Fundamentals Point to Positive Property Market in Hong Kong

Whereas 2006 started out relatively badly for the property market in Hong Kong, as we enter 2007 most fundamentals point to a positive property market in Hong Kong with demand outpacing supply in both residential and commercial property sectors for example, and better affordability factors boosting both rental and resale real estate prices.

New quality property stock is due to come to the market in the form of off plan units, attractively priced Home Ownership Scheme apartments will be made available for immediate occupancy during the course of the year, the demand for grade A office space is far outstripping supply, lower unemployment, better rates of pay and an increase in inflation are all additional factors that analysts are citing when they predict that property in Hong Kong is due a positive year in 2007.

Back at the start of 2006 the Hong Kong residential real estate market was an uncertain place to be.  Fears of interest rate rises crippled the market’s progress really until the third quarter, and again in 2007 it will be the pattern that interest rates take that dictates just how positively prosperous the property market will be – but the universal feeling is that interest rates will drop. 

The effect that an immobile property market had at the start of last year was that fewer developers announced new developments and sales volumes were massively subdued.  But now that confidence has returned to the market, not only has the number of new developments announced sky rocketed to a current level of 116, but consumer confidence is back and demand is increasing for properties for sale and rent in Hong Kong.  A direct result of the fact that in 2006 new home transactions fell to their lowest levels since records began is that now that demand is peaking, supply is not sufficient to meet demand and prices are already creeping up.

Despite the flagging progress of residential property last year, median house price gains of 2.4% were enjoyed across the board with the luxury end of the market enjoying upwards of 20% increases.  It’s no surprise then that of the 116 new developments announced to begin in 2007, the majority feature high spec., high grade housing units with 8 of the projects mega developments comprising of over 1,000 units each and incorporating a fine selection of features for residents from in-house sporting facilities to five star 24/7 concierge services.

If analysts are right and Hong Kong in 2007 sees interest rates fall alongside unemployment figures - and 2007 sees salaries and inflation increases as well then the property market could be due a positive correction of its fortunes with capital gains and strong returns on investment achievable for investors.

Special Reports: Property News for Hong Kong

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