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Hong Kong Real Estate market facing COVID-19, a threat or not?

Hong Kong housing prices are always regarded as the world’s least-affordable. Is the COVID-19 pandemic ever bringing Hong Kong real estates prices down?

Geographically, Hong Kong is as small as a dot on the world map, but about 7.63M people live there. It is predicted that Hong Kong population will reach 8.469M by the year 2041. The incline of population comes from a mass population influx, especially from mainland China. Mainlanders have strong will of investing in free market, and have chosen Hong Kong as it is the closest from China and they have a positive sentiment towards the potential return in investment from Hong Kong property. According to the migration scheme, 150 people migrate down to Hong Kong everyday, which means 52925 a year. People demand a place to live when they immigrate in, which makes the demand really high when everyone needs a housing property at the same time. For locals, birth rates are approximately the same as death rates, which makes migration as the big part of Hong Kong’s increase in population over time. Hence, when the demand of Hong Kong housing increase, price increases.

With housing demand in Hong Kong propelling, Hong Kong’s land is as always considered as very limited. Despite constant building of new apartments, houses, the housing supply is still considered to be low to the amount of people living in Hong Kong. In addition, there is also this special stamp duty policy. Once you buy the housing property, you are not allowed to sell it within the first three years. Referring to the graph below, the equilibrium point has been shifted from A to C instead of A to B.

Hong Kong Real Estates market remain resilient?

Yes. Hong Kong’s residential property price index rose by 5.31% during 2019, a sharp improvement from the prior year’s 1.9% growth, according to the Ratings and Valuation Department (RVD). This was a result of the supply of housing property is still limited no matter how many new apartments they build in the existing available land, as no new land is being created from land reclamation. Moreover, as long as Hong Kong is an international financial hub and a bridge (free market) accessing between China and foreign countries, the demand of housing property remains at an increasing position. Among 24 major cities in the 2019 UBS Real Estate Bubble Index, Hong Kong’s house prices remain one of the most overvalued and at a greatest risk of a real estate bubble.

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