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  • Jul 12, 2014
  • Updated: 10:27am
PropertyHong Kong & China

Fall of 22pc will put flats back in reach, BEA says

Decline over three years would restore 'normal' affordability levels, the bank's research finds

PUBLISHED : Wednesday, 25 September, 2013, 12:00am
UPDATED : Wednesday, 25 September, 2013, 4:44am

Hong Kong property prices will have to drop 22 per cent in the next three years in order to return to "normal" affordability levels for ordinary buyers, Bank of East Asia said in a research report issued yesterday.

"To bring the price-income ratio to eight times - the upper limit of the long-run affordability range - by 2016, either wage growth has to speed up or prices will have to fall," BEA said in the latest issue of its Economic Analysis, which focused on developments in the property market.

The price-income ratio is the price of a home relative to median annual incomes. Property prices have outpaced income growth by a significant margin since 2004, reducing affordability, the report said.

It said the price-income ratio averaged 9.3 from 2008 to last year, and reached a peak of 11.8 by the end of last year due to a number of factors including a historically low mortgage rate, low housing supply and a boom in mainland buying interest.

"Nevertheless, corrections are under way," it said.

During the first seven months of this year, transaction volume plunged 32.4 per cent year on year to 31,700.

Most buyers are holding back following the government's tightening measures, which began in 2009.

The 15 per cent buyer's stamp duty applied to non-Hong Kong permanent residents has cooled mainland buyers' interest. Meanwhile, United States interest rates are expected to rise and housing supply in Hong Kong is forecast to rebound.

The BEA report said Hongkongers should keep a close watch on the potential impact of the expected rise in interest rates and housing price corrections on their finances in the next few years.

The government expects the supply of new flats will total 70,000 units in the coming three to four years, compared with an average of 9,787 units a year between 2008 and last year.

A lawyer living in Sheung Wan said he could have sold his 600 square foot flat for HK$8 million at the start of this year, but now could expect it to fetch only HK$7.25 million.


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when the time comes , this ponzi scheme will end badly. not only HK but those countries not effected by GFC.
Government should be trying to stabilize prices. Not make them fall.
Jumping from 10,000 new flats per year to 18,000 new flats is too big of a jump. Construction costs will go up. raw material costs will jump. And there will be a glut of houses on the market without the people to buy them. taking non Hong Kong residents out of the market has already caused transactions to drop 32% with the current 10,000 units per year. Imagine how many empty flats there will be once they increase to 18,000. Government is just nuts with their housing policy. They spend too much time thinking of what people want them to say rather than what they should do.
If we have a glut of houses 3 years from now the government will just open the doors to mainlanders again to suck up the extra ones. this will then create land shortage with the government saying they should build on country parks.
In the period 1998-2007, private housing supply in Hong Kong averaged some 32k units per year, with a peak of 65k in 2002. It is the period 2008-2012 with <10k units pa that is the anomaly here, entirely the result of Dumb Donald's kleptocratic pro-developer policies. A return to a supply of 20~25k private units and a similar number of public housing units per year constitutes a normalisation, not 'too big of a jump.'
I totally agree. If there is a glut, maybe 'regular' people might be able to start affording to buy a home. The housing prices and supply still need major adjustment.
Most Hongkongers believe property prices are way too expensive. So how would simply stabilizing the prices be adequate? Prices really need to fall....
Alternatively, make income levels rise significantly!


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