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The demand for property has remained strong, with HK$56.4 billion spent on flats, shops, industrial units and car parking spaces as of January 26. Photo: AFP

Hong Kong home prices surge for a 21st month in December, and more gains are seen this year

City’s home price index rose by 1.4 per cent last month, marking the longest stretch of gains since 1993, and with a booming stock market creating more wealth, prices are set to continue rising

Hong Kong’s secondary home prices rose for a 21st month in December, the longest stretch of gains since 1993 and driven by strong demand for small flats, with analysts predicting further rises this year.

The home price index rose 1.4 per cent to 352.8 for the month, according to the Rating and Valuation Department on Wednesday. This compared with a gain of 1.22 per cent in November. Prices for small flats with sizes of less than 430 square feet increased at the fastest pace, growing by 1.54 per cent in December.

Rising property demand, fuelled in part by a strong performance in Hong Kong’s stock market, has pushed prices at many of the city’s residential estates to record levels, which in turn has triggered demand for small flats as larger ones become unaffordable to many buyers.

“Average transaction prices at 22 out of 50 housing estates we monitor have set record prices,” said Derek Chan, head of research at Ricacorp Properties. “As home prices continue rising, prospective buyers have no choice but to go for micro flats with sizes less than 200 square feet,” said Chan.

Of those estates, 13 were in the New Territories, seven in Kowloon and two were in Hong Kong Island.

Fairview Park in Yuen Long in the New Territories recorded the largest price gains, with a 29.3 per cent rise in the past 12 months, followed by Bellagio in Castle Peak Road with a 26.3 per cent rise.

Prices at Fairview Park have risen to HK$12,771 (US$1,633) per square foot this month from HK$9,875 in January 2016, Ricacorp data showed.

Chan said that of the estates monitored, only Kingswood Villas in Tin Shui Wai, also in the New Territories, still had flats priced below HK$10,000 per square foot, with average transaction prices of HK$9,426 per square foot.

“Flats worth below HK$10,000 per square foot will totally disappear within six months as prices go up quickly,” Chan said.

Hong Kong’s overall property market has boomed this month, with buyers and investors splashing out HK$64.89 billion on flats, shops, industrial units and car parking spaces as of January 30, according to Midland Realty. The overall average home price has now reached HK$12,147 per square foot, Midland Realty figures showed, while developers have been taking advantage of positive market sentiment by releasing new projects at higher prices.

Other analysts said there is unlikely to be a slowdown in home price growth this year, with the strong stock market creating cash gains and supporting demand for properties.

“Home prices will continue to grow in the first half of this year,” said Thomas Lam, a senior director at Knight Frank, predicting prices to increase a further 10 per cent in 2018 after a 14 per cent rise in 2017.

The rental index increased for a 13th month to 187.3 in December, according to the government data.

This article appeared in the South China Morning Post print edition as: Demand for Small flats drives up HK home prices
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