Paper Economy - A US Real Estate Bubble Blog: Hong Kong Bubble?: Hong Kong Residential Property Prices May 2011

Friday, July 22, 2011

Hong Kong Bubble?: Hong Kong Residential Property Prices May 2011

Today, the University of Hong Kong released their Hong Kong Residential Real Estate Series (HKU-REIS) indicating that, in May, the price of residential properties increased 2.01% since April climbing 26.52% above the level seen in May 2010.

The “Hong Kong Island” index, “Kowloon” and “New Territories” sub-components also showed notable monthly and annual increases with the "Hong Kong Island" series indicated that prices have now far outpaced the prior 1997 peak.

The HKU-REIS is a set of property price indices constructed monthly using a “modified” repeat-sale methodology similar to that of the S&P/Case-Shiller indices yet suited to the Hong Kong property market.

Labels: economy, hong kong, residential property prices

21 Comments:

Indices paint a good piture of the overall market especially repeat sales that compares the actually transactions or properties instead of price medians. But for Hong Kong in these last few years the fundamentals have changed dramatically with the arrival of the Mainland property investors with deep pockets. Price levels previously reflected a local demand and supply but now with the advent of the cash rich Mainlanders from outside Hong Kong has made the demand side of the equation lopsided. This means when compared to the historical data portrayed by the index, this current exuburant price levels can't be a clear indication of a price bubble.

By Home Net, at 8:42 AM
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By Holiday rentals in paphos, at 4:30 AM
Hong Kong had a real estate bubble for many years. There were a few corrections, but the corrections were almost as fast as the drops themselves. However, very few people walk away from their properties even when their mortgages were higher then the value of their properties.

By Cape Coral Rental Management, at 8:30 AM
The matrix presented is definitely very helpful for the viewers of this blog and to those who are interested to purchase HK properties. It is an expected happening that the price will increase.

By Park City Real Estate, at 2:15 AM
Quote: "Hong Kong had a real estate bubble for many years"

Since the 1997 bust which obviously was a bubble, the property prices were generally on an upward trend (discounting the externalities including the SARs outbreak and dotcom bust). But it is wrong to say that any upward trend is leading towards a bubble, especially in today's market.

The fundamentals are different as I pointed out, a bubble has connotations of being unsustainable like what happened in 1997, but in these few years with the extremely deep pockets of the Mainland Chinese, safe LVR's, negative real interest rates and the inability of the HK Govt. to put a lid on prices, the price levels dont look like dropping anytime soon, and not to mention bust.

Repeat sales indices can be a good tool to identify trends but can be even better at finding relatively underpriced properties by adopting a hedonic pricing model. If there's interest here's an article on how construct and use repeat sales price indexes to forecast trends and identify undervalued properties, Hong Kong property research.

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