climb too quickly,' she cautioned, 'as the new government may dish out more proactive measures to at least maintain sufficient land supply.'
Jeff Yau, a property analyst at DBS Group Research, said the data reflects the market activity a few weeks ago, but the market is slowing down at the moment.
'We expect a modest decline of 5 to 10 per cent in home prices this year, in the wake of slower economic growth in the city,' he said.
How far prices of existing flats on Hong Kong Island have overshot prices at the peak of the market in 1997, according to Centaline