Here’s how Hong Kong property would benefit from Greater Bay Area
- The city is in the middle of an economy larger than the combined one for Russia, Australia, Mexico, Indonesia and Switzerland
- Area’s tech ambition will also boost Hong Kong’s IPO market
For anyone fretting over the recent blips and spikes in Hong Kong’s stock and property markets, there’s good news on the horizon: the Greater Bay Area (GBA) is coming, if it’s not already here.
The GBA concept is one of the most exciting for Hong Kong property to come down the pipe in a long while, and there’s no reason for anyone with a positive view of the GBA not to have a positive view of Hong Kong’s real estate in the coming months and years.
For better or for worse, China’s plan to amalgamate Macau and nine other cities in southern Guangdong province, including Zhuhai, Huizhou and Dongguan, with greater connectivity on all levels with Hong Kong makes smart economic sense in light of the global trend towards city clusters – previously called megacities.
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The Tokyo Bay area is home to 44 million people with a gross domestic product of over US$1.8 trillion. The New York Bay area has 20 million people generating US$1.6 trillion. Then there’s the Bay Area around San Francisco as well as other city clusters that are now crucial economic hubs: Frankfurt Rhine-Main, the UK’s Northern Powerhouse and its Midlands Engine spring to mind.
The GBA, by comparison, arguably has the most mind-boggling numbers: 68 million people with a US$1.4 trillion economy that has just started its interconnectivity.
Need more numbers? When the 26km Hong Kong section of the Guangzhou-Shenzhen-Hong Kong Express Rail Link that terminates at West Kowloon opened for business, it carried 84,000 passengers into Hong Kong on its first two days, and it is the first link in a chain that will connect over 80 per cent of China’s major cities by 2025. The GBA is China’s most productive hub, generating 12 per cent of its GDP with its strongest growth rate at 7.7 per cent to 2017. It also has an economy bigger than Russia, Australia, Mexico, Indonesia and Switzerland. Hong Kong is in the middle of this.
Given those kinds of figures, there’s no way Hong Kong’s property markets won’t benefit from this.
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The office sector, space constrained though it may be, is eventually going to respond to the central government pumping millions of dollars into the technology industry. It’s going to create a little Silicon Valley in and around Shenzhen when all those emerging tech firms need office space. When the time comes for them to list on a stock exchange it’s likely to be Hong Kong’s if they expect to move money around the world and become global players. It may take five or 10 years, but the tech future is bright.
Then there’s the residential sector. The sheer volume of staff needing homes, some to buy, some to rent, is going to boost demand in Hong Kong and underpin the market for years to come. Once the high-speed rail link becomes an entrenched part of life, it creates the potential for commuting – something akin to working in Manhattan or London and living in New Jersey or Birmingham. Commuting puts more affordable residential property at first-time Hong Kong buyers’ fingertips. Why not take a nice starter home in Shenzhen if it’s only 30 minutes to the office? That’s the same length of time it takes to travel between Kennedy Town and Quarry Bay.
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The positivity will be spread around too. It won’t be just moguls looking for prestige homes coming into the market, it will be young, educated, multilingual, skilled staff seeking homes as well. Singles, couples and young families with tastes ranging from chic urban locations to strong school districts will all be in the market. As the city’s infrastructure expands, it won’t just be the strip around the Tung Chung bridge station or the West Kowloon train terminus that benefit.
The possibility for retirees to find affordable options for ageing in place now exists, even if that place is an hour away in Foshan or Zhongshan. Hong Kong’s struggling retail sector will get a boost from tourism. The list goes on.
Sure there are always risks involved in ambitious plans to reorganise entire cities.
China’s credit crunch and softening sentiment are worth keeping an eye on, but in general, prices are stabilising across the board. According to the National Bureau of Statistics, six GBA cities experienced faster price growth than Hong Kong in 2018. The GBA cities are, according to Knight Frank, forecast to outperform China’s first and second-tier cities in 2019.
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Tech trade is a hot button topic, too, but there are signs cooler head may prevail after all following December’s G20 summit in Argentina. And a lot will be dependent on three levels of government streamlining immigration, monetary, legal and tax regimes that are currently independent of each other without sacrificing the strengths of each. There’s no reason this can’t be addressed for the long term. It has to be. It’s in the Hong Kong property market’s best interest.
Victoria Allan is the founder and managing director of Habitat Property
