Demand for small flats drives Hong Kong market to new high

PUBLISHED : Friday, 05 September, 2014, 2:46pm
UPDATED : Saturday, 06 September, 2014, 5:01am

Strong demand for small flats helped push Hong Kong property prices to a fresh high for the third consecutive month in July, with analysts expecting gains to continue in the coming months.

The Rating and Valuation Department's monthly price index for private homes climbed to a record 255.6 in July, 2.2 per cent higher than in June.

It cost an average of HK$5.06 million to buy a 431-square-foot flat on Hong Kong Island in July, compared with HK$4.9 million in March. A flat of that size in Kowloon fetched HK$4.18 million, some 8.8 per cent higher than HK$3.84 million in March.

In the New Territories the average price of a flat of that size rose to HK$3.7 million from HK$3.4 million in March.

The rental index rose to 157.7 in July, 0.32 per cent higher than the previous peak of 157.2 set in November last year.

"Property price growth may continue until the end of October or November," independent economist Kwan Cheuk-chiu said. "The government should release a new round of cooling measures in the property market. Otherwise, prices will continue to go up and the property bubble will burst."

The new round of property price rises has been driven by interest in small flats.

The prices of flats smaller than 430 sq ft gained the most in July, with a month-on-month increase of 2.5 per cent. The increase for flats ranging from 431 to 752 sq ft was 2.3 per cent, while flats of 753 to 1,075 sq ft went up 0.89 per cent.

The rental market for smaller flats was also strong. A 35-year-old, 311 sq ft fully furnished unit in Lockhart House, close to Causeway Bay MTR station, is being offered at HK$15,800 a month, or HK$50.80 per sq ft.

That is on a par with a studio flat in central London or a one-bedroom flat in New York's Upper East Side, according to property search engines.

"Rents are going up fast, particularly for small units as they are targeting young professionals," said an agent at Fook Tin Property Agency.

The Centa-City leading index showed that property prices on Hong Kong Island and in New Territories East hit new records for the week of August 25 to 31, after prices in Kowloon and New Territories West hit record highs the previous week.

Prices have also been given a boost since the government eased some of the terms of its doubling of stamp duty in June.

"It was good that the government revised the terms," Kwan said.

"However, it gave a wrong signal to the market that the government will probably relax cooling measures instead of introducing new measures."