Information Paper for the Meeting of the
Legislative Council Panel on Housing on 6 January 1997
Private Residential Property Prices


Members have expressed concern about the movements of private residential property prices over the past few months. This information paper briefs Members on the current market situation and gives some initial observations.

Price levels

2. Property prices in the secondary market continued to increase in November 1996. The (provisional) overall price index was 3% lower than the market peak in April 1994, 6% higher than that in October 1996, and 32% higher than the market trough in October 1995.

3. Although property prices in November 1996 were close to the market peak in April 1994, prices in real terms (i.e. after adjustment for inflation) were about 20% below the market peak for small/medium-sized flats and large flats. 1)

4. In recent months, prices of large flats generally have been rising slightly faster than small and medium-sized flats. (Annex A)


5. The number of Agreements for Sale and Purchase (ASPs) of all residential units registered by the Land Registry in November 1996 was 14 427, which is higher than the market peak of 13 174 in April 1994. The total consideration involved was $47 billion.

Mortgage lending

6. According to a survey conducted by the Hong Kong Monetary Authority (HKMA), the total amount of outstanding mortgage lending rose by 1.8% in November 1996 to $319.9 billion, which is higher than the monthly average of 1.5% over the last twelve months. Property prices, particularly those at the upper end of the market, have risen sharply in recent weeks and there are signs of renewed speculative activity. The HKMA has recently advised banking institutions to exercise additional care in relation to their property exposure and to adhere strictly to the 70% loan to value ratio in respect of their own lending exposure and to avoid arrangements which circumvent this ratio. It is also stated that a lower ratio than 70% will normally be appropriate for more expensive properties, and the valuation of such properties should be carefully examined.

Speculative activities

7. The number of short-term resales (within two years) in November 1996 was 3 022, which was close to the highest level of 3 177 in April 1994. The ratio of short-term resales to the total number of stamped agreements has been increasing since October 1995 : to 15% in October 1996 and to 18% in November 1996, although this is still lower than the peak of 22% in June 1994.

Transfer of companies or shares

8. There has been a significant increase in speculation through the purchase of flats in the name of companies and then the transfer of companies. In parallel, speculation also takes place in the form of transfer of successful ballots registered in the name of companies before flat selection. In November 1996, there were 778 speculative cases using companies, compared with 362 such cases in August 1996, 378 in September 1996, and 529 in October 1996.

Initial observations

9. There are mixed signals in the market. Prices in real terms (after adjustment for inflation) in the secondary market are still about 19% below the peak in April 1994. Since early 1996, prices of small/medium-sized flats have risen steadily, and prices of large flats have risen relatively faster. The primary market has seen a revival of speculative activities. Some developers have been releasing flats in small batches, with initially low prices, to attract a favourable market response. This is then exploited by speculators using companies to circumvent the resale restriction under the Consent Scheme. Another problem which has emerged is the sale of ballots through shell companies for speculative purposes.

Way forward

10. The Secretary for Housing has set up an inter-departmental group with the task of collating information on the residential property market and monitoring the situation on a regular basis, particularly the impact on the massive end-user market. If necessary, the group will consider suitable measures to deal with a deteriorating situation. In parallel, we will continue to make available sufficient land for housing development to meet demand and to encourage property developers to accelerate their building projects.

Housing Branch
Government Secretariat
December 1996

Annex A

Changes in transaction price indices for selected residential developments by classes

November 1996

compared with

Small and Medium Sized Flats

Large Flats


January 1993




April 1994 (peak)




October 1995 (trough)




January 1996




October 1996




Note: The provisional figures of October 1996 and November 1996 are used in preparing the comparisons.

"Small and Medium Flats" refers to flats with saleable area not exceeding 99.9 m2..

"Large Flats" refers to flats with saleable area of at least 100 m2..

The base for each property group in a sample development is the average unit price for transactions effected during the period July 1992 to December 1992.

Last Updated on 20 August 1998