Property prices pose biggest risk to stability of Hong Kong economy
By James Pomfret
HONG KONG (Reuters) - Just three months after Hong Kong rolled out a tough new round of property cooling measures, home prices have again climbed to record highs with demand unusually strong for new flats over the normally quiet Lunar New Year holiday break.
Hong Kong officials have stressed repeatedly that reining in the city's property market, now one of the world's most expensive, is a policy priority to restore affordability and to mitigate a major threat to the economy of the affluent Asian financial hub.
After five previous rounds of efforts to curb prices since October 2009, including a 15 percent property tax on foreign buyers, mortgage restrictions and quick resale taxes, the home-price juggernaut rolls on and the challenge remains enormous.
"The overheating property market remains the biggest risk factor to the stability of the Hong Kong economy," said Norman Chan, head of the Hong Kong Monetary Authority, the city's de facto central bank, who also said household debt was now at 59 percent, close to a record high of 60 percent in 2002.
Property prices per square foot now exceed HK$10,000 ($1,300) even in drab, unglamorous districts such as Taikoo Shing on Hong Kong Island, where thousands of 700 square-foot units sell for more than $1 million apiece, more than a large cottage in Provence, France, a 2,700 square-foot bungalow in Hawaii, or a 1,300 square-foot flat on Manhattan's Upper West Side.
With affordability reduced in a city with a monthly median household income of about HK$20,000 and one of the widest wealth gaps in Asia, anxiety has grown among its 7 million residents.
That anxiety however, didn't stop buyers flocking to newly built units at Sun Hung Kai Properties' (0016.HK: Quote) Residence 88 in a far-flung district close to the border with China, snapping up 150 of the 352 units over three days at an average price of some HK$8,000 per square foot.
"Sun Hung Kai was testing the market," said property research analyst Wong Leung-sing with Centaline Property. "People still want to buy flats. The desire is strong. They don't think the market will fall." Continued...