Amid the mad homes rush, it certainly pays to be prudent
Hong Kong’s property market is showing signs of overheating — six months after it began recovering from a cyclical downturn that had lasted less than a year.
But, nobody seems to care while the focus is on the mainland property market bubble that keeps growing in defiance of obvious economic logic. Meanwhile, the property rush in Hong Kong is reaching a fever pitch as more and more potential buyers are eager to snap up what they can afford, believing that prices will soon soar to levels beyond their reach.
By most accounts, average prices of small- to mediumsized apartments in more housing estates like Tai Koo Shing and Mei Foo, which are popular with the middleclass, have surged past the level set at the height of the last property boom early last year. Sales of new apartments, especially the smaller ones, have been likened to those of hot cakes.
The latent demand for properties in land-scarce Hong Kong has always been high. Its full force has just been released by low borrowing costs that have whetted the appetite of buyers and investors. Besides, the appreciation of the Hong Kong dollar in tandem with the greenback against most other regional currencies has sucked in large amounts of overseas capital seeking a safe haven in local assets.
The property fever has also been fueled by major local banks eager to grab a bigger share of the mortgage business when loan demand in other economic sectors has been on the skid and is unlikely to pick up in the foreseeable future. In the cut-throat competition, many banks have been trimming their mortgage-loan profit margins to the bone to lure homes buyers.
Defaults on mortgage loans were rare even during the worst of the great recession in 2003 when average homes prices tumbled 60 percent from their peak before the onset of the Asian financial crisis a few years earlier. But, the agony of coping with negative equity still lives in the memory of many homes owners who had endured those testing times.
Before jumping on the property bandwagon this time, it certainly pays by sparing a thought about the probability of a downswing that could be induced by fresh interest-rate hikes later this year, or an outflow of overseas capital.