The Hong Kong Property market has been keeping active since last December and January 2011. The 'overall' property price in Hong Kong reached its historical peak in 1997 and hit the bottom in 2003 when Hong Kong was in the midst of the SARS crisis. Since then, the property price has been picking up and almost restored to the 1997 level in end January 2011. Some individual luxury properties have even reported prices exceeding that of 1997 at the same time. As in February, it is clear that the prevailing momentum in the market persists. Some experts and scholars also predict that the property price will well pass the 1997 level in 2012.

With the experience in the profession of property agent for more than 15 years, my observation is optimistic that the market could accommodate a further 20% or more increase in price in the coming 2 to 3 years.

To conclude this, please see the analysis of the factors, which should not be exhaustive, below.

As a measure of suppressing some of the drives of price increase, the Hong Kong Government imposed, with immediate effect, in August 2010 an extra ‘stamp duty’ policy on property sale and purchase transactions which are to be re-sold within 2 years. The market responded moderately only for about 2 weeks with the impact largely on the mass segment only. It started to roll again; as the policy only helped to eliminate unfavorable doubts that its target was the short term ‘speculators’ and not the end-users of property.

With the 'speculators' out of sight, the home buyers and buyers with investment need come back aggressively. Traditionally, there would have been a small ‘bloom’ shortly after the Chinese New Year which was early February this year. However, this expected bloom came earlier in January as the buyers wanted to stay away from the rush; and many of those deals in the 'pre-bloom' broke price records. This was more obvious in the luxury and super-luxury property segments. This attitude of the buyers reflected that there is a stronger than expected purchasing power and need in the overall property market. The bloom will certainly continue for a while after the Chinese New Year.

Although the cumulative number of completed residential units in 2010 was much higher than that in 2009, it is still far below that of the government expected. On the other hand, according to the Hong Kong Building Authority’s data, the number of residential units freshly started to progress in 2010 was slightly more than 5,000 which is the lowest annual figure ever in its records. As the ‘stock on hand’ and total ‘work in progress’ are both deficient, the overall supply in 2011 and the following 1 or 2 years is, therefore, likely to be tight.

Super-Luxury Property with breath-taking views,
re-sale value secured

In last October, the government announced that more government land would be released for auctions in 2011 as a means to aggressively increase land supply in the hope that it would correspondingly release the pressure on property price increase. On the other side, the ‘private land reserves’ of all the property developers have been low. It is anticipated the developers’ interest to bid in the coming land auctions will be high. This will boost the prospective property buyers' sentiment and confidence for price increase in the overall property market. However, it is also anticipated that the government will insert an associated policy to build more property for the mass market; the impact will therefore only be more obvious in that segment. Unless the total area of land sold is to be large enough, these land auctions in 2011 will then only remind the property buyers that the supply will still be insufficient in the coming several years.

Hong Kong luxury properties’ amenities have been much enriched by the government’s commitment in the following infrastructure investment and projects:
High speed rail connection to Mainland’s national network
Hong Kong-Zhuhai-Macau Boundary Crossing Bridge
Extensions and additional routes of the Hong Kong
Mass Transit Rail
West Kowloon Cultural District – first phase in 2015
Kai Tak Cruise Terminal – in 2013

The above projects employing huge investment funds and promoting living standard in Hong Kong have, to a large extent, been absorbed favorably in the property market. From time to time, they will still be used as value-added selling points in primary luxury property launches, boosting buyers’ sentiment and confidence in the further prosperity of Hong Kong.

Last but not all, let me quickly point out the following:

The rapid economic growth in China to be continued
for 20 years or much longer will continue to benefit
Hong Kong
The bank mortgage market in Hong Kong is healthy
with low or manageable bank ratio.
Other supporting services are readily available and
well established; such as solicitors, banking, privacy
code, land search and estate agent authority
The properties sector is one of the main sources of
income for the government
Stability and sound financial background of Hong Kong
Further tightening policy by the government to cool down
the market will likely be there should the price go up too
fast. But the impact will largely be on the mass market.