It is now cheaper for every would-be home owner in Hong Kong to buy rather than rent an apartment. Mortgage rates have never been cheaper, affordability is at 1980s' levels and future supply of new units looks relatively small. And yet market activity remains sluggish despite evidence of prices inching up at selective developments.
Yesterday's interest rate cut will provide hope to home owners suffering from negative equity and spur many who have saved through the recession to think seriously about buying. Weighing on most people's minds is the risk of an economic crunch as the global outlook darkens. A high US dollar means monetary conditions are effectively tight; yet barring external economic or political shocks, the outlook for property owners is good.
This is not to say prices are going to charge ahead in 1990s' fashion or that housing and land policy is sustainable. It merely takes a positive view of the SAR's economic prospects and assumes the Government has wound down its grand home-building ambitions that so distorted the market.
Today the median income earner can cover monthly mortgage payments 2.5 times over. Compare that with 1997 when the same average-Joe had to use all his income and more to fund a mortgage.
Looking forward, future private sector building is tight despite developers sitting on unsold inventory. The latest Home Ownership scheme building plans suggest a programme in rapid retreat, while many mid-tier developers are exiting the market, with mainland firms in particular shifting attention across the border. Much reduced land sales, rapid demolition of old public rental blocks and site-clearance schemes means any excess supply will be easily sucked up.
The great unknown is confidence. Financial Secretary Antony Leung Kam-chung's ill-considered comments about Hong Kong property values naturally deflating to levels over the border do not help. Unlike the early 1990s when negative real interest rates made property investing a no-brainer, deflation remains the prevailing global condition.
