HK housing market not at risk of a bubble, says Jones Lang LaSalle

Hong Kong is not at risk of a housing price bubble, and home prices should remain firm, supported by strong end-user demand and sound purchasing power, says property consultancy Jones Lang LaSalle.

"The resilience of the residential property market is not a bubble, but a realistic reflection of Hong Kong's long-term economic fundamentals," Jones Lang LaSalle noted in its "white paper" on the housing sector released yesterday.

Continued low unemployment, together with a substantial increase in the number of high-income households, provided ample real income to support residential property demand and prices in Hong Kong, it said.

The paper argued that end-user demand had been artificially suppressed by the government's austerity measures in 2010 and last year, including a special stamp duty levied on short-term trades and a reduced loan-to-value ratio for new mortgages.

The suppressed demand was shown by the divergence between prices and volumes.

While prices of residential properties had grown by 13 per cent from the start of last year to the middle of this year, overall residential sales volumes had dropped from about 11,000 per month in 2010 to only 7,000 per month over the 18 months from January last year. The divergence was the first in 15 years, it said.