Property prices in Hong Kong are at a record high, and there are no signs of it letting up anytime soon. Or does there?
From the number of foreclosures on properties surging to a 5-year high, buyers seem to be struggling to cope with high-interest home loans, almost impossible property prices and a weakening economy. Although a property bubble has yet to occur, cracks in the market seem to be showing as the Hong Kong Monetary Authority (HKMA) points to a growing number of homes whose value are lower than their original price tag.
By the end of 2016’s first quarter, 1,432 homes were already under the foreclosure hammer, and their value – a whooping HK$4.9 million (S$852.5 million). As the Hong Kong government has a strictly-regulated banking system and with 7 rounds of property cooling measures already in place, home buyers and investors have been borrowing from unregulated sources such finance firms and real estate developers, some up to 95 per cent.
Analysts are concerned that the household debt is at 70 per cent and more investors and home owners have been using their properties are collateral for other transactions such as stock trading. As the global and local economy shake, they find themselves in deep hot water. What will the near future hold for Hong Kong’s property market? Is a bubble brewing and is there a danger of the 2008 recession?