Market Analysis

Are Hong Kong Property Prices Ahead of the Market?     January 16th 2008

After continuing price increases over the past 4 years, the Hong Kong property market has now come to a point where most vendors do not want to sell unless they are making a huge profit.

The definition of huge profit is determined by making a comparison of previous transactions - if they can achieve a sale price of 20-25% more than the recent, previous selling price, then, and only then, are most owners considering selling.  

In other words, owners are asking $20M for a property that was recently sold for $15M in the same building with similar features (however, it is often the case that a property asking $15M will only be valued at $12M because the banks reference the last purchase price record and the market trend).

This unusual market situation is a result of a shortage of supply, low interest rates, and increasing numbers of expats buying properties in Hong Kong. There are also some new factors coming into play including anticipation of high inflation rates, an increasingly risky stock market, and a perception that the Hong Kong Dollar no longer represents the value of HK property because it is being dragged down in value by the US Dollar peg.

These factors pushed up property to an unbelievable level with the property market rising far more quickly than it would according to past rules and trends.

We have now come to a point where luxury property owners are very much aware of these factors and they are now asking inflated prices for their apartments.  Transactions for luxury properties have slowed in the past month due to lack of reasonable sellers, particularly on Hong Kong island.

If you look at statistics, the Hong Kong island luxury market has gone up 29.6% in the year of 2007, while New Territories properties are up only 13.6%.  I don’t rule out the possibility the New Territories will catch up, but remember real estate is about Location, Location and Location.

On the other hand, the market for non-luxury apartments (400 – 900s.f.) has just started. This property sector did not enjoy the same appreciation in the past few years and this flat-liner is now getting a strong heart-beat; I believe this trend could run for at least a year.

After 10 years in Canada, Patrick Yiu returned to Hong Kong in 1992 and has worked in the local property industry ever since.  He has many years of experience as an agent handling the Mid-Levels, Pokfulam, South Side and Peak districts and as Centaline Property’s branch manager in Discovery Bay.   Patrick has also worked with the expat leasing team at Colliers and for the past 4 years with Century 21.   Patrick can be reached by email or telephone 852 852 9088 0928