SINGAPORE/HONG KONG • On the surface, the property markets in Singapore and Hong Kong have much in common. The two Asian financial hubs have both moved to rein in runaway home prices in recent years as they sought to make housing more affordable.
Yet, home values in the cities have diverged. Singapore has been successful in damping buyer demand with curbs, while restrictions have had little impact on Hong Kong's gravity-defying market, which is rebounding after a short-lived dip.
Urban planning researcher Demographia last year found Hong Kong housing to be the least affordable it has measured in 11 years of surveying large urban markets.
Singapore ranked 27th on the list with its overall affordability score holding steady in recent years. It takes an estimated 19 years of median household income to buy a home in Hong Kong, compared with five in Singapore.
Singapore's public housing model offers one explanation for how the city has been able to keep a tight leash on prices. Homes owned under a programme run by the Housing Board accounted for 80 per cent of all dwellings as of last year.
Hong Kong's public housing accounts for only about 21 per cent of total home ownership, and there is an average waiting list of more than three years to obtain a government flat in the city.
"The fundamental difference between the two property markets is that in Singapore, there is a big public sector," said Mr Raymond Yeung, chief economist at Australia and New Zealand Banking Group.
Hong Kong also has severe land-use restrictions and a higher population density, Demographia noted, resulting in a shortage of land supply. Less than 25 per cent of Hong Kong's land has been developed, according to government figures. Even with a 6.3 per cent drop since a peak in September last year, home prices in Hong Kong remain up 35 per cent since curbs were rolled out in 2012.
Home sales, which dipped to a 25-year low in February, rebounded last month to levels not seen since at least the beginning of last year.
Another possible explanation for the Hong Kong market's resilience this year is a resurgence of interest from mainland Chinese.
Seeking alternatives amid surging home prices in cities such as Shanghai and Shenzhen, they accounted for 9 per cent of total Hong Kong transactions in the three months ended June 30, compared with 5.8 per cent in the same period last year.
By contrast, the share of Chinese buyers in Singapore has been on the wane, with mainland investors representing 6.9 per cent in the second quarter, down from 7.1 per cent last year.