Sunday Times

Hong Kong prop­erty bub­ble risk

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● Hong Kong is the city most at risk of a prop­erty bub­ble, ac­cord­ing to a rank­ing from UBS Group.

Mu­nich, Toronto, Van­cou­ver, Am­s­ter­dam and Lon­don are the next most vul­ner­a­ble in the bank’s Global Real Es­tate Bub­ble In­dex of 20 ma­jor cen­tres for 2018.

Prices ris­ing at an av­er­age of 35% in ma­jor cities over the past five years have con­trib­uted to a “crisis of af­ford­abil­ity”, the bank said.

“Most house­holds can no longer af­ford to buy prop­erty in the top fi­nan­cial cen­tres with­out a sub­stan­tial in­her­i­tance.”

Still, the risks are more con­tained than in the run-up to the global fi­nan­cial crisis, since mort­gages are grow­ing more slowly than dur­ing that pe­riod, and there’s no ev­i­dence of “si­mul­ta­ne­ous ex­cesses” in lend­ing and con­struc­tion, the bank said.

In­vestors “should re­main se­lec­tive within hous­ing mar­kets in bub­ble-risk ter­ri­tory such as Hong Kong, Toronto, and Lon­don”, said Mark Hae­fele, chief in­vest­ment of­fi­cer at UBS Global Wealth Man­age­ment.

The first cracks in the global hous­ing boom have ap­peared, the re­port said, cit­ing price de­clines in four of the eight cities listed as bub­ble risks in 2017: Syd­ney, Stock­holm, Lon­don and Toronto.

Tighter lend­ing and in­ter­est-rate in­creases brought a price rally to an abrupt end in Syd­ney, the re­port said. The Aus­tralian city and Swe­den’s cap­i­tal both ex­ited the “bub­ble risk” cat­e­gory.

Over­all, prices in most of the 20 cities grew “con­sid­er­ably” less in the past four quar­ters than in pre­vi­ous years.

Hong Kong also topped the rank­ings for the num­ber of years that a skilled ser­vice worker needs to work to be able to buy a 60m² apart­ment near the city cen­tre. The 22 years re­quired com­pared to 15 years in sec­ond-placed Lon­don.

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