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Hong Kong: A property boom you can feel

By Dean Irvine, CNN
  • Recent research placed Hong Kong as most expensive city for housing in the world
  • Low borrowing rates, lack of land and lots of investors from mainland China boost prices
  • On average each Hong Kong resident has 100 square-feet of living space
  • High density city means buildings often obstruct views; close-up view of neighbors

Hong Kong (CNN) -- In Hong Kong you can feel the current property boom.

Relentless hammering from new construction sites shakes the affluent streets of Mid-levels, a property hot-spot in a city that has become one the most expensive and least affordable place for housing in the world.

But for some Hong Kong residents who now find themselves on millionaire's row, thanks to a doubling of high-end property prices in the last five years, the boom is more like blight.

"It's a war zone," shouts Katty Law, above the earth-shattering noise of pile driving at a building site just a block from her home. "The noise is terrible, I don't want to stay here too long. It drives people crazy."

Ms Law is a member of a local community pressure group who is almost despairing of the current construction in her neighborhood despite the rise in property values. Last month property prices in the city reached a 13 year high.

Feeling Hong Kong's property boom
Living in HK's property 'warzone'
We're very good at knocking things down, but not so good at building things like connections between communities.
--Professor Paul Yip, Hong Kong University

"The prices are going up, but it's just a dollar sign, it means nothing," she says.

"Even if I sell my house I can't buy the space that I enjoy. I have to buy a smaller place and live further away not near my family. It means you got stuck in a place and you have no choice, even though the price is high."

A modest 1,200 square-foot (111 square-meter) apartment in an "old" building in Mid-levels can easily cost around 15 million Hong Kong dollars ($1.9 million); newly built high-end apartments can easily be double that amount.

A survey by Savills found that the very top end properties sell for a staggering $10,550 per square foot, but even the lower rungs on the property ladder will be 40% more expensive in Hong Kong than London, New York or Moscow.

Hong Kong's lofty position as the most expensive place for housing has been fueled by record low borrowing rates, hot money from mainland Chinese investors and a chronic lack of space.

The Chinese mainland investors are "the elephant in the room" says Simon Smith, head of Asian real estate research with Savills, who explains that "there's nothing like bricks and mortar in a stable legal environment" as an attractive investment opportunity.

Many of the apartments in the slew of skyscrapers being built in Law's Mid-levels neighborhood (eight within a few hundred meters of each other) will be left empty once completed, as around 30% of new high-end buildings in the city are bought by Chinese mainlanders. They're for investment purposes and the buyers have no interest in living in them or incurring rental regulations, says Alnwick Chan of Frank Knight.

Even those invested in the market find the situation of high prices for small spaces ridiculous. A local real estate agent and lifelong resident of Mid-Levels (who preferred to remain nameless) said a first-floor, 360 square-foot (33 square-meter) apartment next to a construction site would sell for around $500,000, but it was a crazy situation.

Even if I sell my house I can't buy the space that I enjoy. I have to buy a smaller place and live further away.
--Katty Law, Hong Kong resident
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In a city where convenience is prized above all, a central location twinned with a sea view commands the biggest bucks. However the city's ever changing skyline means these views can't be guaranteed for long as Elina Li, another long term resident of Mid-levels, is finding out.

The view across the harbor and distant mountains from the window of her 17th floor apartment is being replaced by a 53-storey luxury apartment block.

"When the building is finished I think I'll see people having breakfast in their dining room and I'll be able to wave hello to them," she says.

Having an insight like that into a neighbor's life isn't uncommon in the city that has one of the highest population densities in the world. Only around 24% of Hong Kong is built upon, so high-rise living is a fact of life for the majority of the seven million inhabitants.

Illegal, home-made apartments still top some of the older buildings and the clamor for space throws up some remarkable juxtapositions. The view from the windows of a building on Bonham Strand West in Central Hong Kong will soon be of a new hotel, just 10 centimeters away.

But if close physical proximity is common in Hong Kong, being connected to neighbors is not, according to Professor Paul Yip of the University of Hong Kong's department for social work.

"People in Hong Kong do live very close to each other, but they live in very confined areas and they might not know the name of neighbors next door," he says.

"In Hong Kong everyone on average has about 100 square-feet in a living area. The appreciation of heritage is not always a priority. We're very good at knocking things down, but not so good at building things like connections between communities. Often the relationship in a community has not been rebuilt. "