A recent survey has claimed that Hong Kong homes are the least affordable in the world - with the average flat costing 10.4 years of household income. This compares to 9.3 times for Vancouver and 9.1 times for Sydney which came in second and third on the survey. The survey uses median property values and median gross income levels to calculate affordability. In the case of Hong Kong, the medium house price was HK$2.18 million (US$280,000) and the medium household income was HK$210,000 (US$26,900).
Hong Kong fares better in terms of affordability with between 44% and 34% of household income being spent on mortgage payments (depending on which calculation you wish to use).
The survey makes the point (as have a lot of people, including myself), that the affordability ratio is based on the current very low interest rates (0.8-2.1% pa in the survey - which is actually higher than I am paying on most of my mortgages). Because those interest rates are floating, it means that any increase in interest rates will have an immediate and substantial effect on affordability.
I agree with both the fact that housing is very expensive in Hong Kong and that affordability (and, by implication, property prices) are vulnerable to a rise in interest rates.
What I don't agree with are the validity of comparisons between markets. In particular, basing the expensiveness and affordability calculations using gross income ignores two important facts about Hong Kong - a person on the median income in Hong Kong will pay zero income tax. This is not true for many of the other markets surveyed. In addition, only a small minority of people in Hong Kong own cars - that is significant expenditure which a lesser percentage of Hong Kong residents incur than would be the case in a lot of other markets.
There is, of course, another basis for differentiating the Hong Kong market from other markets - the extent of taxpayer subsidised home ownership programmes in Hong Kong goes far beyond first home buyer credits and rental subsidies in other markets.
So, yes Hong Kong real estate is very expensive. Yes, it is probably over priced. Given the flaws in the survey methodology, I do not know how overpriced it is and how it really compares to other markets.