Hong Kong homes becoming more affordable than China, BofA says

[HONG KONG] Chinese buyers are stepping up home purchases in Hong Kong, where prices are becoming "relatively more affordable" compared with some major mainland cities, according to Bank of America Merrill Lynch.

Interest from mainland buyers, amid a surge in home prices in many Chinese cities, may support Hong Kong's property market, analysts Karl Choi and Fan Tso wrote in a note dated Thursday.

Hong Kong's housing affordability ratio, which measures mortgage payments as a proportion of median household income, now stands at 58 per cent, compared with between 80 per cent to 124 per cent in three first-tier Chinese cities, they said.

"The home price gap between Hong Kong and the first-tier cities in China has narrowed," the analysts wrote. "More mainland investors might consider buying a second home in Hong Kong for diversification or wealth-protection purposes."

Chinese authorities have also introduced purchase restrictions and toughened mortgage lending to rein in property prices in the bubble-prone nation. Housing prices in China rose by the most in six years in August, with the biggest gains in large cities such as Shenzhen.

Mainland buyers have accounted for a higher proportion of Hong Kong property sales in 2016, driven by rapid price growth in China and a heightened interest in offshore assets, the analysts said. Some investors could have sold properties in China to lock in profit, then decided to re-deploy the proceeds in Hong Kong, they said.

BLOOMBERG