Hong Kong’s property prices have reportedly increased five times between the year 2003 and mid-2018. However, they have now come down by approximately 3% from their peak levels in August 2018 as per reports. One of the costliest property markets in the world, Hong Kong, has been seeing property prices coming down steadily over the last few months. Location and size are two key factors impacting property prices in Hong Kong with prices being more insulated against reductions in the central districts while falling more rapidly in the suburbs.
Hong Kong is characterized by the huge premium that is put on space. The city has seen real estate developers take to building small apartments due to rapidly increasing prices and the lower levels of supply of bigger properties will ensure that their prices remain on the higher side even during a market slump. However, prices came down in September and October this year after the US-China trade face-off and interest rate hikes by the Federal Reserve.
Market experts believe that the Hong Kong real estate market is maturing and the fall in prices should stimulate hitherto lower buying demand. Several experts have also forecasted long-term corrections of around 15% in home prices which should certainly shore up buying demand hugely. During the 2015-16 downtown, for instance, prices came down by a whopping 16% in Hong Kong Island as per reports while they came down by 22% for the suburban New Territories.
A similar thing is forecasted and this may actually make the realty market more stable and mature in Hong Kong. A correction is long due as felt by several prospective buyers and they will naturally quit sitting on the fence in case prices keep coming down to more reasonable and practical levels. Apartments that were lower than 430 sq. ft. had price drops of 12% previously while homes between 750 and 1075 sq. ft. had price drops of 9% earlier. Micro-apartments also saw price drops in the downturn period stated above.
The pattern may be repeated with supply of new housing being higher in the New Territories as per experts. For premium districts such as Mid-Levels and Peak in Hong Kong, limited availability of redevelopment land keeps new home supply limited, thereby making prices hold on longer. Even real estate developers in Hong Kong have already put off new projects and are offering attractive discounts and other freebies to lure buyers at lower prices in a bid to clear their inventory. Simultaneously, the Hong Kong Government has also introduced its new vacancy tax that has been tailored to ensure that developers do not end up hoarding apartments for sale in a bid to earn more from higher prices in the near future.
Many investors are set to welcome a price correction since it will stabilize the Hong Kong real estate market and lead to considerable demand from homebuyers. This will help them invest in future realty growth once demand levels go up.
