Hong Kong Residential: the More Rich People, the Higher the Price / ft2

Stephen Chung

Managing Director

Zeppelin Real Estate Analysis Limited

March 2006

Recently there was a report by a bank giving details on the number of millionaires in each district of Hong Kong. Millionaires are defined as people having HK$1M or more (HK$7.80 = US$1.00) in liquid assets (such as cash, stocks etc). Hence, just for fun, your humble author has attempted to match such numbers against published real estate price data to see if there is a relation between the number of wealth folks and the typical / representative average real estate price per floor area (HK$ / ft2 GFA).  

While reminding the readers that such calculations tend to very ‘ballpark’, there seem to be some correlation between them. A few notes as follows first: 

1)      Numbers of millionaires = were based on those released publicly by Citibank recently

2)      Real estate average prices per floor area data = were based on those found in the Centaline Agency’s Centa-City Index webpage

3)      Subjective judgment = might have existed when selecting the average price data of a district-representative-reflective residential complex to use

4)      No weights applied = i.e. no adjustments, plus or minus, have been done for a district with a higher population and / or with a higher quantity of residential properties 

The results are as follows: 

A)     HK Wide = the correlation is around 0.53, which is not overly high yet definitely implies some relation between them [Note: a different correlation may be arrived IF hypothetically someone decides to select residential complexes different from the ones selected by your humble author]

B)     HK Island Only = the correlation is not only lower at 0.41 but demonstrates a negative gradient. Nonetheless, this may have to do with the data macro-limitations and the sample size being very small.

C)    Kowloon Only = the correlation is not very strong at 0.36.  

D)    New Territories Only (including the islands other than Hong Kong Island) = the correlation is around 0.54 being very close to the territory wide figure.  

By and large, these correlations, notwithstanding their broad-brush tendencies, may suggest that the district demarcations and their coverage (seemingly following broadly the electoral districts) are generally sizable to an extent that no district is distinctly and overwhelmingly rich or poor i.e. there are rich folks even in the perceivably poor districts and not so rich residents in largely well-off districts. Alternatively, it may also mean some rich folks lead relatively plain and frugal lifestyles, including living in a modest home.

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