Home prices in some Asia-Pacific countries seem to be coming down after a long run of skyrocketing figures. The impact is felt more strongly in Australia and now perhaps also Hong Kong.
Hong Kong rise in home prices on a slight decline
While home prices in Hong Kong are not yet falling, the rate of increase has diminished. For the second half of this year, the rise of private home prices in Hong Kong is expected to fall as the property market cools.
In just 10 years, home prices in Hong Kong have increased by 300%. In the first half of 2018, prices rose 12%, exceeding what some analysts expected to be a 5% to 10% increase. In H2, the pace of home prices is expected to be slower with a single-digit rise. Some have predicted a flat home growth rate for 2018.
While governmental cooling measures may have had some effect in cooling the market, market forces may already have pushed home prices so high that fewer buyers are now able to afford a unit. There have also been tighter controls on land acquisition by Chinese developers plus the supply of government-subsidized housing is also expected to rise.
These factors may also play a part in slowing down the rate of price-increments. The curbs on Chinese developers who have taken up 40% to 50% of land auctions in Hong Kong in past years came from Beijing. Beijing has discouraged mainland firms from making property investments in both domestic and foreign markets.
Private home sales have fallen 42.6% from the 20,395 units sold per year from 1996 to 2006.
Rising interest rates and government cooling measures played a part in easing property prices?
Low interest rates have been put down as the main push factor for suppressing an out-of-control race to the top for home prices in Hong Kong. But will rising interest rates really be an effective curb on home buyers’ and investors’ appetites?
Some of the cooling measures proposed by the Hong Kong government include the introduction of a vacancy tax on property developers with an overload of unsold units and also ramping up the supply of subsidized public flats. These moves do not seem dissimilar to what the Singaporean government has done.
Will this move by the Hong Kong government be a timely one? Or will property prices continue to climb?
Now with a trade and tariff war between the US and China, economic growth in Hong Kong may slow down. Some analysts, however, expect home prices to continue to rise as long as employment rates are maintained and buyers are able to service their mortgages.