Hong Kong’s real estate market has witnessed a robust revival following the government’s sweeping decision to scrap all property tightening measures. This move has reignited the interest of high-net-worth individuals (HNWIs) from mainland China and local investors, sparking a surge in transaction volumes and property prices.
In March, the number of first-hand residential property transactions in Hong Kong soared, increasing more than fourteenfold compared to the previous month, totaling 4,200 transactions— the highest monthly figure since 1998. This explosion of activity is a direct consequence of the lifted restrictions, underscoring the considerable pent-up demand built up under the previous measures. Correspondingly, the Land Registry Department reported a 57.2% month-over-month increase in registered property sales contracts across all building types, with residential sales dominating these figures.
The removal of the cooling measures also has had a favourable impact on property prices. The Centaline City Leading Index (CCL), which tracks the price trends of second-hand properties, showed signs of recovery, with a recent mark of 146.35 points as of 19 April. Additionally, the total value of sales contracts in March escalated to HK$37.4 billion, a rise of 65.5% from the previous quarter, indicating a vibrant market response.
The influx of Mainland Chinese HNWIs to Hong Kong
Eliminating the additional 15% stamp duty for non-local buyers has significantly enhanced Hong Kong’s appeal to HNWIs from mainland China. These affluent investors have been particularly active since the policy overhaul, gravitating towards premium and new development projects. Notable examples include Belgravia Place in Cheung Sha Wan, where mainland buyers played a substantial role in the swift sell-out of 138 units in 4 hours.
While Hong Kong enjoys a surge in real estate activity, the implications for the broader region, especially cities like Shenzhen, are mixed. The newfound focus on Hong Kong could potentially divert capital and interest from Shenzhen’s property market, which has already been witnessing a downturn. Some property companies in Guangdong are now recommending that mainland investors shift their focus to Hong Kong’s burgeoning market.
According to Centaline (a leading property agency in Hong Kong )’s Greater Bay Area Index, property values in Shenzhen dropped by approximately 14% last year, indicating a market under pressure. This downturn can be attributed to tightened government regulations to curb speculation and maintain housing affordability. The economic uncertainties brought about by global trade tensions and the COVID-19 pandemic have also dampened investor enthusiasm.
Will the Boost in Hong Kong’s Real Estate Market Be Long-lasting?
Hong Kong’s real estate market initially experienced a significant upsurge following the removal of property cooling measures, with transaction volumes and property prices soaring. However, many second-hand properties are selling at a loss of 15-40% compared to their peak prices five years ago.
During an interview with BBC Chinese, a professor at the Business School of the Chinese University of Hong Kong stated that the market’s quick recovery after the policy change is now reversing, revealing the market’s true condition. According to him, the impact of the policy removal on property prices is relatively minor, around 5% plus or minus, and other factors, such as global geopolitical risks and economic shifts in Hong Kong and China, play a more significant role in shaping the market.
This suggests that while removing cooling measures provided a temporary stimulus, the long-term sustainability of Hong Kong’s real estate market’s growth remains influenced by broader, more complex economic forces. Investors and market watchers should thus remain cautious, keeping an eye on global economic trends and local market dynamics to navigate the real estate market’s uncertainties effectively.
