The standard forecasts for Hong Kong’s property year are in. Despite various cooling measures the residential property sector continued to grow in 2014, and it looks like the same will happen in 2015. End-user demand is high and supply is low in the mass market, and Colliers International for one predicts 3 to 5 percent price growth for this year. Modest gains should be seen in ‘15, and even an expected interest rate hike in the second quarter won’t have that much impact. In fact, rental rates are expected to rise to offset mortgage costs as owners increase rates and potential buyers hold on until they are in better down payment circumstances.
In the Numbers
That said, not everything is crystal clear. “It’s more difficult to do a forecast as the market is more influenced by government policy,” theorises Eric Lee, chair and executive director of Century 21 Goodwin Properties. “Just like 2013’s Double Stamp Duty froze the market, the 2014 DSD adjustment released buying power.”
Lee sees the first quarter remaining strong, but doesn’t rule out further government intervention if prices continue to rise. “The market will be rising first and then it will drop. If the rate of increase in the first half of the year exceeds 10 percent, new property curb policy is likely to come out. The second half of the year could see a downturn,” he reasons. One of the ways government hopes to control prices is by increasing supply and releasing more land. In reality, any land sales in the past year and coming up this year are not going to help in the short term; expect to see more units for sale in 2018 and beyond. Additionally, January’s Policy Address made target noises about supplying nearly 500,000 units — over the next decade. Add to that public and private housing are two very different beasts and the SAR is still facing an affordable housing crunch.
Increasing prices in the mass sector will translate into greater demand for small and medium-sized flats. “Soaring prices result in deteriorating affordability. As the affordability of housing has become a growing issue, homebuyers have to compromise with smaller flats,” notes Joanne Lee, manager of research and advisory at Colliers. “Therefore, demand for small-to-medium sized flats will remain strong in 2015.” The luxury sector could be the one with the least wholesale movement. Properties in the $10 to $50 million range have dropped 3 percent overall since the introduction of the DSD in 2014, and the market could remain stagnant. “The luxury market is still constrained by property cooling measures, so it is expected that luxury prices will be steady, increase just slightly,” notes Eric Lee. “The first-hand market will see more transactions and deals at high prices, with the government vigorously selling land,” he continues. “That trend will linger for some time. But if the market is backed up with first-time buyers, the situation could be worrying.”
In the Stars
If you strip away the hard data and look at Hong Kong’s situation from a feng shui perspective, the upcoming Year of the Ram doesn’t offer much in the way of hopeful contradiction. One area of the Hong Kong market expected to perform reasonably well is the office sector, with growth predicted to return to Central and Kowloon East, continuing its makeover as a business district. “This year, a prosperity star at the east implies that the east side — meaning Kowloon East — is good for investment,” begins Feng Shui Master Philip Wong. “As 2016 and 2017 will still see lucky stars at the east, steady growth is expected during this period. As for office space, Central remains the location where major positivity gathers. Central should outperform any other areas,” he predicts.
But residential property is another story. “Judging from the ‘Beginning of Spring’ [mass residential] prices will remain at high levels and the market is hardly affordable,” he echoes, adding that, “Both prices and transactions of luxury housing will be weak.” Either way, the big question this year and every year is whether the time is right to buy. Eric Lee points to a number of outside factors — global market uncertainty, deflation, an American interest rate hike — that could impact Hong Kong buyers, noting a rate hike could be good for the short term but a potential threat in the long run. Wong simply argues caution. “Any ideal purchase will be after November 8, 2015, the Beginning of Winter on the Chinese Lunar Calendar. As for owners, flat sales should be after May 6, or the Beginning of Summer,” he estimates, adding a final word of wisdom in any year. “It’s better to take a more conservative approach towards home purchase. Don’t act too aggressively.”