Record prices of mid-sized Hong Kong flats driven by first-time buyers taking advantage of relaxed mortgage rules, say analysts

Homes measuring between 431 and 752 sq ft soared to record-breaking prices in June as couples and young families snapped up second-hand units
Among the most popular developments driving the price increases were Kingswood Villas in Tin Shui Wai, and City One Shatin in Sha Tin

Hong Kong property

Bobo Chan

Published: 7:30am, 4 Aug 2021

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More first-time buyers have been piling in to Hong Kong’s property market, driving up the prices of mid-sized flats in out-of-town locations, according to analysts.

Homes measuring between 431 sq ft and 752 sq ft soared to record-breaking prices in June as couples and young families snapped up second-hand units in areas like the New Territories, where their money goes a lot further than it does in the city.

Property agents said the prices had been driven higher by a relaxation of mortgage rules in 2019 allowing first-time buyers to borrow a much higher percentage of a flat’s value.

“The relaxation measure pushed more first-time homebuyers to enter the property market,” said Derek Chan, head of research at Ricacorp Properties. At the same time, more people were taking the opportunity to upgrade to larger units.

“This led to more people making use of the relaxation rules,” said Chan. “So people who previously bought units of 200 to 300 sq ft would perhaps purchase units of 400 to 500 sq ft instead.”

Among the most popular residential developments driving the price increases were Kingswood Villas in Tin Shui Wai, City One Shatin in Sha Tin and Metro City in Tseung Kwan O, according to Peter Wong, director of research at Hong Kong Property Services (Agency).

“For some buyers who live in a two-bedroom unit … their family has expanded and they have another child or their children are growing, they may need to switch to a three-bedroom [unit],” said Wong.

The prices of second-hand homes measuring 431 sq ft to 752 sq ft set a new record in June, according to an official price index. They edged up 0.37 per cent to 381.5 in June, breaching the previous high of 377.9 set in May 2019, according to recent data from the Rating and Valuation Department.

Homes at the extreme ends of the size spectrum fell in June. Houses larger than 1,722 sq ft saw their value drop 1.2 per cent, the biggest fall among all types of unit, while the very smallest flats, less than 431 sq ft, declined 0.45 per cent.

Home prices were flat overall, with the index remaining at 394.5, just a whisker below the previous peak of 396.9 in May 2019.

A total of 3,059 transactions were recorded in 10 major second-hand housing estates so far this year, up by a half from the 2,049 sales recorded in the first seven months of last year.

Kingswood Villas topped the list, with 433 transactions, a 29 per cent increase, according to the agency.

Hong Kong Chief Executive Carrie Lam Cheng Yuet-ngor announced the relaxation of the lending cap in October 2019.

Under the measure, which applies to completed flats only, the lending cap for those who are qualified to borrow up to 90 per cent of the property’s value rose from HK$4 million to HK$8 million. The cap on the value of flats eligible for mortgages of up to 80 per cent also rose from HK$6 million to HK$10 million.

“The transaction volume of people buying properties in this range is always going to be big,” said Sammy Po Siu-ming, chief executive of Midland Realty’s residential division. “Now many people are first-time buyers, and when you buy property for the first time you typically buy around such sizes, which makes for an easier entry point.”

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