Hong Kong housing bubble! Mainland buyers blamed

Residential property prices in Hong Kong are bubbling up again, following substantial falls in the second half of 2008. Hong Kong is riding another euphoric wave of property purchases.

Hong Kong’s housing market was seriously affected by the global financial crisis, but after falling 17% (18% in real terms) from June to December 2008, Hong Kong’s residential price index rebounded and rose by 20% (21% in real terms) from last year’s bottom to August 2009, according to the Ratings and Valuation Department (RVD)

A massive influx of buyers from mainland China has been a partial cause. The Chinese stimulus package of November 2008 boosted liquidity, and cash-rich Chinese, facing restrictions on bringing out capital from China, bought properties in Hong Kong.

Hong Kong Island, Kowloon and the New Territories all saw strong price increases in the first two quarters of 2009. The overall residential price index in Hong Kong rose 8.3% (8.4% in real terms) in Q2 2009.

PRIVATE DOMESTIC PRICES (Q2 2009)
PROPERTY CLASS	LOCATION	USD PER SQ. M	Q-O-Q Nominal	Q-O-Q real
A (Less than 40 sq. m.)	Hong Kong Kowloon New Territories	7,566 5,434 4,853	13.6% 12.5% 7.6%	13.9% 12.8% 7.9%
B (40 to 69.9 sq. m.)	Hong Kong Kowloon New Territories	8,890 6,997 4,923	12.2% 16.8% 7.7%	12.5% 17.2% 8.0%
C (70 to 99.9 sq. m.)	Hong Kong Kowloon New Territories	11,717 10,731 6,155	13.6% 14.1% 6.9%	13.9% 14.4% 7.2%
D (100 to 159.9 sq. m.)	Hong Kong Kowloon New Territories	14,651 12,395 7,530	7.0% 8.2% 17.4%	7.3% 8.5% 17.7%
E (more than 160 sq. m.)	Hong Kong Kowloon New Territories	20,764 17,522 8,869	15.0% 6.1% 13.4%	15.4% 6.4% 13.7%

Heavy intervention by the HK government helped. There were two stimulus packages, in October 2008, and May 2009, which maintained buyer confidence and encouraged continued spending. The government likewise implemented measures to strengthen the financial sector and ensure liquidity. (more)