Can home prices go up by double digit per year? If it seems unlikely, then let’s look at it from the number perspective. Briefly, a RM400,000 home becoming RM450,000? This is already an increase of 12.5percent. So, in number, it’s actually possible because people do not think too much about an extra RM50,000 divided over 30 years because the final total is only RM200 plus extra. (Same number of years, same interest rate and same 10 percent downpayment) Then, we add in the fact that demand is far higher than supply for some areas. These transactions would push up the median prices and as usual, will also help other cheaper areas to also move up. In Hong Kong, the home price was up 16.7 percent for the whole of 2017 from the already extremely high median prices in 2016. Full article in TheStar here.
Home prices would usually push up rentals even if the effect is not immediate. According to the same article, rents are also up andfor the whole of 2017, it rose 7.89 percent. According to analysts, the property prices would continue to rise another 5 to 20 percent in 2018 because of HIGH LIQUIDITY and a severe supply-demand imbalance. This was an earlier article quoting the HIGH LIQUIDITY. Why prices in HK still up Currently, Hong Kong has already one of the most expensive property markets in the world. It has an average of HK$12,100 (RM6,036) cost per square foot, according to property agency Midland Realty. On the prime Hong Kong Island, the average cost is about HK$16,200 per square foot. This is the full article again. There are definitely cheaper homes, for example for the same price but for a bigger size, think further away from the island. As long as one is willing to spend 1.5 hours travelling daily, the choices would open up further even if prices wise, it is still not considered as affordable.
HIGH LIQUIDITY is quite bad. It creates a lot of demand simply because people could afford to outbid others who could not. This is the reason why cooling measures can help slow down the increase but at the same time, that imbalance of demand vs supply needs much more work. It’s not just building ever more homes unless these homes are acceptable to the people needing one. Accessibility, for example. Acceptability is another. Well, hopefully the Hong Kong government could solve this sooner rather than later because without access to homes, the youths would suffer high rentals which will make it even more unlikely for them to save enough to buy. As for the older folks, growing old without a proper roof over their heads is going to be many years of demeaning lives. The richest few could do something about it perhaps. Happy following.
written on 1 Feb 2018
Next suggested article: Plain unlucky or just simply no planning