Hong Kong's property market has 10 more years in its bull run as population inflow from Greater Bay gives it sustenance

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Sandy Li and Cheryl Arcibal sandy.li@scmp.com
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cheryl.achibal@scmp.com
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May 14, 2019 10:48 AM SGT
Hong Kong's property bull market has another 10 years to run, as housing supply fails to keep up with the new population pouring in from the Greater Bay Area, said the Swiss bank UBS, which correctly picked the bottom in the city's short-lived price correction last year.
Home prices will continue spiralling upwards as buyers compete to get their hands on residential property, according to the bank's real estate research team, led by John Lam. Hong Kong's annual housing stock is estimated at 45,000 homes a year, 25 per cent short of UBS' calculation.
"Our analysis based on demographics and non-local demand suggests annual housing demand would stand at 60,000 units," Lam said. The Greater Bay Area, a cluster of 11 southern Chinese cities including Hong Kong and Macau, "should enhance integration [within] the area through improving software and hardware, lowering transaction costs and boosting economic activity. We believe this will benefit Hong Kong property."
UBS isn't alone with the bullish forecast. Moody's Investors Service said Hong Kong's home prices would rise between 8 per cent and 10 per cent over the next 12 to 18 months, revising its earlier estimates of a drop of up to 15 per cent, with its vice-president Stephanie Lau predicting median home price to surpass its July 2018 record.
The forecasts by UBS and Moody's pose a policy challenge for Hong Kong's Chief Executive Carrie Lam Cheng Yuet-ngor and her administration, which have made affordable housing a key policy objective.
Hong Kong's government may give the city's subway operator and the urban redevelopment authority a greater role to provide affordable housing, such as turning more urban projects into subsidised homes, and reserving sites along rail lines for public housing, Financial Secretary Paul Chan Mo-po said in an interview with South China Morning Post .
UBS's research team correctly picked the property market's inflection point last year, when Hong Kong's median home prices declined by 9 per cent between August and December.
That correction amounted to a blip in the record, as dovish interest rate policies by the US...