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Property Market and Housing The property market is perhaps the greatest barometer of Hong Kong's growth and the confidence of its citizens. When the property market is booming, confidence is high. When the property market takes a tumble, so too does the confidence level of Hong Kong people. In a city with such a limited land supply, housing prices will always be more sensitive than most areas to the law of supply and demand. This sensitivity has been compounded by the 'Asian Contagion', which has pushed interest rates higher in the short-term and, in turn, dampened consumer sentiment. Property prices are down about 35% compared with nine months ago, while rents have seen similar sharp decreases. Sales in the first five months of the year are more than 50% down on the same period last year, while the value of transactions is 61% down over the same period. For landlords, the correction may be painful, especially if properties were bought for speculative purposes rather than as a long-term investment or as the family home. Housing has now returned to a more affordable level. Prices will bounce back, but at a slower, more gradual and more realistic rate. As the Financial Times pointed out on May 29: "So far there is no reason to panic. Most of the fall in property prices is the correction of a bubble." The correction, though, was needed because high property prices - sales and rentals - were adversely affecting Hong Kong's competitiveness. Lower rentals for office space and flats will help retain business in Hong Kong. On the housing front, the government aims to achieve a home ownership rate of 70% within the next decade. Currently, just over half of Hong Kong people live in flats they own. To increase the home ownership rate, the government has launched a number of schemes and initiatives over the past year, including :
A key element to the new strategy, which will see up to 85 000 flats a year produced in the private and public sectors, is the introduction of a rolling five-year land disposal programme which will provide developers and the public with a better idea of how much, and when, land will be released for development. Despite uncertainties in the housing market in recent months, a stable supply of land for housing development will ensure that Hong Kong's future housing demand will be met in the years to come. At the end of May the government announced the suspension of several measures relating to the pre-sale of flats that had been introduced to curb speculation. The day after the measures were announced, 1 400 flats at a new residential complex were sold within hours. The flats were offered at a price about 30% lower than the secondary market in the area, indicating that demand for property is still strong at a competitive price. The main and overriding concern has been to stabilise property prices to prevent the rapid increases which contributed to a 'bubble' economy.
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