Last year's big price jump, external factors weigh on market
The Hong Kong dollar is losing its buying power at a rate of 3.8 per cent a year as a result of inflation, and with savings deposits earning just 0.25 per cent a year, money kept on deposit with a bank will lose its real value.
'All things being equal, putting that money down on buying an apartment would seem to be an obvious move,' said Joe Lo, Citigroup's senior economist for Asia-Pacific economic and market analysis.
The argument for quitting cash and buying property looks even more compelling when taking into account that at an effective 3 per cent - and likely to head lower - the monthly repayment on an average home loan is now negative in real terms (compared with an inflation rate of 3.8 per cent), and in many districts is now below the cost of renting.
'While this does not immediately trigger a mass exodus from bank deposits to the property market, it does start to erode the value of savings and is another prompt for people to invest their money,' said Mark Konyn, the chief executive of investment manager RCM.
But all things are not equal. For one thing while domestic conditions seem to favour buying property, an unknown element that complicates the investment equation is what is happening in global financial markets - chiefly in the United States, to which the Hong Kong economy is closely tied.
