Asian housing review 2008

Transcription

1 August 28 Asian housing review 28 How have housing systems in Asia evolved against the wider national economic and socio-demographic trends? What have been the key drivers of housing demand and government initiatives which have shaped delivery of homes over the last 5-6 years? RESEARCH

2 The RICS ASIAN HOUSING REVIEW 28 is commissioned and published by RICS (Royal Institution of Chartered Surveyors) which is the largest organisation for professionals in property, land, construction and related environmental issues worldwide. RICS is the leading source of property related knowledge, best practice and consumer protection. Policy makers, from local authorities to governments and global bodies, listen to and value RICS impartial advice on public affairs, economic analysis and policy research. RICS Asia RICS Asia, based in Hong Kong, is the regional head office of RICS in Asia Pacific and represents the nine Asia Pacific National Associations (RICS Brunei, RICS China, RICS Hong Kong, RICS Indonesia, RICS Japan, RICS Malaysia, RICS Singapore, RICS Sri Lanka and RICS Thailand). To find out more about membership in Asia Pacific, contact RICS Asia in Hong Kong: RICS Asia Suite 214, Central Plaza 18 Harbour Road Wanchai Hong Kong Tel Copyright in all or part of this publication rests with RICS and save by prior consent of RICS no part or parts shall be produced by any means electronic, mechanical, photocopying or otherwise, now known or to be devised. While every effort has been made to ensure that the data and other information in this report are accurate, some errors may remain. In addition, it should be remembered that information in this field is variable in content and quality. The purpose of the Review is to provide information, analysis and background to Asia s housing markets and housing provision systems. It is not intended for use directly either in market forecasting or for investment decision purposes. This report is for general informative purposes only and does not constitute a formal valuation, appraisal or recommendation. No responsibility can be accepted to any third party for the whole or any part of its contents. It may not be published, reproduced or quoted in part or in whole, nor may it be used as a basis for any contract, prospectus, agreement or other document without prior consent, which will not be unreasonably withheld. Our findings are based on the assumptions given. As is customary with market studies, our findings should be regarded as valid for a limited period of time and should be subject to examination at regular intervals. Whilst every effort has been made to ensure that the data contained in it is correct, no responsibility can be taken for omissions or erroneous data provided by a third party or due to information being unavailable or inaccessible during the research period. The estimates and conclusions contained in this report have been conscientiously prepared in the light of our experience in the property market and information that we were able to collect, but their accuracy is in no way guaranteed. The full report is available at RICS July 28 ISBN:

3 This report was produced for RICS by Savills, drawing on research staff from its London and Hong Kong offices. The team that produced the report was: Jacqui Daly London Rebecca Gill London Simon Smith Hong Kong Leon Wang London Savills Research & Consultancy, Hong Kong Savills (Hong Kong) Limited 23/F Two Exchange Square Central Hong Kong Savills (L&P) Ltd Lansdowne House 57 Berkeley Square London W1J 6ER United Kingdom Savills Plc Established in 1855, Savills Plc is a leading international property services company with a full listing on the London Stock Exchange and is in the FTSE25 group of companies. The company, which employs around 15,5 staff worldwide, has offices and associates throughout the UK, Europe, Asia Pacific and Africa, giving a total distribution of 15 offices in 26 countries.

4 FOREWORD I am very pleased to welcome the first issue of the RICS ASIAN HOUSING REVIEW, which provides a detailed overview of the recent performance of housing markets across Asia. This highlights the major achievements that have been made in countries across Asia to develop their housing markets, to ensure that the housing needs of the population are met. While there have been different routes to achieving this, as outlined in the report, the common thread that emerges is the considerable success that has been achieved in all countries across Asia. This must rank as one of the most significant achievements in poverty alleviation worldwide. Now, however, the housing markets across Asia face fresh challenges, with the advent of the global credit crunch. The development and maturity of the housing and financial markets across Asia means that we are far better placed to weather this storm than would have been the case a few years ago, and I am sure that in the longer term, the housing markets will continue to be able to meet the needs of all groups within society, contributing to the stable and harmonious development of society across Asia. I am grateful to Savills for having carried out this Review and do hope that you find this of interest and value. Darren Jensen Director, RICS Asia

