Analysts argue the Hong Kong property market remains unhinged following cases of corruption amidst growth forecasts
Figures released by the Land Registry indicate that sales of new properties have increased and have led to a growth in sales of 10.7 percent from 2011 figures, with 3,884 properties going under the hammer in February.
John Tsang, the Hong Kong Financial Secretary, is still concerned that the property market in Hong Kong is facing a ‘property price bubble’ following the region’s low interest rate and has said that he will step in should the market become over inflated.
Representatives from both Hong Kong and Chinese property companies have recently approached French insurance giant AXA in a bid to encourage the company to invest in the property market. An article in The China Economic Review claims that AXA is looking to invest $2.6bn in the Chinese property market over the course of the next five years. Other companies looking to invest in Hong Kong include ARA Asset Management and China’s Citic Capital. Following legislation from the Chinese government in a bid to halt the rapidly inflating property market many development companies are facing financial problems, due to high debts and the government campaign to reduce house prices. Overseas companies see this situation as ideal for long term property investment in Hong Kong and believe that future returns could be as high as 15 percent.
The Hong Kong property market was stunned in early April, following the arrest of development tycoons Raymond and Thomas Kwok. The arrest is a response to an investigation by China’s Independent Commission Against Corruption and shares in the brothers’ Sun Hung Kai Company fell by 13 percent. The Hong Kong Stock exchange showed that the company had of $4.9bn wiped off the value of its shares. Experts believe that this move shows that the administration is determined to demonstrate its prosecutorial zeal in a bid to remove any stain of corruption from the country.
Meanwhile, problems with the European debt crisis have alas affected the Hong Kong property market. A new report released by Knight Frank examines the market in detail and reveals a buoyant primary sales market. The report also reveals that new developments have been launched and show positive sales. The report also states that: ‘residential sales may dip again in the coming months, while the rental market will remain lukewarm. We believe both luxury prices and rents are likely to fall during the year.’
The uncertain state of the Hong Kong property market has led to a growth in leaseholders with many landlords showing that they are prepared to negotiate on both price and terms and conditions. Though the situation facing the commercial market is also uncertain and there has been a 2.1 percent drop in office rents. The Knight Frank report also projects that office rents will continue to fall in the first half of 2012 and points to the global economic problems affecting these rental properties with rents projected to slide by 10-15 percent.