Lack of land supply, Hong Kong property market is difficult to reverse

Recently, there have been reports that property prices in Hong Kong have started to fall sharply. Since the Fed has raised interest rates three times in a row this year, the Hong Kong Monetary Authority followed the Fed to raise interest rates. According to analysis, Hong Kong’s ultra-low interest rate environment, which has lasted for 10 years, has come to an end. . It is expected that the Fed will continue to adopt interest rate hikes and Hong Kong has to follow suit. This is not only a big negative for Hong Kong’s property market, but also the Hong Kong property market may face a reversal into the down cycle. Yan Ansheng

Analysts who are concerned about the Hong Kong stock market pointed out that the property stocks in the Hong Kong stock market performed poorly this year. As of October 5, the Hang Seng Property Sub-Index has been 20% higher than the high recorded in January this year. Morgan Stanley and Citigroup believe that Hong Kong property prices will fall by 5% to 7% in the second half of the year; on October 24, UBS Wealth Management released a monthly report on investing in the Asia Pacific market, forecasting Hong Kong property prices in the next 6 to 12 months The decline may be as high as 15%. The founder of Yao Cai Securities said that if the trade situation is further strained, Hong Kong’s housing prices will fall sharply within two years, or fall by 40%. Cushman & Wakefield is looking at the rental prospects of office buildings and shops.

Judging from the recent transactions in the Hong Kong property market, it is undeniable that investors have a strong wait-and-see attitude, transactions are relatively calm, and property prices have also experienced a slight decline. It is also in this context that the voices of the Hong Kong property market are sung more and more, and the analysis of the price of Hong Kong property prices has begun to increase. However, is the Hong Kong property market really turning around? How should we view and grasp the current fine-tuning of Hong Kong property prices? Therefore, we must analyze from a historical perspective and not be able to draw conclusions only from the data of the first few months.

A number of hot tricks can’t curb property prices

As we all know, since the Asian financial turmoil in 1998, Hong Kong’s property market has fallen from a high level, and by the outbreak of SARS in 2003, the Hong Kong property market fell to the lowest point. However, since 2004, the Hong Kong property market has started a big bull market for 14 years. Since 2004, Hong Kong property prices have risen more than 4.4 times. In the past 14 years, there has been a slight decline in 2016. In other years, Hong Kong’s housing price increase has been impressive. Even during the 2008 financial tsunami, Hong Kong property prices have continued to rise. In the first seven months of 2018, Hong Kong’s residential prices are still rising month by month, only a limited callback has begun in the last two months.

We must know that in order to curb the skyrocketing property prices in Hong Kong, the Hong Kong SAR Government has taken many measures to suppress it. For example, since 2010, the SAR Government has successively adopted measures such as levying additional stamp duty, rebuilding home ownership, restricting the proportion of non-resident mortgages, raising the threshold for mainlanders to enter Hong Kong, introducing special stamp duty, and suspending real estate investment immigration. On October 26, 2012, the Hong Kong SAR Government announced the “double hot trick” measures to regulate the property market: from October 27, 2012, the extension of the additional stamp duty (SSD) will be applied from 2 to 3 years and the relevant tax rate will be increased. It also introduces new buyer stamp duty (BSD) for non-Hong Kong permanent residents and corporate buyers. However, all these “re-trick", “smuggling" and “spice tricks" did not make Hong Kong property prices bow.

The property market callback is a non-inflection point

The Hong Kong property market has experienced such a long period of soaring or skyrocketing, so the increase is so amazing that it has almost become a dislocated wild horse, which is beyond control. Why is this happening? What can make Hong Kong property prices rise and fall only for such a long period of time? Although the reasons are manifold, the most fundamental reason is that Hong Kong’s land supply is seriously inadequate. In 2013, the Hong Kong Government announced that in the long run, the total supply of residential land in Hong Kong is less than 400 hectares. That is to say, the land supply in the Hong Kong property market is a hard constraint, but the demand for Hong Kong property market by local, inland and international funds is It is unlimited. Therefore, for homebuyers, whether they are investing or self-occupying, as long as the purchase of Hong Kong properties is almost only profitable, coupled with Hong Kong’s ultra-low interest rate environment, international investors and local citizens have poured into the Hong Kong property market and pulled up. Property prices in Hong Kong are climbing.

Although the fifth Chief Executive, Mrs Lam, in his second policy address, reclaimed land reclamation as an important measure to solve the shortage of Hong Kong’s property market, the land reclamation cycle is long and the capacity is limited. In the foreseeable future, in the next decade or so, The situation in Hong Kong’s property market, which is in short supply, will not be alleviated. In view of this, it is still difficult for property prices in Hong Kong to fall. So, how do you view the fine-tuning of Hong Kong property prices nowadays? Imagine that a 10% increase in the property market that has risen 4.4 times in a row for 14 consecutive years is not normal? Even a very strong athlete running a marathon has a need to gasp. At present, the callback of Hong Kong property prices can be understood as a respite after the long-distance running of the Hong Kong property market. It is not the arrival of the so-called turning point.