5 3 Hong Kong 3.1 The housing system The performance of Hong Kong s housing sector is closely linked to the Special Administrative Region s (SAR) economic performance. In addition, political events have contributed to uncertainty in the market, such as the 1997 transfer of sovereignty to China. During the 195s there was high levels of refugee immigration to Hong Kong from China. In response, the Government established bodies responsible for overseeing the provision of public housing. In 1954, a fund was established to construct high density accommodation, and the Hong Kong Housing Authority (HA), a semi-autonomous, non-governmental authority, was founded and is now the main provider of low-cost, self contained apartments in Hong Kong. In order to ease high demand for housing among very low income households, a Low Cost Housing Programme and a Temporary Housing Scheme were introduced in the early 196s. High levels of new construction in the 197s also saw new towns and housing estates emerge across Hong Kong. In response to rising market demand, private sector development has focussed on delivering high density apartment blocks with a mix of both privately owned and collectively managed property. In contrast, development by the public sector has led to a high stock of compact, basic quality housing units. Public housing is provided by government at cost, and therefore can be produced at much lower costs than other forms of housing. In 1965 one million people in Hong Kong lived in public housing, and by 1981, this had doubled to two million. By the 198s, the focus of public housing development shifted from a mass-production approach, to an emphasis on delivering quality. Today, as shown in Figure 9, 18% of the population live in housing bought from the government at subsidised rates. Since the 197s a number of schemes have been introduced to encourage home ownership, including the Home Ownership Scheme (HOS) (which ceased to operate in 23), and The Tenants Purchase Scheme (TPS) which was introduced in 1988 to allow residents and tenants to purchase their homes at subsidised rates. Some of these units were subsequently permitted to be traded on the open market. Other government schemes also provide financial assistance for home buyers and private housing production. These initiatives have raised the rate of home ownership in Hong Kong from just 28% in 1982 to more than 53% in 27, as shown in Figure 1. Prior to the Asian financial crisis many factors, such as economic and population growth and rising incomes, had contributed to house price increases. Government responded to this by introducing measures to curb speculation. Indeed, because all land is owned by Hong Kong SAR, authorities are able to control construction supply and pricing levels. Nonetheless, the crisis led to a sharp downturn in asset prices as interest rates rose. Significant house price falls were further exacerbated by high levels of unsold residential supply, rising unemployment, lower affordability, limited bank lending and reduced consumer confidence. Figure 9: Hong Kong population by housing type Figure 1: Owner occupiers, Hong Kong 1% Privately owned housing Government subsidised apartment sales Public rented housing Temporary housing 6 Owner-occupiers as a proportion of total households (%) % of people by housing type 9% 8% 7% 6% 5% 4% 3% 2% 1% % Source: Hong Kong Census and Statistics Department and Savills Research 1 1 Note: Housing Authority subsidised sale flats include flat that could be traded in the open market in These flats are classified under ʻPrivately owned housingʼ in 21 and 26. Excludes non-domestics housing % Source: Hong Kong Census and Statistics Department and Savills Research

6 In response, in May 1998, government relaxed the policies formerly imposed to limit speculation, which helped to stabilise the market. As shown in Figure 11, new mortgage take up levels remained flat after 1998 and started to decline in 2, as economic growth slowed. With improved economic performance in 24 there was a 75% increase in housing loan take up compared to the previous year. In 27, the mortgage market saw considerable growth, amounting to HK$173,6 million. There is strong demand for housing at all levels of affordability in Hong Kong. Rising consumer wealth and strong economic performance has led to increased demand for luxury housing. Similarly, high levels of immigration into Hong Kong has fuelled demand for low cost housing, leading to rising prices across the market. Strong housing demand and factors including limited available development land have meant that government has been required to play a more interventionist role in the housing market sector than in other areas of the economy. Policy has included anti price speculation measures, and the active encouragement of home ownership. Today, more than 53% of households are owner occupiers. 3.2 Demographic profile As shown in Figure 12, Hong Kong s population has grown on average by 1% per annum since 198, peaking in 1996 due to heightened immigration levels ahead of the transfer of sovereignty to China. Hong Kong s population is projected to reach 7 million, and the World Bank forecasts the population to continue expanding, to reach 8.5 million in 25. In terms of population distribution, 18% of people live on Hong Kong island, which is considered the most desirable residential location. Almost 3% live in Kowloon, and the remaining 52% are located in the New Territories, which is home to a large proportion of the immigrants from the mainland. Figure 11: Mortgage take up, Hong Kong Figure 12: Hong Kong population and growth rates 2, 18, 16, Annual mortgage take up (HK$ Millions) Hong Kong population (millions) LHS Annual population growth % RHS 3.5% 3.% 14, 2.5% HK$ Millions 12, 1, 8, 6, 4, Millions 2.% 1.5% 1.%.5% 2,.% % Source: Hong Kong Census Monetary Authority Source: IMF

