Asia

Hong Kong’s sky-high property prices prove resilient in face of protests

HONG KONG: While months of Hong Kong protests have scared away tourists, sent jitters across the financial centre and cast a dark cloud over the local economy, there's one thing residents of the city are confident they can bank on – sky-high property prices.

Home prices in the former British colony have rocketed over 200 per cent in the past decade, driven by limited housing supply and large capital flows from mainland Chinese buyers, angering many residents who can't afford to get on the property ladder.

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And despite the worst protests since Hong Kong reverted to China rule, property prices have hardly budged.

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Lily Chow, a 32-year-old clerk, is among the lucky ones. She and her husband recently snapped up a two-bedroom apartment off the plans for HK$7.5 million (US$957,000) in the New Territories.

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"I am not confident in the government, outlook or economy. I am only confident that Hong Kong property prices will not drop," Chow told Reuters in the sales office of the development.

Property firm Wheelock has sold 80 per cent of the 816 flats in its projects since late August, lower than sales at other launches this year, but "still good" given the current environment, property agents said.

As Hong Kong gears up for yet another anti-government protest on Oct 1 – the 70th anniversary of the founding of the People's Republic of China – there was scant sign the prospect of further violence had dampened homebuyer demand.

Hundreds of prospective buyers queued on Thursday in a sales office in the gleaming International Commerce Centre (ICC) skyscraper for a development near Mong Kok district, the site of some of the most violent protests in recent months.

High rise private residential buildings are seen in Hong Kong, China on May 21, 2017. (Photo: REUTERS/Bobby Yip)

"The political environment is shakeable, but I am pretty sure the property market is unshakeable," said office assistant Candy Lau, 32, as she queued for an HK$8 million, 273 sq ft, one-room apartment in the development by Sun Hung Kai Properties , Hong Kong's largest developer by market value.

A week earlier, Sun Hung Kai launched its first batch of 352 flats in the same development in Kowloon district, selling all but one to underscore the strong demand.

Commentary: Out of reach? The unaffordability of housing fuelling the Hong Kong protests

"HOUSE LIKE A CELL"

A traditional belief in bricks and mortar investment and a history of strong returns from property has helped Hong Kong home buyers keep the faith.

Official data showed Hong Kong property prices rose close to 10 per cent in the first seven months of the year, including a tiny 0.1 per cent decline in July after the mass protests intensified in mid-June.

One reason for the smaller-than-expected drop was low transaction volumes during July, caused by a mismatch of price expectations between sellers and buyers.

But with signs last month that sellers were more willing to reduce their initial asking prices, volumes have stabilised, according to realtors.

"There's still much real demand, and when sellers became more willing to cut prices by 10-20 per cent, some buyers chose to enter the market," said Derek Chan, realtor Ricacorp's head of research. He estimates a 5 per cent rise in prices for the full year, down from an earlier forecast of 10 per cent.

August house price data is due on Monday and agents are expecting a bigger fall than July.

Two other buyers told Reuters they expect home prices will climb in the long run, despite any short-term softness, because a fundamental supply shortage simply won't go away.

The Hong Kong government's plans to build new housing on artificial islands has met with opposition AFP/Elaine YU

Every day, Hong Kong grants 150 residential permits to mainland Chinese, according to the government, adding to a population of 7.4 million crammed into just 1,100 sq km of which 40 per cent is country parks or nature reserves.

Tiny living spaces have become increasingly common in the world's most expensive property market where some of the city's poorest people live in cage homes – wire mesh hutches stacked on top of each other.

Long-standing frustrations over unaffordable housing have spilled onto the streets during recent protests, which started over a now-suspended extradition billRead More – Source