Hong Kong Property Market Forecast: Falling Home Prices, Land Reclamation Loom Large
It is possible that the Hong Kong property market will see lower home prices by late 2019, likely to be caused by scheduled hikes on housing loan rates. Meanwhile, industry experts have called on SAR authorities to step up on the planned reclamation in the city, which they deem as the most viable solution to Hong Kong’s housing supply woes.
Building an artificial island, according to think-tank Our Hong Kong Foundation, will make for an adequate supply that will house over one million residents of the Special Administrative Region, per the report by the South China Morning Post.
The group’s call aligns with the SAR’s plan to reclaim up to 1000 hectares of fresh land that can accommodate around 700,000 residents. Authorities have indicated that the large-scale project is set for implementation starting on 2013.
More Living Spaces Needed
However, Our Hong Kong Foundation is convinced that the target set by the government will prove insufficient. For better cost-benefit result, the proposal will need to double the size of the new island to be constructed, the group said.
“It is our consideration that the size should be larger for a higher cost-benefit,” the group was reported as saying.
The group’s version of reclamation project will lead to the creation of new space where up to 400,000 flats can be built. If approved, the project site will be on Lantau Island and when completed the reclaimed land will take in 1.1 million new residents.
By building new living spaces, Hong Kong will address its nagging housing density problems and possibly at the same time arrest the skyrocketing property prices, which the group said “have severely affected people’s livelihood.”
Home Prices Dipping Soon
The spectre though of higher price tags for a Hong Kong address is likely to ease down soon. This according to consultancy firm UBS, which predicted that in the last quarter of 2019 home prices could decrease considerably due to the expected increase on home loan rates.
In a separate report, the South China Morning Post said the residential real estate sector will be hit by lower prices over the next 17 months. The retreat is seen to hover between five and 10 percent, and analysts are blaming two things, the publication said.
First as mentioned is the housing loan rate that by next week will be set at its highest level in the last five years. UBS is alarmed too by the heightening trade war between China and the United States, saying the spat will lead to unfavourable conditions for the Chinese economy and that of Hong Kong.
“The dampener on China and Hong Kong’s economies as a result of the trade war is likely to weaken property purchase sentiment in the city,” UBS warned.