I just find it confounding that HK savings rate is low yet LTV for mortages is pretty low due to regulations. More reason for people to not be able to afford flats.
This is where i have serious doubts, wages not rising much on entry level/lower level, rise in middle level could be negated with higher cost of living, continuous growth in property/stock price should attract more money in the same asset class (e.g. Upgraders making profit on small property and investing in big one, investors putting down payments in multiple properties etc).. Agreed many of them could be setting aside small % profit in FDs and regular high saving ratio of HK should contribute to overall higher deposit amount still cant fathom such growth rate coming from small population.. Also lot of high value non-luxury property transactions (i.e. 8-15M) in last couple of years indicates more money flowing into it and not much buying power left in the market for average person so overall i think huge portion of it could be outside money..average monthly salaries have been rising and property prices and equity markets remain robust.
Also there are more people in the workforce in total now than a few years ago so even if the average savings rate remained low, the total amount being saved would have to increase.
I take your point on a lot of savings being sucked into expensive real estate but the flip side to that is that because almost all mortgages in HK are P+I, every month there are people whose mortgages are being paid off and who suddenly have a lot of additional cash flow.
I do have another question on the statistics I have been looking at - whether the savings rate is based just off what people save from their salaries or whether it includes savings from other income sources. I assume the former but don't actually know.
I was looking at it very very broadly from population/workforce/average household income perspective..
For reference, in 2014, total HKD deposit was around 4.8T and now its 6.8T, so 2T in 5 yrs..
From workforce perspective, 2T/3.9M comes around 500k in 5 yrs which is 100k saving/person every year, sounds very difficult across all income groups..
From household perspective, with median household income 335k(roughly 28k*12) for a household of 2-3 person, 2T/2.5M households comes around 150k saving/household every year, seems extremely difficult even for public housing renters..
For those with mortgages being paid off, most likely they are investing in another property so no more cash flow and on the other hand large chunk of renters have to dip into their savings every year for rental increase as well..
Agreed HK's average savings rate is one of the highest in the world but even with that being 25%, seems impossible to amass so much..
I'm afraid I'm going in the other direction - the more I think about it the more convinced I am that the majority (I'm not claiming most) of the increase in bank deposits is largely organic.
In addition to savings from employment income, the net cash flow from businesses, shares, bonds, bank deposits (okay - that one is very low), rents etc is huge.
Back of the envelope calculation: HKEX market cap of listed companies (excluding bonds and warrants) is somewhere around HKD30 trillion. If I assume an average yield of 3% (lower than 2800 to account for a number of companies not paying any dividends), that alone is around HKD900 billion in dividends floating through the system. While there is certainly an element of "in one hand out of the other" a huge amount of it is generated from outside HK. Even if the majority of it is spent or reinvested, it's a sufficiently large waterfall of cash to make a big contribution to the annual growth in bank deposits. Add in bonds, rents etc and the the proposition becomes more realistic.
On property investors reinvesting, I'm sure many do but 100% of people I surveyed this afternoon did not or don't plan to reinvest in the HK property market once their mortgages are paid off. The sample size was a whopping 3 people so no more than anecdotal but still .... The main reason cited for investing elsewhere is the punitive stamp duty.
Then there's another way of looking at it. Hong Kong has a million people with a million dollars of investable assets (which do not include real estate or which they also own a lot). That's a very large number of affluent people most of whom got there through high savings rates and sensible/lucky investing. They also have on average 14% of their assets in cash according to this:
American uni educated working professional family
Savings account : less than US $5,000
Hong Kong public housing grass roots family
Savings account : Greater than US $30,000
My opinion, no idea what the true stats are.