Hong Kong home prices unbelievably soared 111% since 2008

What does this imply?

According to Barclays, one of the oft-cited bull-case arguments for the Hong Kong property market is the absence of leverage.

For instance, 60% of Hong Kong home owners do not have a mortgage, and for those that have taken on a mortgage over the past two years, with LTV at origination only c55%, the market is healthy.

Here's more from Barclays:

Although these are the stats, another key statistic is that since the end of 2008, Hong Kong’s total mortgages outstanding have increased by 50.6% from HK$600bn (Nov 2008) to HK$904bn (Nov 2013).

The other point to note is that total mortgages outstanding as a percentage of total loans has declined from 25.7% in 2003 to only 14.0% in November 2013. For one to conclude that there is little leverage in the system, one needs to have a good idea that the other 86% of loans have not somehow found their way into the property market.

A more telling picture actually emerges when we consider total loans in Hong Kong. Over the same period (November 2008 to November 2013), total loans in Hong Kong have increased by 92.7% from HK$3.35tn to HK$6.46tn.

By comparison, Hong Kong home prices have increased by 111%. As the figure below clearly shows, with the two lines of total loans and home prices almost right on top of each other, we believe the property market has clearly been a beneficiary of liquidity during the QE period.