In most major cities of the world, population growth greatly extends beyond the available land area which is unable to grow much, if at all. In Hong Kong especially, where the terrain is hilly and land suitable for building is lacking, home prices are escalating rapidly.
The rapid increase in home prices means decreasing home ownership
Hong Kong is called the world’s least affordable property market for a reason. Home ownership in the city has now become a minority. The first time in 20 years.
Since 1999, property prices in Hong Kong have tripled. That is 3 times in 20 years. Now, only 49.2% of domestic households in Hong Kong own their living quarters, according to Hong Kong’s Census and Statistics Department. Singapore’s property-price hike has nothing on this. Here, due to citizens’ ability to secure public housing, home ownership is more than 90%.
In Singapore, S$355,000 (HK$2 million) could get you a 4-room HDB flat. In Hong Kong, the same amount will not be sufficient to purchase even a small, simple home.
Hong Kong government has admitted it is powerless to curb rising home prices
Despite the numerous rounds of attempts at cooling the market, the Hong Kong government has not been able to hold back the escalating prices.
In Discovery Bay, private homes cost anything from between HK$8 million to $80 million. Even smaller apartments in older buildings demand HK$5 million in the Central and Western districts. At the exclusive and luxury-enclave of The Peak, home prices can easily reach HK$1 billion.
Soaring home prices aside, rock-bottom interest rates could also be a factor. But the Hong Kong Monetary Authority has recently intervened to maintain the city’s currency peg. This may, in turn, prompt banks to finally lift mortgage rates. Will this put a dink however small in the bubble that is quickly forming?