Home Prices In Hong Kong Climb To Record Highs Even As Chinese Buyers Pull Back

Tyler Durden's picture

Chinese banking regulators’ efforts to force the country’s largest conglomerates to deleverage after an unprecedented binge on foreign assets has already spurred a pullback in foreign real-estate investment, part of a broader decline in foreign investment more generally.

But with wealthy Chinese buyers suddenly out of the real-estate market, housing analysts are anticipating a wave of sharp declines in housing prices in some of the world’s most expensive markets like New York City, London and Hong Kong.

But during the first half of the year, real-estate prices in these markets have continued to climb. Even in Hong Kong, one of the most expensive markets, and also one of the first places one might expect the impact of a mainland pullback to be felt, prices have instead climbed to all-time highs, according to Bloomberg.  

The Centaline Property’s Centa-City Leading Index of existing home prices surged to a record high 160.3 as of July 30. The index has climbed 11 percent this year, and more than 50% in the past five years.

Over the past five years, the rapid runup in home prices has caused densely populated Hong Kong to become the world’s most expensive housing market.

“Hong Kong’s housing affordability ratio, which measures the proportion of income spent on mortgages, worsened to about 67 percent for the quarter, the government said Friday, up from 56 percent in the year-earlier period.”

Reining in housing prices in the former British colony is a top priority of the HKMA – the city’s de facto central bank – and its incoming Chief Executive Carrie Lam. Home prices have been a major driver of inequality; for example, now takes a household earning the median income 18 years to afford a home, according to data from Demographia. Every housing auction is hopelessly oversubscribed.  

Back in May, HKMA’s current Chief Executive Norman Chan warned about the bubble-like behavior in the city’s housing market, saying levels of demand were reminiscent of 20 years ago, just before Hong Kong suffered a property bust. Chan cautioned people with limited financial resources to stop speculating in property based on the expectation that prices would rise indefinitely.

With wealthy foreign buyers stepping away, there’s probably enough repressed demand in the local market to keep prices buoyant for now. The number of residential transactions surged 43 percent to 18,892 in the second quarter, helping to push prices higher.

Unfortunately for investors, without a supply of wealthy mainland buyers willing to pay the “Chinese premium,” prices will soon slide back to Earth.

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TheSilentMajority's picture

HK is an absolutely miserable place to live, unless you have a allot of money or a fantastic expat package.

Mainlanders are still heavily buying and hiding allot of money in HK property using structures that avoid taxes and conceal the residency/passport of the beneficial owners.

Any decent HK real estate agent or banker can explain how to do it.

Bigly's picture

I love it but have to agree with you. Your employer needs to put you up in exec housing or you will be living in a sunless 200-300 sq ft box for >5000/ month.

Laowei Gweilo's picture

Vancouver back at records, too.

Was never primarily about Chinese demand but lack of supply.

williambanzai7's picture

Well, I could explain to you why that might not be the case, but for what purpose...

Of course, if your opening premise is I can only be happy if I live on an Expat package(been there done that many times) then you could say the same for lots of places.

Bigly's picture

WB - when decent (not opulent) is 20000/mo., you usually require your employer to subsidize, no? Well, if one is making 10 mil/yr., no....

To your point though, big money can make most cities attractive.

williambanzai7's picture

Well, I manage to survive here on a marginal artist/bohemian budget. I don't have a pool or a gym in my building and I certainly don't need a parking space without a vehicle. I live in a quiet old old Chinese neighborhood that is being torn apart by voracious developers.

Here are a few things few people realise about Hong Kong:

-It is absolutely safe. I mean absolutely.

-Healthcare is free for all holders of a HK ID, including expats.

-The transportation system is the best in the world.

-60% of the area of HK is public land and nature parks. Which explains why all the urban areas housing 7.5 million people are high rises. So, in the cooler months you can go an hike mountain trails and Island hop to your hearts content.

-HK is two hours from Vietnam, Thailand, Taiwan etc.

-The food in the markets is 100% safe and awesome fresh.

This is not a utopia by any means and it's not for everyone. Certainly not for people who dislike Chinese food, even though there are tons of international restaurants here. The skyrocketing rents is having a noticeable impact on street level retail rents, which means old establishments are shutting down.

But after years in places like London and NYC, I'll stilltake HK any day for the near term...Unfortunately, the integration into Mainland China will accelerate over the next 30 years and then HK will be just another Mainland city.

The end.

Mustahattu's picture

WTF I had to write my first post as your comment is just fucking insane. Hong Kong is a miserable place? Unfuckingbelievable. Where do you live Cheapo?

This is it's picture

Go ahead suckers. Have some dim sum while at it. 

Déjà view's picture

Affordable soup du jour...Sweet & Sour...

ET's picture

The declining value of paper money relative to hard assets.

Ethereal's picture

The Chinese government can't control everything through the central bank simultaneously. Economic growth, inflation, real estate, and exchange rate are all countervailing forces. Something has got to give...

Déjà view's picture

Also can't control pollution nor corruption...
Phat Boy...Kim is a different story...

SAIAN's picture

The thing about owning property in China which a lot of people don't seem to grasp is that it's lease hold... 50 - 75 years and then it leaves your hands.


Never mind HK, investment into China for property is for suckers this far into the run.

Five Star's picture

Over half of Chinese millionaires are thinking about emigrating...


Bigly's picture

Best bar: Ozone

The Ingenious Gentleman's picture

This is a bit out of date. Yes, first half sales surged 43%, but things fell apart in July, with sales plunging 42% month on month.