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Hong Kong’s dizzying property prices may finally be falling but they are still notching up records, with a survey released on Monday showing the Chinese territory has consolidated its status as the world’s least affordable housing market.
Median prices in the third quarter of last year were 19 times median annual pre-tax household income — the highest in the 12 years of Demographia’s International Housing Affordability Study. That compares with second-ranking Sydney, with a median multiple of 12.2, seventh-placed San Francisco on 9.4 and London, eighth, at 8.5.
Between 2003 and their September peak, property prices in the city soared 370 per cent, fuelled by record-low interest rates, a buoyant economy and interest from mainland Chinese buyers.
The cost and availability of housing in Hong Kong is a particular sore spot for citizens, many of whom live in cramped, overcrowded conditions. It is not uncommon for entire families to live in spaces less than 50 sq m. Some poorer citizens occupy “cage homes” — tiny bunks stacked atop each other and enclosed by metal grating.
In his annual policy address this month, chief executive CY Leung pledged to tackle the issue by boosting the supply of affordable housing with a host of new projects over the next five years.
“High property prices and rents have prevented many young people from forming a family or starting their own business,” Mr Leung said. “This has also resulted in cramped living space for society as a whole and insufficient space for social welfare facilities such as kindergartens, elderly homes and residential care homes for persons with disabilities
However, he pointed out the introduction of cooling measures over the past three years, including a double stamp duty for some buyers, had sparked a decline in rental and property prices in recent months.
His comments were underscored only days later by new data forecasting that the number of property transactions this month would be the lowest since agencies began measuring in January 1991.
Despite this, with median monthly wages at less than $1,900, buying a home remains a distant prospect for many.
The city’s median multiple is nearly four times the threshold at which Demographia considers prices “severely unaffordable”.
“This was the sixth year in a row that Hong Kong was the least affordable, with a substantial worsening from 2014,” read the study.
The surge in home prices was frequently cited as a source of discontent among Hong Kong’s youth during the months-long Occupy protests in 2014.
There is hope for would-be homeowners so far priced out of the market as it starts to fall, with the centa-city index, a widely used gauge of prices, down 7.5 per cent since September. However, analysts do not expect a prolonged slump.
“You are going to see increasing supply in the coming years so you’re going to see pressure on prices,” said Chris Wood, equity strategist at brokerage CLSA, which forecasts a 10 per cent decline this year. “But I don’t think the market is going to collapse because speculators have been squeezed out by government tightening measures.”
Additional reporting by Jennifer Hughes