Nomura’s Paul Louie is out with a huge report examining the Hong Kong real estate market for 2013. It highlights another way the economy is changing in one of the world’s fastest growing and dynamic city’s
The country’s condos have always been famously expensive, but as Louie notes, Hong Kong is in a particularly precarious situation, because growth is slowing, while residences are more expensive than ever before.
By at least one metric, home prices/income, housing is as expensive as it has ever been.
However, the really interesting thing is the theory that the apartment bubble is causing a “reverse baby boom” so to speak.
We are not seeing the usual boom in Dragon babies – Even on the demographic front, we are witnessing something very unusual. In the first eight months of 2012, there were only 60,103 births in Hong Kong. Compared to the same period in 2011, this is down 5.2% y-y. In the past two Years of the Dragon (2000 and 1988), the number of births rose by 6% and 4% even as the marriage numbers declined by 1% and 7%. Thus, the current condition of a 5% drop in births while marriages are up by 5% is highly unusual. Considering that this is the Year of the Dragon and private hospitals’ zero quota on mainland babies does not come into effect until 1 January 2013, the decline in the birth rate may suggest that Hong Kong may have become so unaffordable that local fundamental demand is now being curtailed.
The connection seems hard to prove, but that is quite a drop in a year that was expected to see a baby boom. If there’s a sense of a real estate bubble, and people are feeling less secure about their incomes, it seems plausible.
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