Mixed Signals from Hong Kong’s Property Market

When researching current activities, trends and opinions within Hong Kong’s property market, the signals being received are definitely mixed.  On the one hand reputable sources such as Bloomberg and the Herald Tribune are reporting a 30% drop in the value of property related transactions in the first half of 2006, and on the other hand leading real estate industry players in Hong Kong are reporting steady and sustainable growth.

In a report by Bloomberg in America’s Herald Tribune newspaper, Hang Lung Properties - which in terms of sales volume is a real estate industry leader in Hong Kong - was reported to have seen a 35% fall in its annual profits and overall turnover to June 2006.

The report went on to say that overall the number of property transactions exacted in Hong Kong in the year to date had fallen by up to 1/3 – the report attributes the weakening market to interest rate increases, a widening of the affordability gap and decreasing public confidence, interest and purchasing power when it comes to property in Hong Kong.

However the chairman of Cheung Kong (Holdings) Limited, a company with significant property interests in Hong Kong announced only yesterday that it foresees continued growth, success and sustainability from the property market. 

In the announcement made by Li Ka-shing, Cheung Kong’s net profits were revealed and although un-audited, currently they represent a 33% level of growth for the company from real estate in the past year.

Li Ka-shing responded directly to challenges raised relating to the overall slow down in Hong Kong’s property market by stating that his group had also seen a slow down in property transactions and volumes in the first half of 2006 but had not suffered significantly; furthermore he added that he believed that the market environment was ripe for future positive developments.

According to the chairman of Cheung Kong (Holdings) Limited the overall economic success of Hong Kong and China will support the property market, there is doubt that interest rates will again rise in the near future therefore public confidence will likely return to the market, and ultimately the solid demand for property in Hong Kong where supply is geographically limited and demand is consistent will mean that real estate remains a profit generating commodity in the short, medium and long term.

Property investors poised on the brink of investment commitment in Hong Kong could be confused by these dramatically different opinions relating to the state of the market –when it comes to Hong Kong it is never easy to predict market activity because property prices are already dizzyingly high and domestic purchasing power is only so strong. 

But while Hong Kong remains so financially dynamic and commercially successful and it remains such a close ally with rapidly expanding China it’s highly likely that the property market will benefit from continued capital growth activity and property investors with well priced and located assets will benefit from increasing rental rates at least for the short term.

Special Reports: Property News for Hong Kong

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Hong Kong Property Investment Guide
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