Is 2007 a Good Time to Enter the Hong Kong Property Market?

Most major analysts agreed that going in to 2007 the Hong Kong property market was set up as an exciting prospect for established investors - but if you’re not there already is 2007 actually a good time to enter the Hong Kong property market for newbies?  We examine the market climate…

2006 got off to a shaky start in terms of the Hong Kong property market, however all sectors of the real estate economy recovered well by the fourth quarter of the year and some such as office and high end residential recovered exceptionally well setting the market up for a positive start to 2007. 

Analysts are predicting that Hong Kong could be about to enter what’s called a ‘negative interest rate environment’ where the interest rate is cut whilst inflation expands significantly, and this is just one key reason why property in Hong Kong in 2007 could be a great place to invest because more funds will be available to the market creating even more local investment buying power for example.

Overseas buyers looking specifically at the residential property market in Hong Kong for 2007 entry will be interested to learn that luxury grade property rental rates are expected to go up by just under 10% and that capital values could go up by as much as 20% during the year, buoyed up by increasingly affluent local demand and the fact that Hong Kong is seeing an increasing number of international and Chinese companies establish a presence there. 

Hong Kong is a preferred location for many companies because of the simple low tax system it has implemented, the strong economy and the appeal of the location among staff – executives and professionals relocating to Hong Kong with their companies seek high grade residential accommodation, and yet supply of this type of property stock is already falling short of demand thus creating a good investment climate to explore.

Hong Kong has strong economic fundamentals which is the number one factor in its favour currently.  It has an attractive taxation system and it is strategically well located for the entire region meaning that it is seeing an increase in business commitment, local affluence is improving, interest rates are expected to be cut and therefore there is a unique atmosphere of prosperity in Hong Kong crossing over to the real estate market place.  This makes it a positive prospect for investors looking for a short-term entry point and longer term capital and rental yield appreciation potential.

Analysts we have spoken to are saying look to the grade A office market and general mid to high end residential property sectors for an entry point in 2007.  Even though office rental rates are among the highest in Asia in Hong Kong already, the fact that demand is still so intense and supply is currently limited apparently means that there is still room for growth. 

It is expected that Hong Kong can sustain its property market success for at least the short term.  During this period the economy will continue to develop strongly, inward migration of professional staff will follow hot on the heels of company establishments and expansions in Hong Kong creating demand - and insufficient supply in many property market sectors will contribute to increasing underlying prices as well as rental yields. 

However, don’t forget that Hong Kong property is already extremely expensive for the region and affordability can only extend so far. 

Developers seeking to cash in on the boom are helping to alleviate longer term supply issues which will control price expansion after the medium term.

Finally, because Hong Kong is such an expensive market to enter individual investors might be better to look at REITs rather than personal direct exposure to a single market sector or asset – after all REITs are a far more realistic way of accessing expensive property markets for the average investor.

Special Reports: Property News for Hong Kong

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