While Hong Kong is now under the stewardship of China as a special administrative region it looks as though Hong Kong property assets are benefiting from problems within China. A recent report by the Hong Kong Monetary Authority confirmed that demand for new mortgage loans has been extremely strong and there is a growing appetite for Hong Kong property. This may surprise many people, especially when you consider the close relationship with China, although Hong Kong is proving a very useful tool for investors.
New mortgage loans
It was confirmed that new mortgage loans totalled a staggering HK$17.8 billion in June which was an increase of 15.8% on the May figure. Even though the number of applications remained fairly steady at 9,900 per month, it does seem as though investors are more willing to invest in Hong Kong property than mainland China. The same report also confirmed that outstanding mortgage loans now top HK$1.08 trillion and perhaps more importantly, 89.8% of new mortgage loans were priced with reference to the Hong Kong Interbank offered rate.
This would seem to indicate there is a better quality of mortgage application across Hong Kong when compared to other countries around the world. The fact just over 10% of mortgage applications are based upon rates other than the Hong Kong Interbank offered rate certainly tells its own tale.
Banks jumping aboard the bandwagon
When you consider that the one-month Hong Kong Interbank offered rate now stands at 0.239% and traditional mortgages operate in a range of 2% up to 2.5%, it is not difficult to see why banks are falling over themselves to service the Hong Kong market. There is significant profit margin for the banks to “play with” and while Hong Kong is effectively part of China let us not forget it is a very different animal with regards to culture and economy.
Data also confirmed that due to planning for the future there will be a supply line for 93,000 new flats in the next 3 to 4 years. When you bear in mind the issues that the UK government has experienced in keeping up with new build demand, the Hong Kong authorities are showing their UK counterparts how it is done!
Who is buying Hong Kong property?
It is very interesting to see that the main reasons why Hong Kong property is so popular at the moment are simply – more people are living longer and the so-called “younger generation” are looking to live independently of their parents. These are very traditional reasons for strong property markets and when you also take into account relatively low interest rates it is not difficult to see this trend continuing for the foreseeable future.
As we touched on above, there also seems to be some benefit from a weakened Yuan with some investors now specifically looking for Hong Kong dollar denominated property assets. It will be interesting to see where this particular trend goes in the short to medium term because with underlying problems in China, although things are starting to improve, perhaps we could see more people switching to Hong Kong?