HK home market cools but remains in bubble territory
SINGAPORE: A weaker economic outlook that’s cooled residential buyer sentiment has stalled Hong Kong’s red-hot property market. But it isn’t out of bubble territory yet.
That’s one of the findings of UBS Group AG’S Global Real Estate Bubble Index 2019, released yesterday.
While Hong Kong topped the list last year as the city most at risk of a property bubble, this year the former British colony fell to the No. 3 spot, overtaken by Munich, now in first place, and Toronto.
“Over the last four quarters, imbalances have soared particularly in the Eurozone, with Frankfurt and Paris the two most prominent new additions to the bubble-risk zone when compared with last year,” the report found. “By contrast, valuations in Vancouver, San Francisco, Stockholm and Sydney have fallen sharply. London’s property market has cooled down considerably, moving the financial hub out of bubble-risk territory for the first time in four years.”
The report didn’t canvas any later data than second quarter, so the full impact of political protests that have rocked Hong Kong wouldn’t be factored in. Still, the city has seen a slowdown in property sales and prices, Hong Kong Monetary Authority Chief Executive Norman Chan said at a briefing Monday.
“Investors should remain cautious when considering housing markets in bubble-risk territory,” Matthias Holzhey, lead author of the study and head of Swiss Real Estate Investments at UBS Global Wealth Management, said. “Regulatory measures to curb further appreciation have already triggered market corrections in some of the most overheated cities.”
In the U.S., index scores didn’t rise in any city for the first time since 2011, while regulatory changes and affordability issues have caused home prices in New York to lag the countrywide average. Similarly, affordability issues, trade tensions and diminishing foreign demand have capped price growth in San Francisco and Los Angeles, although Boston still ranks in fair-value territory.
“Chicago is undervalued but continues to lag far behind given its increasing fiscal challenges,” the report said.