Home confidence at 4-year low

A woman looks at advertisements in the window of a local estate agency. Hong Kong people's confidence in their affordability to buy a home has fallen to a 4-year low, according to a CityU survey. Kevin Lee / Bloomberg

Housing prices at prohibitive levels, straining affordability among buyers

Hong Kong's rising home prices have reached a prohibitive level straining average buyers' affordability, with residents' confidence in their ability to purchase a flat falling to its lowest level in at least over four years, according to a City University survey.

The index, which is scaled between 0 and 200, suggests people lack confidence when scores are below 100, and reflect optimism when the score is above the benchmark. The "housing sales" index that measures residents' ability in purchasing properties in Hong Kong has fallen to a record low of 43.4 in the third quarter, all the way down from 49.2 and 56.9 for the previous two quarters.

The historic low housing score since the index's launch in the third quarter of 2008 suggests that Hong Kong people are on the one hand facing sky-high home prices that they are unable to afford, and on the other hand, it also suggests that the high prices situation is unlikely to reverse in the near future, said Geoffrey Tso, associate professor from the department of Management Sciences of CityU.

Their belief is due to the low-interest environment which is likely to be sustained and the fact that the city is facing greater high inflation pressures after the US initiated the third round of quantitative easing (QE3) measures, which is seeing a strong inflow of capital into the cityboosting property prices that are unlikely to ease up in the following few quarters, Tso added.

Writing in a blog over the past weekend, Financial Secretary John Tsang said the biggest concern to him these days is the "detached performance of (the) Hong Kong property market and the economy".

Residential prices registered an average monthly increase of 2 percent in the first eight months, which runs counter to the city's overall economic growth slowdown, Tsang wrote.

"Once the external economic conditions deteriorate, or the city sees a reversal of capital outflows, the the downward adjustment pressure in property prices will not be overlooked," according to the Financial Secretary.

Data provided by Centaline Property showed that only 21 transactions were recorded throughout the city's 10 key real estates it monitored during the past weekend, down further from the 25 transactions during the previous weekend, which represents drops in second-hand home transactions for two consecutive weeks.

Besides the recent spate of new property launches in the city, potential home buyers also worry that the government will initiate new policies to curb the city's heating property market, leading to a stalemate in second-hand home transactions, according to Centaline.

Chief Executive Leung Chun-ying said on last Wednesday that the Hong Kong government has readied a new batch of housing measures to help tackle the city's housing problems, which can be implemented any time when necessary.

The Centa-City Leading Index (CCL) that tracks the city's home prices has climbed for three consecutive weeks to a record high of 111.11 on October 12, after property prices have surged over 90 percent since 2009.

In another survey conducted by the Chinese University of Hong Kong in August, more than 90 percent of local respondents said the current Hong Kong property prices are so exorbitant that they are unable to afford them.

litao@chinadailyhk.com