Residential property prices in Hong Kong have risen to their highest since December 1997, defying government efforts to rein in real estate speculation and prevent an asset bubble.
The latest index from Centaline Property Agency increased 1.11% to 84.54 in the week ended on September 05, from 83.61 a week earlier.
The report from Centaline, one of Hong Kong’s biggest property agencies, also shows that transactions of used apartments at 10 of Hong Kong’s biggest private developments fell for a second straight week.
The index has risen 1.2% in the three weeks since the measures were introduced in the middle of August after having risen about 13% since the beginning of the year. The figures are causing concern as economists and analysts repeatedly warn of the dangers of a real estate bubble.
The government has increased down payment ratios and accelerated the sale of land for development to rein in home prices that have now surged 45% since the beginning of 2009. Prices are now on par with 1997, the height of a previous bubble that was followed by a six-year slump that sent values more than 50% lower.
‘Any further measures may have only limited impact. Transactions have already declined a bit and price growth has slowed since the measures were introduced. The market has already slowly taken in those measures,’ said Adrian Ngan, an analyst at CCB International Securites in Hong Kong.
The government is closely monitoring the property market and may introduce further measures to contain prices if they continue to escalate. But experts in the industry are not expecting a sudden change. ‘Prices are going to stay around this level in the short term,’ said Centaline associate directors Wong Leung-sing.
Sales are also increasing but high prices are not putting off buyers. Hong Kong’s home sales rose 33% by value in August to the highest in almost three years as the number of transactions completed in the first half of the month outweighed the second-half’s decline, according to the latest figures from the Land Registry.
There seems to be no let up in demand. A 26 year-old government built apartment near one of Hong Kong’s busiest shopping areas sold in July for a record price per square foot. The 420 square foot home in the Sham Shui Po area of the Kowloon district was bought for HK$1.98 million ($255,000).
Prices have exceeded estimates in both land auctions held since the cooling measures were introduced. Kerry Properties, controlled by the family of Malaysian tycoon Robert Kuok, paid 26% more than analysts estimated for land in the Kowloon Tong district last month. Cheung Kong, controlled by Hong Kong’s richest man, Li Ka-shing, paid more than estimated for a site in the nearby Ho Man Tin district four days after the government announced the curbs.