Property prices are being driven to stratospheric heights , and, the boom in property prices has little to do with anything other than historic low interest rates. Property income yields are at historic lows and yet property buyers couldn’t be more enthusiastic. Buyers, who tell me that they don’t mind buying on a yield of 2.5 per cent because they will get a capital gain need to understand that the capital gain will only come when a buyer is willing to accept an even lower yield.
Surging house prices have nothing to do with a shortage of land. Hong Kong has less land and a much higher density of people per square kilometre and that has not prevented falling property prices. Moreover, surging dividend incomes, retiring baby boomers and Chinese fondness for our climate and air quality are all “weight-of-money” arguments that have never prevented falling prices.
Sourced from D Cameron