HPI Trend Highlights

1)  1997 Asian Financial Crisis and 2003 SARS
Since 1997, the Asian Financial Crisis started to drive down the local economy and asset prices. In 2003, the outbreak of SARS further dampened the traders’ confidence in housing investment in Hong Kong. Hence, the housing demand plummeted. Later in June 2003, Hong Kong had been removed from the WHO’s list of ‘SARS-affected Area’, the economic recovery gradually restored the positive market sentiment in property investment, and the HPI started to increase.

2) Financial Crisis in Year 2008
The Global Financial Crisis in 2008 had led to synchronized economic downturns in Hong Kong, the domestic demand on residential property market dropped. Hence, the HPI attained another local minimum in 2008, but they were still higher than the historic minimum in 2003.

3) Continuous Growth since 2009
From 2010 to 2014, the government implemented a series of cooling measures against the speculation in residential properties sale, such as introducing Special Stamp Duties in 2010 and Buyer’s Stamp Duties in 2012. Hence, the transaction cost of residential property sale has been significantly increased and the HPI grew less sharply from 2012 to 2014.

4) Drop from 2015 to 2016
From February 2015, HKMA announced the Prudential Measures for Property Mortgage Loans, which reduced the maximum Loan-To-Value (LTV) ratio and the minimum debt servicing (DSR) ratio. Therefore, more home purchasers or speculative investors failed to seek enough source of finance in property mortgage. Therefore, the HPI declined.

5) Growth from mid 2016
However, additional financing schemes have been offered by private developers especially for first-hand sale residential properties, such as the secondary mortgage plans. Therefore, property purchasers who lack sufficient savings for down payment are still able to reach the entry requirement of property purchase through secondary mortgage, more property transactions can be conducted and the HPI has been driven up.

Summary of HPI Trend
Overall, the Royal Peninsula HPI has demonstrated a sign of underperformance in the market since 2008 due to insignificant transaction volumes. However, the overall price trend is still in line with the market growth. Due to the high degree of free-market economy and well-established financial system in Hong Kong, together with the ever-growing housing demand, traders in the housing market can flexibly absorb the changes of external shocks, and the HPI can recover its growth soon after significant decrease. In spite of the influential presence of government intervention in the housing policy, the HPI generally grows with fluctuations over the historical timeline.