Prices remain high in Hong Kong, which prompts the risk of a property bubble, warns the Financial Secretary John Tsang, who also said that if there are signs of overheating of the market he will introduce more cooling measures.

The growth of prices in the last two years is due to the rich investors switching from cash to property amid the panic caused by the European debt crisis. People prefer not to hold cash, and logically the rich have started buying property, which is a better and more secure long-term investment. Moreover, the Hong Kong Island is home to people with middle to high income, who comprise the majority so it's not surprising that prices hit a record high.

The Hong Kong government is determined to increase land supply, a measure that would try to maintain more stable property prices. Housing prices have been on the rise since 2009 and today are 70% higher, which was helped by record low mortgage rates and an influx of mainland Chinese buyers. In 2012 alone, prices increased with 4% already.

Prices of condos and flats have hit a record high, further increased by improved sentiment and diminishing supply. Indeed, the Centa City Leading Index (base value from 1997 is 100), shows home prices increased with 1.37% reaching 112.3 during the week of March 26, which surpassed the previous peak of 111.88  from the week of June 5, 2011. For comparison, the average price of flats in Taikoo Shing in Quarry Bay, a popular housing area, increased from €932.25 per square foot in 2011 to €1,020.56 per square foot at the end of March.

Experts believe that another reason for the increase of the property prices over the last few months was the action undertaken by the European Central Bank, which had pumped more than €1 trillion into the banking system.

 

Domaza - Properties