Marketing sales manager David Li was badly burnt when the Asian financial crisis and global downturn sent property prices tumbling 10 years ago.

Marketing sales manager David Li was badly burnt when the Asian financial crisis and global downturn sent property prices tumbling 10 years ago.

He had spent HK$3 million (S$590,000) on a 475 sq ft two-bedroom home in Quarry Bay when prices were at their peak just months before the handover.

‘I cut my losses and sold it for about HK$1.65 million in 2005, when there was a rebound in the sector,’ the 41-year-old told The Straits Times. ‘Even now the place is worth just HK$1.8 million.’

Luxury homes aside, the overall property sector remains 30 to 40 per cent below prices seen at the peak in 1997 - a time when the Hong Kong economy was booming from increased trade with mainland China and the rest of the world.

‘Things are more stable now, and most people are much more realistic after the experience of the financial crisis as well as Sars,’ said Mr Michael Ng, a managing director at property firm Savills.

Mass-market homes now average HK$3,500 to HK$4,000 per sq ft in a city where the median monthly income was HK$17,250 last year.

A recent boom in the luxury home sector - typically units exceeding 100 sq m - has spilled over to the suburbs.

Some projects in places like Sai Kung, Tai Po and Sheung Shui are commanding prices once reserved for high-end districts such as Repulse Bay and the Peak.

‘In the mid- to long run, there is the danger that the average person will be priced out of his dream home,’ said City University professor James Sung, who sits on public advisory boards.

‘This is a hot potato facing the current administration, which could turn into a big social and political problem if not properly addressed.’

The government recently resumed sale of public homes, reserved for lower-income groups, to cool the market as well as to meet rising demand for more such homes.

It had stopped building the public flats in 2002 to arrest a five-year property slump.

Mass-market apartments are forecast to appreciate by around 5 per cent this year, while luxury homes are expected to rise by 10 per cent to 15 per cent on average.

A bubble, however, is unlikely to form, analysts said, citing the fact that apart from the top-end homes, the rest of the property sector is still cheaper than the 1997 levels.

But Mr Li has learnt his lesson. He now rents a 900 sq ft place for HK$18,000 a month, because of the ‘reduced risks’.

Source: The Straits Times, 30 June 2007