Taikoo Shing, Hong Kong Island Photo: Google Maps
Taikoo Shing, Hong Kong Island Photo: Google Maps

Panic buying ahead of a likely interest rates hike has been blamed for the latest increase in the cost of Hong Kong apartments, and with the government unlikely to boost the supply of flats or curb prices any time soon, the sky is still the limit for the city’s property market.

The secondary market home price index recorded 1.84% month-on-month growth in April, the largest increase in the past year, according to the Government’s Rating and Valuation Department. It was also the 25th straight month of increases in the world’s most costly market.

Prices have now risen 6.6% since the end of 2017, which is better than the return on most global equity markets; even high-risk junk bonds cannot offer such an attractive yield. In the past 12 months flat prices have climbed 14%. Little wonder that people talk of a property bubble.

Derek Chan, head of research at Ricacorp Properties, told Metro Daily that buyers were entering the market now because they were worried flats would soon become too expensive if interest rates rise.

Hong Kong is expected to match the United States in hiking interest rates later this month, while buyers do not believe the city’s government will launch any measures to cool housing markets. Optimism has also been lifted by the record HK$25.1 billion (US$3.29 billion) tender price last month for the site of the former Kai Tak airport by Sun Hung Kai Properties, the city’s largest developer.

Small flats are most in demand, which is not surprising, given the steep prices. Otherwise known as subdivided flats or nano flats, these are units of less than 430 square feet, which have nonetheless gained 6.8% in price so far this year.

As a consequence, very few homes in housing estates, even in the New Territories, are now offered for less than HK$5 million. People joke that they dare not invite their mainland relatives to visit, lest they be asked: “How come your apartment is smaller than my toilet?”

But few are laughing at the cost: a two-room apartment of 600 square feet now is priced at a whopping HK$10 million. Even top-tier white- collar worker like lawyers and doctors may find it hard to buy one.

By comparison, prices in the luxury market have risen only 2.4% this year, though some of these units are fetching more than HK$100,000 a square foot, which means their price tags are easily nine digits.

Of course, this is not going to surprise many people in a city that boasts the highest density of millionaires in the world— where an ordinary parking lot can cost HK$2 million.