Hong Kong’s housing market is slowing but surely on the path to recovery
- Sentiment around the property market has improved and sales have trended up
- There are a lot of Hongkongers, local and expat, sitting on cash and looking for somewhere to put it
In early September, on the Friday after the government relaxed Covid-19 measures that restricted on-site dining, it was nigh on impossible to find a table at your favourite restaurant (capacity limits remained). In all corners of Hong Kong, six weeks of stagnation had led to an outburst of pent up demand – for everything. People wanted out.
Similarly, with infection numbers averaging in the (mostly) single digits this month, and business getting back to something resembling “as usual”, sentiment revolving around the property market has also improved, and in another display of pent up demand, sales have trended up. In September, sales clocked in at 6,581, surpassing August’s total of 5,390, according to Land Registry data.
But research by JLL seemed to fly in the face of that good news. JLL stated luxury property sales in the first half of 2020 plunged 17 per cent over the same period in 2019, although capital values ticked up by 0.4 per cent in the second quarter.
St George’s aside, inactivity in the secondary luxury market was more pronounced in the HK$50 million to HK$150 million neighbourhood, simply because of the inability to physically see a property. The July/August lockdown effectively halted viewings, and as innovative as virtual tours may be, they’re no match for the real thing. Add to that, owners with strong holding power and prospective buyers who are waiting to pounce on distressed properties are going to keep waiting.
Plenty of other news slowed things down this summer. A resurgence in Covid-19 infections led the charge, but the implementation of the national security law in July also created a flight of capital overseas. There’s no denying the law is an immediate term disrupter that will require adjustments, but lest we forget, many Hongkongers, both native and naturalised, have few flight choices. For most of us this is home. We have jobs and lives, and have built businesses in the special administrative region’s low-tax environment and we’re not ready to give them up, whether possessed of a foreign passport or not. As is usually the case, the SAR will adjust, reset and move on.
The markets aren’t going to start picking up significantly until at least 2021, probably after Lunar New Year, so what does that bode for the rest of this annus horribilis? An even keeled market for Hongkongers.
More than ever before, Hong Kong is an end-user residential market. As long as governments, economies and the people who work in them can keep the coronavirus pandemic from worsening, that pent up demand is going to continue trickling out. It may not explode, but potential buyers are going to recognise the new market dynamics are unlikely to become any more favourable and will drop their wait-and-see attitudes. There is too much stability and liquidity in the market, and interest rates are still historically low.
In the mid market, the HK$25 million to HK$50 million space, upgraders are going to underpin any transactions, as families take aim at outlying districts with more space, both inside (where a home office might fit) and out (in the event Greek beaches remain out of reach for an extended period), to meet the world’s shifting Covid-19 conditions.
And as gutting as it is to see the services and retail industries suffering, it has been a good year in finance. As a result, there are a lot of Hongkongers, local and expat, sitting on cash and looking for somewhere to put it. It’s entirely within the realm of possibility that Hong Kong sees a bump in the HK$50 million-plus market sooner rather than later.
Victoria Allan is the managing director and founder of Habitat Property
