SAR outranks more than 400 major cities as the most expensive property market for seventh consecutive year

Hong Kong has kept the dubious honor of being the world's most expensive housing market for the seventh year running, outranking 406 other major metropolitan regions.

According to US-based Demographia's annual international housing affordability survey, the SAR is the least affordable city globally to buy a home, with average homes prices in 2016 standing at 18.1 times the median annual gross household income.

While that's a modest improvement in affordability compared with 19 times in 2015, Demographia considers a score of more than 5.1 as "severely unaffordable".

Hong Kong's median multiple "represents a substantial deterioration in its housing affordability", Demographia said in the report, citing a median multiple of 11.4 times in 2010.

Hong Kong - the only city in China included in the survey - saw homes prices in November 2016 hit an all-time high, as the private residential price index traced by the Rating and Valuation Department had soared for eight consecutive months and surged 4.5 percent on a yearly basis.

The city's prices for secondary homes, which account for about 70 percent of the total volume, have soared almost 40 percent since Chief Executive Leung Chun-ying took office in July 2012, and went up a further 7.7 percent last year - hovering just 2.6 percent shy of the record reached in September 2015.

The dearth of affordable housing has been a longstanding headache for Hong Kong despite a raft of taxes and mortgage caps introduced by the government in the past few years.

The government raised the stamp duty for homes transactions to 15 percent for all residential purchases in November last year, except for first-time buyers who are Hong Kong residents, in another desperate attempt to rein in the runaway property sector following a raft of similar measures implemented since 2010.

"Those macro-prudential measures have proved that they're still unable to curb Hong Kong's soaring homes prices because the global macroeconomic environment is still good, and local buyers can still afford mortgage loan repayments even though the US had raised interest rates recently," said Marcos Chan Kam-ping, senior director at global real estate advisory firm CBRE.

"The local homes market, however, has grown healthier as these measures, which include requiring banks to conduct a stress test of a 300-basis-point hike, make only those homes buyers with sufficient financial strength to be eligible for buying a home in the city," he said.

The US federal funds rate hike in December 2015 - the second in a decade - has pushed down Hong Kong financial markets as the city's mortgage loan interest rates will likely follow suit this year. A spike in mortgage loan rates definitively will dent the mortgage loan capability of local homes buyers.

Elevated Hong Kong property valuations have also put the city's economic growth at risk. The International Monetary Fund warned that stretched property valuations mean that Hong Kong's economy is vulnerable if interest rates rise faster than expected.

According to the Demographia survey, Sydney held on as the second-costliest housing market worldwide, with a median multiple of 12.2, followed by Vancouver, with Auckland in fourth place.

Bloomberg contributed to the story.

oswald@chinadailyhk.com

It seems there's no silver bullet for Hong Kong's chronic housing problem as prices continue to go through the roof despite various measures to curb the runaway property market. Average homes prices stand at an estimated 18 times the median annual gross household income. Edmond Tang / China Daily

(HK Edition 01/24/2017 page1)