Hong Kong homebuyers warned to stay within means amid economic volatility and additional supply of 20,000 new flats
Development minister says increase in supply of flats and outside pressures pose risks to owners
The development minister has warned homebuyers to pay close attention to market conditions and assess affordability amid a "considerable increase in future supply" and volatility in the global economy.
Writing in his weekly blog yesterday, Paul Chan Mo-po said the number of private-sector flats due for completion next year was 70 per cent up on the yearly average over the last decade, with an additional supply of 20,000 flats set to reach the market.
"There have been many fundamental changes in the private residential market," Chan said later. "For one, future supply will be considerably higher."
The supply of new flats reaching the market each year is forecast to hit 83,000 in the next three to four years, a figure about 28 per cent higher than that for 2012, he said.
Chan said demand outstripping supply had seen the price of new flats reach levels more than 20 per cent higher than those in the second-hand market, but in the last year or so the price gap had been narrowing.
"In some districts, first-hand flats are even cheaper than those in the second-hand market," he said.
There have been many fundamental changes in the private residential market. For one, future supply will be considerably higher
Earlier this month, a 714 sq ft flat in Taikoo Shing sold for HK$12 million, six per cent below prevailing prices. Some analysts last week said that an increase in interest rates could result in home prices falling by as much as 10 per cent this year.
Chan said the market was also under pressure from external economic uncertainties, including an expected rise in interest rates by the United States Federal Reserve and downward pressures on the mainland's economy. Interest rate increases can affect the ability of homeowners to keep up with repayments on their mortgages.
"The impact on the city is especially significant, as if there is volatility in the mainland economy, Hong Kong will be the first to be affected."
He also pointed to weak local economic indicators such as the falling number of inbound tourists and the drop in retail sales figures.
"People must take into account demand and supply, competition and the economic environment," Chan said. "In this context, potential buyers should be doubly vigilant, carefully measure risk and stay within their means."
Commenting on plans to develop new towns on Lantau Island, Chan said such plans were necessary in order to move part of the city's population to the area and increase employment opportunities in western parts of Hong Kong to achieve more balanced development. New town development has previously primarily focused on the northern New Territories.
Chan said the government was still exploring the feasibility of building flats above the MTR's train depot at Siu Ho Wan, but he brushed off rumours such a development could house up to a million people. Yesterday, MTR Corporation chairman Dr Raymond Chien Kuo-fung said the project was still in the early stages of being conceived.
