HONG KONG, Oct 14 — Chinese buyers are stepping up home purchases in Hong Kong, where prices are becoming “relatively more affordable” compared with some major mainland cities, according to Bank of America Merrill Lynch.
Interest from mainland buyers, amid a surge in home prices in many Chinese cities, may support Hong Kong’s property market, analysts Karl Choi and Fan Tso wrote in a note dated yesterday. Hong Kong’s housing affordability ratio, which measures mortgage payments as a proportion of median household income, now stands at 58 per cent, compared with between 80 per cent to 124 per cent in three first-tier Chinese cities, they said.
“The home price gap between Hong Kong and the first-tier cities in China has narrowed,” the analysts wrote. “More mainland investors might consider buying a second home in Hong Kong for diversification or wealth-protection purposes.”
Chinese authorities have also introduced purchase restrictions and toughened mortgage lending to rein in property prices in the bubble-prone nation. Housing prices in China rose by the most in six years in August, with the biggest gains in large cities such as Shenzhen.
Price surge
Hong Kong secondary home prices surged by the most in seven years in the week ended Oct. 2, according to the Centaline Property Agency website. The city’s residential property prices have rebounded from a six-month slump when they fell 13.3 per cent from a record high in September 2015.
Transaction volumes have also rebounded, with 7,826 properties changing hands in September, the highest level in at least 15 months.
Mainland buyers have accounted for a higher proportion of Hong Kong property sales in 2016, driven by rapid price growth in China and a heightened interest in offshore assets, the analysts said. Some investors could have sold properties in China to lock in profit, then decided to re-deploy the proceeds in Hong Kong, they said.
The analysts maintained their forecast Hong Kong property prices will fall five per cent next year, though said the risk is “skewed to the upside” because of Chinese demand.
Renewed demand from Chinese buyers looking for offshore assets is helping drive sales at Wheelock Properties (Hong Kong) Ltd.’s housing projects. Mainland buyers accounted for nearly 20 per cent of September sales at its Kowloon development One Homantin, compared with about five per cent when it launched six months ago, the firm said.
In a sign of optimistic market sentiment, Kerry Properties Ltd. earlier this month paid the highest price for a parcel of government land in three-and-a-half years. The developer outbid Hong Kong giants Cheung Kong Property Holdings Ltd. and Sun Hung Kai Properties Ltd. with a HK$7.3 billion (RM3.04 billion) offer for land in the territory’s Kowloon district. — Bloomberg
