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Fear of price increase and the push to buy (someday, not today)

Posted in China and Hong Kong Property related

Source: https://www.macrobusiness.com.au/2017/01/2017-demographia-housing-affordability-survey/

What do we do when we know that our savings will never catch up with the property prices which are already highest in the world today? Sorry, the honour of having the highest property price versus household income does not belong to Malaysia. We are far from even the top 10. Here’s an image one not too long ago. Hong Kong already has the highest property prices in the world versus household income. 18.1 here means that the house price would require a working adult 18 years of his salary in full in order to buy a house. Example calculation, RM10,000 x 12 (months) x 18 = RM2.16 million. Any Malaysians here earning RM10k who could actually afford to buy a RM2.16 million. The answer is highly unlikely. For Hong Kongers, they are not that lucky even if Hong Kong is already considered an advanced city state. This is the actual situation many of the younger professionals face today.

Here’s one latest article from South China Morning Post: Hong Kong’s millennials join the red-hot property party snap up 50 pct of units launched over weekend.  The developer is Sun Hung Kai (second largest Hong Kong developer by market capitalisation). The property name is Wings at Sea (what a name) Location is Tseung Kwan O. According to Sammy Po Siu-ming, chief executive of Midland Realty’s residential division half of the buyers were millennials and they would need help from their parents either for part of the downpayment or even help to partially pay for their mortgages. According to Demographia, the median property price in Hong Kong has now reached 19.4 times the median annual household income more than twice the number in London; around 8.5 times. According to the Rating and Valuation department, a flat smaller than 430 sq ft on Hong Kong island will cost an average of HK$16,103 (RM8,173) per sq ft while the price tag for one in Kowloon is about HK$13,763 (RM7,000) per sq ft. In other words, a 430 sq ft flat in Kowloon would have cost HK$6 million. (RM3.05 million). On an average basis, Hong Kong workers earn HK$31,201 (RM15,837) per month. Here’s that info in PayScale.com  For reference, this is the SCMP article again.

I shared this with a dynamic real estate agency the other day when they invited me to share about the property market with around 100 pax of their agents. Parents with children today, do you seriously believe your kids will be able to buy a property by themselves when they grow up and start working 10-15 years later? Their answers showed that as parents, they are ready to help their children. In fact, there’s no need to help them in the future. It’s best to start that step today. There is no way that the property prices in Greater KL will ever reach Hong Kong’s levels. It’s important to note though that even KLCC’s average price per sq ft is not even 20 percent of Hong Kong’s Kowloon yet. Even if it grows by 3 percent for the next 10 years, a RM400,000 property will still be around RM550,000 by then. Salary may not have grown that much unless one is the top 20 performers in the working world today. Happy anticipating.

written on 1 June 2018

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