Yesterday the Hong Kong government revised its forecast for the supply of new flats in Hong Kong this year downwards by more than 30%. The number of new completions is expected to be 10,980. This compares with the previous forecast of 16,000 units and the 10,470 units completed in 2007 and a forecast on 12,670 for 2009. These numbers contrast strongly with the average of 27,000 new units a year completed between 1998 and 2004.
With very low mortgage interest rates (2.8%), rising inflation (3.4-4+%, depending on which numbers you look at), rising incomes and high levels of liquidity in the banking system, the reduction in the forecast supply of new properties is good news for property owners.
Of course, history has shown that confidence is also an important factor in the demand for property and the prices people are willing to pay. The declines in equity markets and generally gloomy economic news from the United States (and, to a lesser extent, other markets) has the potential to be a drag on the market. Whether this will overcome the underlying fundamentals remains to be seen.
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