7 As shown in Figure 13, Hong Kong s population has been ageing for the past ten years, and currently people aged over 65 years account for more than 12% of the population. This is forecast to continue expanding to more than 34% by 25. One factor contributing to the ageing population trend is declining fertility rates, from 2.9 births per woman in the 197s to.9 in the 2s. This high old age dependency ratio is likely to negatively impact the SAR s longer term economic productivity. Figure 13: Age profile, Hong Kong 1% % % % Household sizes have also fallen from 3.3 people in 1996 to 3. in 26, reflecting smaller family sizes and also the increasing propensity for young professional people to leave home. This latter trend, combined with population growth, is contributing to increasing household numbers, which have grown 2% annually in the past decade, as shown in Figure 14. 2% % Source: Hong Kong Census and Statistics Department 3.3 Macro economic influences Hong Kong has transformed from a manufacturing-based economy to a services hub. Currently more than 21% of GDP output comprises financial and business services. However it is (mostly textiles) wholesale and retail import/ export trade which dominates GDP at 27%. In 1983, the Hong Kong dollar was pegged to the US dollar, and subsequently the currency did not experience exchange rate volatility with the Asian financial crisis. However, Hong Kong recorded negative GDP growth (-5.5% in 1998), as shown in Figure 15. Despite economic growth in 1999 (2.6%) and 2 (7.9%), the slowdown in the US economy and the end of the dotcom era had a dampening effect on Hong Kong s economy. In 21 there was another recession which was followed by the outbreak of the 23 SARS epidemic. Since 23, annual GDP growth has been above 5%, peaking in 24 at 8.5%. In 28, growth is anticipated to be more moderate, reflecting slower external demand and global economic downturn. Prior to the Asian financial crisis, unemployment in Hong Kong had been relatively low at 1.9% on average between 1987 and After the crisis, unemployment peaked in 1999 at 6.3%, and then again in 23 at 7.9%. It has subsequently been decreasing, and reached 4% in 27. Unemployment mostly impacts the low-skilled proportion of the work force; in 27, 5% of low-skilled workers were unemployed compared to just 2% of those in high-skilled sectors. Figure 14: Household size, Hong Kong Number of households (s) US$/capita 2,5 2, 1,5 1, Number of domestic households ( ) Average domestic household size Source: Hong Kong Census and Statistics Department Figure: 15: GDP per capita and growth, Hong Kong 35, 3, 25, 2, 15, 1, 5, Hong Kong GDP/capita LHS Hong Kong annual GDP growth RHS Houshold size % Source: IMF

