There’s no doubting Hong Kong’s beauty and grace. Elegant skyscrapers that stretch to the heavens is what you meet when you are in the business district. It’s no wonder Hong Kong is right up there as one of the most expensive cities to live in.
That being said, Hong Kong’s amazing high-flying residential property could be facing serious times ahead after home prices dropped drastically to nearly twice their value in the past 12 months amidst international and domestic factors crippling the sector.
Property is a vital center that generates massive revenue for the Hong Kong economy. Additionally, with such a dense population packed in a series of hilly petit islands, the value of land should no doubt be important.
Hence, it’s ranking as one of the cities with the steepest prices in the real-estate sector alongside a booming stock market.
But after years of exponential rise in prices, new financial nuances have readied the market for a sharp decline. This is as per information released by CLSA, an investment group in the region.
Hong Kong house prices are some of the most expensive in the world
Crippling property market
According to one of CLSA’s chief analysts, Nicole Wong, the property market in Hong Kong is experiencing some of its worst prices in over 15 years, as a result of the exponential rise in interest rates that is subsequently resulting in a stall in the economy of HongKong.
Additionally, the fact that the RMB is depreciating could be another factor.
Additionally, Wong went on to state that they expect a positive percentage correction of the current predicaments in the next 15 months to come.
Moreover, Wong added that the Hong Kong Interbank Offered Rate is on the verge of reaching the 2% mark after staying beneath the 1% mark the previous nine years.
This is believed to have been caused by the horrific dip in the local stock market coupled with a 9 percent drop by the Chinese yuan according to reports gathered.
Hence, having a much weakened Chinese Yuan competing against the dollar thus makes the Chinese yuan much weaker against the dollar means that Chinese investors would not be that enthusiastic to purchase property in Hong Kong.
Moreover, there is also the issue of external factors that could be affecting the property sector. In fact, from a report published by Investment bank Nomura earlier this month, the interest rates on mortgages have been increased.
In retrospect, such rises (since the last one in 2008) have resulted in a massive five and thirteen percent drops respectively.
Population pressure has resulted in a lack of space in Hong Kong
Unattractive housing market
That being said, when rates are higher, it becomes much more difficult for homeowners to finalize their loans on mortgages. This, in turn, dissuades potential buyers from having a shot at the market and making purchases.
In an attempt to minimize the exponential rise in the price of housing, the government of Hong Kong earlier this year declared a tax implementation on any new high-rise or apartment that are not occupied in the bit to prevent the ongoing catastrophe from being aggravated any further.
Though the bill is currently only missing the approval of the legislative, the impending troubles in the property sector is a side-effect of the current trade war between the United States and China.
From its monthly report, real estate consultancy mogul Knight Frank commented in the current situation, citing that they expect the prices to continue on their rise this year though, however at a much slower pace that was initially anticipated.
Some are citing conflicting information
Other real estate consulting and management services such as Colliers International expects that the current efforts being undertaken by the government are not expected to yield any influential impact on the current outlook and situation regarding prices.
As a matter of fact, having a look at the future of the property sector, analysts have put it that a shortage of about 108ha up to the year 2026 would be sufficient enough to ensure a steady growth of about 5 to 10% going for the next 5 years straight. Changing the metrics, 108 hectares would translate to about 267 acres.
Conclusively, it appears the housing market all across the globe is seeing the crippling effect of the tough economic times that are being felt across the borders due to the intense US-China trade wars.