Macroscope | Hong Kong property will trend higher...until it doesn’t
‘It is because we have so little faith in the next chief executive to drive change that investors should expect the Hong Kong property market to continue to trend’
Property prices are going up.
It struck me the other day how hard it must be to live in a subdivided flat with no windows – illegal, but often not enforced by the Buildings Department. And bad luck if you are a young Hongkonger whose glittering school, university and career is blighted because you can’t get married without your own home.
Hong Kong residential property is the least affordable. In the world. Average flat prices, measured by Demographia, are over 19 times median income at the highest measure in 11 years. The price for a starter property on Hong Kong Island is today HK$6 million. You need a cash deposit of 60 per cent and a salary to pay a big mortgage. A good young professional’s salary doesn’t go far in battling the food, transport, distribution and utility cartels in the second most costly city in the world – and that’s before housing (Economist Intelligence Unit). The retail property index is up 123 per cent since the trough of 2009.
And still property prices go up. Over the weekend, 1,000 apartments were offered, attracting 23 potential buyers for every single unit. One family bought nine flats for a cool price tag of HK$200 million. In Communist China, lots of people have lots of money, and if you are wealthy on the mainland, Hong Kong property is a trophy.
Hong Kong is an extremely attractive place to live if you can get permanent resident status. We have good health services, transport and communications unslowed by someone cyber-snooping on you. As long as you are not an intemperate bookseller, you can say what you like. The rule of law means you can sue the government and win. We have just jailed our former chief executive for a misuse of office that would not raise an eyebrow in most developing countries. We have tax levels low enough to cause hyperventilation in most parts of the world, while running a large budget surplus and holding monstrous capital levels that make eyes water.
That would be fine if property were an investment but to nearly all of us, it is a home. It is not a luxury but a necessity. Not a want but a need.