8 As shown in Figure 16, recessionary pressures from the Asian financial crisis led to widespread deflation until 25 when the consumer price index (CPI) grew by.9%. CPI is anticipated to further increase to 3.6% in 28. Net Foreign Direct Investment (FDI) inflow to Hong Kong has fluctuated greatly. Whilst it peaked in 21 at US$ 12,431million, 22 and 24 saw negative net outflow of US$-7,781 million and US$-11,684 million respectively. However, 25 saw positive FDI inflow at US$6,416.8 million, demonstrating improving overseas confidence in the market. As shown in Figure 17, household income grew by 1% per annum between 1996 and 21 to HK$224,46 ( 14,718). However, mirroring deflationary trends in the economy, by 26 income had reduced to HK$27, ( 13,573) indicating a 2% annual decline since New supply Annual delivery of private new residential has almost halved in the last 6 years, from 31, units in 22 to almost 16,6 in 26. Just 1,47 completed units came on to the market in 27, and is expected to increase slightly to 1,98 in 28. As shown in Figure 18, new supply exceeded take up levels in 22 and 23. In 24 however, there were significantly more residential transactions than delivered new supply, thereby reducing vacancy levels. Indeed, vacancy levels peaked in 23 at 68,7 units, and as new supply levels have diminished, vacancy has also reduced by -3% annually to 62,6 in 26. This increase in housing demand was also reflected in new mortgage take up as shown in Figure 11. According to the Hong Kong Housing Authority there are approximately 65, public rental flats in Hong Kong, for which there is reportedly a substantial waiting list. Government policy is to encourage upward socio-economic mobility among existing tenants to remedy the shortage, and to produce more units. Figure 16: Unemployment and CPI, Hong Kong % HK$ Figure 17: Household income, Hong Kong 25, 2, 15, 1, 5, Figure 18: Private residential new supply and take up, Hong Kong 35, 3, Hong Kong CPI Hong Kong unemployment rate Average household income (HK$) Source: IMF Source: Hong Kong Census, Statistics Department, Savills Research New supply Take-up 25, Units 2, 15, 1, 5, e 28e Source: Rating and Valuation Department

9 However, as shown in Figure 19, public rented housing production peaked in 22 with 65, units and has subsequently declined to 29, in 27. Low supply levels of public rented properties will therefore extend the waiting lists. Figure 19: Public rented housing new supply, Hong Kong 7 Total new supply of public rented housing (s) LHS Annual supply growth % RHS 4% 3.5 Recent market performance As shown in Figure 2, massive house price inflation in Hong Kong preceded the Asian financial crisis in Between Q and Q3 1997, house prices grew by almost 58%. By Q3 1998, however, prices had dropped by over 95% in one year. There were comparatively modest, although still strong, growth levels until 21, after which a second recession saw average prices decline as affordability plummeted. Growth then resumed again in late 23. Units ( s) % 2% 1% % -1% -2% -3% -4% Source: Hong Kong Census, Statistics Department, Savills Research Trends in the luxury market mirror average house price change, although between Q3 23 and Q3 27, luxury house prices have grown by 142% compared to 44% for the market as a whole. Demand in the luxury market is fuelled by the increasingly wealthy number of locals as well as the high number of expatriates living and working in the financial hub. Figure 2: Hong Kong house price growth Average house price index Luxury house price index High demand for, and low supply of, luxury homes is leading to robust price rises in this end of the market. Transactions of luxury properties rose from 1,23 in 22 to 6,682 in 27, representing a 46% average annual increase in transactions. Limited developable space, a prevalence of high-end properties and preference for living in the Hong Kong Island area has meant prices here are higher than elsewhere in Hong Kong, as shown in Figure Source: Rating and Valuation Research, Savills Research In 1996 and 21, the price premium for island living compared to elsewhere in Hong Kong was around 32-33% on average, demonstrating the high level of demand for housing in all areas of the market. By 1996 the disparity in prices by location had begun to widen further, underlining the very strong demand for high end properties in the market and rising wealth in the SAR. Figure 21: Average private house prices, Hong Kong Average HK$/sqm 7, 6, 5, 4, 3, 2, HK Island Kowloon New Territories 1, Source: Rating and Valuation Research, Savills Research

10 3.6 Fact file Hong Kong Background Population (m) Annual population growth.6%.5%.6%.9%.9% Fertility rate (births/woman).9 Life expectancy (years) 81.9 Economics GDP per capita 23,428 24,394 26, 27,54 29,149 GDP growth % 3.2% 8.6% 7.5% 6.9% 5.7% Inflation - consumer price % -2.6% -.4%.9% 2.% 2.% Labour participation rate % 6.3% Unemployment rate % 7.9% 6.9% 5.7% 4.8% 4.2% Housing market Annual house pries (HK$) 38,442 Annual house price growth 3.3% 21.8% 7.4% -3.2% 14.%

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