Already MOST unaffordable but prices will continue rising?

Which is the most unaffordable property market in the world today? Hong Kong. Who said so? US-based Demographia based on their survey. According to them, Hong Kong’s median hoe price was more than $S4.02 million compared to the median income which was only HK$270,000. Few weeks ago, Malaysia was said to be severely unaffordable at 5.5 times. (Median income to median house price). For Hong Kong, this is nearly 15 times. How should we label them? If you think due to this, Hong Kong is poised for a bubble bursting, think again. According to real estate professor Eddie Hui Chi-man of Polytechnic University,  property prices would continue to increase for the next 2 years because new housing supply will not increase significantly until 2016. This is based on statistical numbers. He said, ‘It’s impossible for salary income to catch up.’ One key reason was because the government did not increase the land supply and the Home Ownership Scheme for flats was only restarted in October 2011, after a 9-year absense.
How expensive is expensive? Well, in Hong Kong, due to the extreme high prices, the new flats being ordered these days can be as small as 160sf!! Yes, 160sf. Demographia said for housing to be affordable, the house prices must not exceed three times the median salary. Anything higher needs intervention from the government with respect to the land supply, infrastructure planning, provisioning and financing. I think this is already being done actively by Singapore via its HDB programme. In terms of success? Well, perhaps due to this, Singapore’s median home price is still at 5.1 times versus gross annual median household income. Without the intervention, perhaps Singapore would be closer to what Hong Kong is experiencing?
Personally, it’s not hard to understand when the population is increasing and the land size remain small, the prices go up. However, another reason why prices go up may also because of the sudden increase in demand while supply did not increase fast enough. Thus, when supply catches up, the prices would stay stagnant or even decrease. However, when it is not an island why do house prices increase? The main reason is thus the popularity of a certain area versus others. It’s not even necessary be close to the city centre! Just that feeling when you are driving in your neighbourhood. Thus, it’s much harder to control these ’emotions’. That’s why prices will continue to increase for popular areas even when more affordable units are built. In fact it will increase until everyone who can afford them has bought one unit somehow or somewhere else. We shall see. Happy buying, OBJECTIVELY.
written on 23 Nov 2014
Next suggested article: Demand vs Supply, Location and Price, Your Decision.