Following a series of recent protests in Hong Kong, the real estate industry investors and home owners are concerned about the impact the protests will bring to the sector. However for the rate of growth of the property industry to slow down it may require more than the few protests that have been witnessed in recent weeks. The industry will continue to flourish if it managers to overcome the impacts of the protests.
Recent protests affecting property sector
Since the beginning of last month the city has witnessed a series of protests opposing the extradition bill permitting the transfer of criminals to mainland China. The massive protests have negatively impacted on operations affecting the transport system while most businesses remaining closed.
The chaos has affected the real estate industry in the meantime. For instance a publicly traded company had to forfeit its $3.2M deposit for the acquisition of a commercial property approximated at $1.41B. Equally a buyer who was purchasing a luxury house had to walk away from a $1.6M deposit for the house estimated to cost around $32.2 million.
The two events have been interpreted as signs of the bursting of the bubbling Hong Kong property market. However the industry is relatively steady and index values are still below 1% off the highs achieved at the end of May.
Unaffordable property for most in the city
CBRE Group Inc. which is a property services company indicates that the mean buying price for a property in Hong Kong is around $1.23 million. Last year Hong Kong recorded its second best ever year in property sales at $93B. This is despite most of the over 7.4 million residents making a yearly income of around $38,500 which makes buying quite expensive.
Those who can afford usually dedicate on average close to 70% of their earnings to service their home equity loans. Affordability ratio in Hong Kong is more than 60% which is the highest since the real estate bubble of 1997. The present bubble confirms that the housing crisis has no answer and in the near future housing supply will most likely slump by 40%.
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