There are signs that the Hong Kong property market may be turning around. There have been increased viewings at project sales and revived interest in government land auctions, and Hong Kong’s property prices have started to rise again, after losing about 10 per cent since August 2018. Some analysts forecast prices will rebound by 5 to 15 per cent this year, and they attribute the expected price increase to the lower likelihood of the US Federal Reserve increase interest rates, broader stock-market gains as demonstrated by the 17 per cent climb by the Hang Seng Index since the end of October, and the strengthening of China’s currency.
In addition, Hong Kong usually sells enough land for just 20,000 apartments a year, and analysts had expected the amount sold this year will be enough for just 18,000 apartments. Instead, the Hong Kong government has just unveiled its plans to release only 15 private residential sites in the fiscal year starting 1 April. That would supply around 8,800 private homes, and represents a 42 per cent decrease from the year before.
The decrease is because the government is increasing its focus on public housing. There was an earlier announcement in December 2018 that land supply allocation quota for private homes would be reduced to 30 per cent, down from 40 per cent. The demand for public housing has been increasing over the years, with the average waiting time for a government-assisted rental unit now more than double of what it was in 2012, according to the Hong Kong Housing Authority.
While the reduced land supply for private residences will not have an immediate effect on prices as it takes around five for a project to be successfully launched, developers will want to want to extend the roll-out period for their existing projects and start slowing home sales.
Another factor affecting demand is the sheer number of Hong Kong residents who came from mainland China. Workers who moved to Hong Kong in 2012 wuld soon be able to avoid the 30 per cent stamp-duty tax on foreign buyers which started that year, as they would be able to qualify for permanent residency.