On the scale of 1 to 10, how would you rate the affordability of housing in Hong Kong? (1 the lowest, 10 the highest) It can effortlessly be imagined that the result is one-sided, concentrating on the lower end. Have you ever questioned yourself why on earth do I have to bear this expensive living? How can I even live with it? If you were to choose wherever you want to reside, where would it be? The Demographia International Housing Affordability Survey may provide you with some practical indicators.
12th Annual Demographia International Housing Affordability Survey: 2016 (“The Survey”)
The Survey records an international comparison of housing affordability at the metropolitan area level. It covers 367 metropolitan markets in nine countries (Australia, Canada, China, Ireland, Japan, New Zealand, Singapore, the United Kingdom,and the United States).It rates middle-income housing affordability using the “Median Multiple”. To put it simply, this rating is calculated by dividing the average market price of a standard home by the average or median annual household income. Markets rated 3.0 (and below) are categorized as “affordable” whereas those with rating 5.0 (and above) are “severely unaffordable”, implying an alarming deviation from the average market median.
Ranking of Hong Kong
Ironically, Hong Kong “came first” in this Survey. In the third quarter of 2015, we got the highest rating of 19, making it a severely unaffordable city to live in. Sadly, it saw a substantial worsening from 17 in 2014, reaching a record high in the twelve years of the Survey. These results are no tip of the iceberg as the list of the least affordable metropolitan areas largely echoes the UBS Global Real Estate Bubble Index, which ranks London, Hong Kong, Sydney and Vancouver as most vulnerable to risk from a real estate bubble.
So, what do these figures imply?
Experts forecast that home prices in Hong Kong will fall in the near future. Potential buyers may delay purchase, fearing a further fall in property price, thereby stabilizing the market and hopefully, resuming the affordability rating to a lower level.