Residential Property Prices example essay topic

Content 1. Introduction P. 1 2. Background P. 2 a. Pre- Crisis Situation f{ The Demand and Supply In The Property Market f{ Residential Property Prices f{ Interest Rate b. After Crisis Situation f{ The Demand and Supply In The Property Market f{ Residential Property Prices 3.

Effect of Asia Financial Crisis P. 4. Interest Rate Change P. 5. Bank's Strategy P. 6. Future Expectation P. 7. Reference P. Background Pre- crisis situation The Demand and Supply In The Property Market There was the shortage of residential quarters to accommodate Hong Kong's households throughout the 1980's. Between 1981 and 1986, the gap between residential quarters and the number of households exceeded 200,000 each year.

According to the 1981 population census and the 1986 by-census, the number of households sharing one residential unit was 1.4 and 1.24 respectively in the private sector. However, the gap was largely closed in the 1990's with the steady supply of residential properties and slow population growth. Between 1991 and 1996, there are basically no shortages of quarters, and the quarter-sharing ratio fell to 1.09 in 1996. Since the generic shortage in residential quarters is no longer prevalent, supply alone will no longer dominate the future course of the property market. Factors affecting demand are equally important.

Until 2002, Hong Kong residential of demand is greatly less than supply. Because Hong Kong has faced a serious problem of! SS negative equity!" is continuously increasing after Asia Financial Crisis in 1997. Moreover, the SAR Government m release! SS 8.5 million housing policy!" to make public rental housing exceeding supply. Owner-occupiers think that apply the public rental housing is the best strategy to own housing.

Furthermore, according to the Census and Statistics Department the number of households sharing residential ratio fell to 1.05 in the private sector in 2000. The above factors effecting owner-occupiers are lack of capital and lack of confidence to invest in the property market. Residential Property Prices In the property market boom that started in 1985 and which lasted until 1997, residential property prices had surged some eightfold. The market's stellar performance was attributed to a combination of many special factors, including the 50-hectare land sale restriction, rapidly rising household incomes as Hong Kong benefited form mainland China's opening up, and the negative real interest rates in the early 1990's. 3 types of buyers are active in the property market in the past two decades, furnishing the price increase momentum. They are owner-occupiers, property investors and not least of all, the property speculators.

Speculation has been a major force behind the local property market. Speculative activities can be discerned through indicators such as the number of confirmed transactions and the volume and prices of the ballot papers offering a buying right for uncompleted units. With huge financial resources, speculators have the ability to push up prices substantially in a very short period of time. The nature of the property market only allows speculators to take a long position. The faster property prices climb, the more speculators would enter the market reaping the windfall profits, but not vice versa.

Therefore, the rise in property prices and their subsequent sideways destabilization in 1991 to 1997 make much room for the speculators to maneuver, and speculative activities swell sharply as a result..