World Economy

Investors Wary of HK Housing Market

Hong Kong’s property prices have increased 430% since 2003.Hong Kong’s property prices have increased 430% since 2003.

Nearly half of experts polled by global property consultants Colliers International suggest the economic outlook and likely rising interest rates are the two most important factors for Hong Kong investors wanting to make investment decisions for 2018.

The property firm polled 35 leading investors and developers who have been actively seeking investment opportunities in Hong Kong and the rest of the region, and noted a decidedly more cautious approach to the coming year in Hong Kong, after months of soaring capital outlays in 2017, Xinhua reported.

In the next 12 months, officials at Colliers predict yields are likely to drop, and capital costs rise, triggered by likely interest rate rises. It also suggests some investors see Singapore and Shanghai as offering better investment potential than Hong Kong.

“More than 45% of respondents consider the economic outlook and likely rising interest rates as the two most important factors when making investment decisions for 2018,” its survey concludes.

Yields are expected to persist as the US Federal Reserve increases the cost of borrowing and tapers off its balance sheet over the next year.

Antonio Wu, Colliers’ deputy managing director of capital markets and investment services, said investors reported becoming “more cautious”, and some said they expected to “adopt a more defensive approach, to hedge against any downward price adjustments”.

The tone of Colliers’ report chimes strongly with findings released earlier this month by the Asian Association for Investors in Non-Listed Real Estate Vehicles, which found more than 60% of global real estate investors were concerned of possible asset price bubbles forming, with some predicting the rising chance of a “sharp correction” globally.

Hong Kong’s property market has remained resilient despite increases in US interest rates by the Federal Reserve, said Colliers.

Its latest figures show total Hong Kong property transactions during the first 10 months were worth HK$357 billion ($45.9 billion), making it the world’s second-largest investment markets behind New York, and by far the largest in Asian Pacific.

September was the 18th consecutive month to hit a new high, according to the Hong Kong government’s Rating and Valuation Department, Hong Kong’s property prices have increased 430% since 2003, making it the world’s most expensive urban center among 406 cities monitored, according to the Demographia International Housing Affordability Survey.

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