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A consortium of Hong Kong and mainland Chinese buyers paid a record HK$40.2 billion (US$5.15 billion) for The Center in early November: Photo: Nora Tam

Divisions grow as analysts debate Hong Kong property outlook

Confidence in Hong Kong remains generally upbeat, even as the mood among property investors globally is growing more cautions

Hong Kong property analysts are divided on the outlook for the local property market, as international property investors express concern over excessive prices and deteriorating market stability worldwide.

More than 60 per cent of global real estate investors ranked an asset price bubble and the risk of a sharp correction as their top concerns, according to a survey released Tuesday at an annual conference in Singapore organised by the Asian Association for Investors in Non-listed Real Estate Vehicles (ANREV). The survey was conducted at the beginning of November.

But analysts say such concerns are not slowing investment in the Hong Kong property market.

The city has been ranked the world’s least affordable to buy a home for the seventh year running, according to the 2017 Demographia Housing Affordability Survey, with flats on average costing more than 18 times annual median income.

Commercial property prices are also on the rise, as Central district remains the world’s most expensive to rent a prime office. Grade A office rents rose 2.9 per cent from the beginning of the year to September, reflecting their highest level in a decade, according to the SCMP-JLL Grade A Office Rental Index, tracking 123 office buildings.

Commercial property investment has been “quite active” in the past few months, said Thomas Lam, senior director of international property consultant Knight Frank Hong Kong. Although prices are high, he did not foresee any likely circumstances that would trigger a downward adjustment.

However, Denis Ma, head of research at global real estate services firm JLL Hong Kong, said that the “local real estate market will inevitably correct”, but cautioned that prices are unlikely to plummet.

The city’s property market is being fuelled mainly by mainland investors who are eager to invest overseas, according to Ma and Lam.

Earlier in November a consortium of Hong Kong and mainland Chinese buyers paid a record HK$40.2 billion (US$5.15 billion) for The Center. The skyscraper is Hong Kong’s fifth tallest building and the tallest owned by property tycoon Li Ka-shing.

“Investment volumes have more recently started to pickup with the return of mainland Chinese buyers and a handful of mega transactions,” Ma said. “Hong Kong will continue to attract strong interest from mainland buyers. As companies go global, they will use Hong Kong as a platform to broaden their reach into other markets.”

This article appeared in the South China Morning Post print edition as: Concerns fail to dampen demand for HK property