Hong Kong’s housing market demonstrates its resilience and will continue to roll with the punches in 2022
- Investors and end users alike will be wrestling with the same factors they always have, chief among them high demand and low supply, particularly in the luxury sector
- Don’t be surprised if spots like Red Hill, Regalia Bay and Tai Tam enjoy price gains of up to 10 per cent this year, says Habitat Property’s Victoria Allan
Things cooled off in the third quarter when the Evergrande Group debt crisis really exploded in October and caused investors, shareholders and the central government in Beijing to sit up and take notice. The Evergrande quagmire threw a dampener on Hong Kong’s sentiment-driven market, making investors cautious in light of how the banks may be exposed to the developers massive debt.
That said, authorities in China are unlikely to let the Evergrande fire rage out of control and drag down the entire sector. Coming up on the end of the year, traditionally a quiet period that doesn’t really activate again until after Lunar New Year, prices mostly stabilised – flattening rather than falling – and prospective buyers exercised their conservative muscles.
First up, interest rates. One of the fundamentals that has underpinned residential transactions for years is not going to change. A hike in interest rates has been the fear every year for the last 15 years and it hasn’t happened. It’s not likely to any time soon, and if rates do go up, the lowly quarter or half point won’t take us out of a low interest rate environment.
Second, a generous amount of liquidity remains in Hong Kong; the banks have had a banner year, as has the stock market. That’s going to carry into 2022. Third, we’re all here. As long as travel restrictions remain in place, we’re not going anywhere and buyers are looking to make the most of their homes. Finally, the fourth factor, supply and demand, is a familiar one.
In 2021 luxury activity was concentrated in the HK$60 million (US$7.7 million) to HK$100 million range, but there could be a pivot to HK$100 million-plus if there’s no sign of a border opening. Prices will be propped up by the fact that there’s so little supply in the secondary market, and only Ansaldo in Shouson Hill and Central Peak in Mid-Levels are primary sales contenders in the short term.
There are speed bumps to watch for, however. Fresh measures that align with mainland housing policy could chill the market, and coronavirus is not going away: Europe is seeing another Covid spike, and now the Omicron variant is a looming challenge – and there are likely to be more variants down the road. While the current quarantine regulations have indeed insulated Hong Kong, they are also dampening sentiment and could continue to do so, potentially leading to an expatriate exodus out of Hong Kong in the summer as some residents prioritise their families. Executives could be temporarily relocated to places easier to come and go from for companies whose business and competitiveness relies on staff moving around.
Ultimately, though, Hong Kong’s property market has a way of adapting to shocks; it rolls with them far better than other global cities and moves on much faster. The lower Peak and upper Mid-Levels areas and Island South in particular are outperforming every other market sector right now, and spots like Red Hill, Regalia Bay and Tai Tam are bracing for a buzzy 2022 that could end in another 10 per cent in price gains. Nearly two years on from the shock of Covid and the market has recovered and surpassed 2019’s figures in many sectors. At the end of the day the SAR is still an important gateway to China, and its resilience will keep it that way.
Victoria Allan is the founder and managing director of Habitat Property