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Hong Kong’s Housing Market Skyrockets – But Developers are Panicking

Last Updated September 23, 2020 2:03 PM
Joseph Young
Last Updated September 23, 2020 2:03 PM
  • The demand for Hong Kong’s housing market soared in June, with 2,136 units sold.
  • Strategists worry that the trend is not sustainable, as developers rush to attract Hong Kong buyers.
  • No additional stimulus by the People’s Bank of China (PBoC) in 2020 might slow demand for Hong Kong properties.

It’s not a surprise that Hong Kong’s housing market has become extremely volatile. Developers are now starting to panic as new home sales surge substantially.

On July 3, South China Morning Post reported that home sales in Hong Kong spiked to a 13-month high . Sales of apartments jumped 92% in a single month to a staggering 2,136 units in June.

Developers offering low prices for flats in key areas in the city triggered the upsurge in sales.

But, as more individuals move out of Hong Kong, overseas real estate developers are scrambling to target high-net-worth investors  from the region.

hong kong housing market
Hong Kong’s housing market prices drop considerably since last year’s peak | Source: SCMP 

Developers Rush to Cater Wealthy HK Investors in Overseas Markets

On June 30, the Hong Kong national security law was officially signed into commencement in Beijing. Since the bill’s approval, strategists say that Hong Kongers began to move their capital to overseas markets.

BuyAssociation’s Asia Sales Director James Dempsey said:

A lot of the wealthy, wealthy Hong Kongers already have a footprint in the U.K. and they’ve already started some of that displacement of capital or diversification of capital outside of Hong Kong.

The support towards the national security law  by major financial conglomerates, including HSBC, initially led to hopes for market stability. Eventually, the uncertainty in the region reached a peak, affecting the housing market.

Local developers were able to fuel an increase in appetite for Hong Kong properties in June with compelling pricing.

Analysts are skeptical that the trend can continue, especially as U.S.-China relations show barely any sign of improvement.

Ricacorp Property head of research Derek Chan said:

The impact of the law on US-China relations and the reaction of the local community has to be observed for some time. We do not rule out the possibility of some buyers taking a cautious approach.

For now, a drop-off in home prices is keeping the buying sentiment around Hong Kong properties afloat. But, major overseas developers expecting a mass exodus of investors from Hong Kong remains a threat against market stability.

Centaline Property Agency executive Wong Leung-sing said that rising fears of social unrest could further escalate. If it does, he warned that buying sentiment could decline once again.

Real estate firms based in Europe state that the interest in foreign properties is increasing rapidly.

DLF Limited chief marketing officer Karan Kumar said, “there is heightened interest” for overseas properties from Hong Kongers. He also said more real estate firms are reaching out to investors in Hong Kong more directly.

hong kong canada
Source: Robert Falconer 

Two Variables to Hong Kong’s Housing Market Demand

There are two key variables that might impose additional selling pressure on Hong Kong’s housing market in the near-term.

First, countries are growingly advising citizens not to travel to Hong Kong. The government of Canada’s official travel website reads: 

[Canadians in Hong Kong] may be at an increased risk of arbitrary detention on national security grounds and possible extradition to mainland China.

Second, the People’s Bank of China (PBoC) does not intend to introduce additional stimulus in 2020 . The central bank emphasized that a lower interest rate is not necessarily better.

The reluctance of China to further stimulate the financial economy could lead to lower demand for Hong Kong’s housing market from mainland buyers.