Hong Kong property Market

A basketball flies toward a hoop near residential buildings in Hong Kong. Bloomberg News

Home prices in Hong Kong have reached their highest point ever, according to an index compiled by one of the city’s largest property agencies.

“We have three [indexes]: one is the whole market, one measures small units and one measures high-end units, ” said Sandia Lau, a director at Centaline Property. “All of them are at a record high.”

The Centa-City index is compiled every week by tracking recent transaction prices of 118 of the most-traded units in Hong Kong, the second-most expensive real estate market in the world. A property in the city’s exclusive Peak neighborhood was just listed for HK$819.1 million, the world’s most expensive home per square foot.

Analysts attribute Hong Kong’s steadily rising prices to a series of economic and regulatory factors. A combination of low interest rates, currency stability and stringent government regulations on development have fed years of demand while buildable land, always scarce in Hong Kong, continues to shrink.

“There’s still a low interest rate, which makes demand a bit urgent now, ” Ms. Lau said. “People feel the economy is quite stable, and because [the Hong Kong dollar] is [pegged] to the U.S. dollar, it attracts foreign money—people are trying to buy assets to protect their money from depreciation.”

She also pointed out that various regulations hinder injections of new housing supply into the market. “You can only build so many units, they have to be a certain size… When the Hong Kong government puts land on auction, they put limitations on it, ” she added.

Prices hit new highs despite extensive government measures to cool the red-hot market. In 2012, three new property taxes were rolled out in quick succession, including a 15 percent tax on foreign buyers meant to deter speculators from mainland China. But in the two years since the measures were enacted, the index has only continued to climb, rising from 94.02 in February 2012—when the last of the taxes were implemented—to 134.14 today. (The index is anchored to prices in July 1997, which are represented by a value of 100.)

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