The Hong Kong first hand residential sales market has had a buoyant year. Developers have been selling their projects quickly, especially in the lower-to-mid-market price range (HKD 4m-15m). By most international standards this is still considered pricey considering the size of homes in this price bracket can range from just 150-160 sqft to 400 sqft+ in size! Most developments in this price range have tended to be over-subscribed. Affordability for the average Hong Konger is not there, but at the same time, most buyers do not want to miss the opportunity to buy in.
However, according to local reports in recent weeks the market has seen a few buyers forfeit their deposits on new off-plan properties rather than continue with the purchase. We are only talking a small number, and this is obviously the exception and not the rule, as Hong Kong’s demand for property continues to outstrip supply. Whatever the actual reasons, it is perhaps a little warning sign to those buyers who may be jumping in head first, and not sure how they may manage to complete their purchase. The HK market and stamp duty regulations make it near on impossible to flip a property, and so most buyers of new off-plan properties need to be aware of these issues and understand their affordability before they even decide to pay the deposit. Many HK investors are seasoned real estate investors, but one or two will get caught out. With youngsters also needing to get on the real estate ladder, it does pose a real problem for HK.
The second hand resale market in HK remains sluggish due to the extremely high down- payment requirement of 40%-60%, with only the balance being able to be financed via a mortgage. So unless your sitting on a few million HKD in spare cash or savings, you’re not likely to be able to afford to buy a home. The first-hand new development market continues to be the beneficiary of this and attract the interest of those looking to own a home. Downpayment requirements are less and some developers will offer buyers a top-up mortgage to reach the 80%+ region.
The main advice to our clients is to understand your affordability, irrespective of what the market is doing.