HK property to rise as Shanghai levels drop
The price gap between Shanghai and Hong Kong properties is expected to widen this year as the mainland's cooling measures take the steam out of the red-hot sector and as the Hong Kong market remains strong.
The mainland's tightening measures including the newly created property tax and the policy to limit the number of home purchases would cause home prices in Shanghai to drop by as much as 10 per cent this year, according to the consensus prediction by consultancies Jones Lang LaSalle and Savills.
'All signs are showing that Shanghai housing prices will drop by as much as 10 per cent now that the government is determined to cool the market,' said Joe Zhou, Jones Lang's head of research consultancy in Shanghai. 'Turnover will be hugely affected due to the weak sentiment.'
A price drop in Shanghai, in a stark contrast to the buoyant market in Hong Kong, is likely to draw more foreign talents to the mainland's economic engine.
Centaline Property Agency chief executive Sherman Lai Ming-kai predicted Hong Kong home prices would jump another 10 per cent this year. A 5,636 square foot unit of Henderson Land Development's residential development 39 Conduit Road was reportedly sold at HK$63,800 per sq ft recently. That price is nearly 10 times that of an average flat in Shanghai's prime Yan'an Road area.
'I do not see any sign of a price drop in Hong Kong,' said Lai. 'The housing market consolidated immediately after the March 11 earthquake in Japan.'
Centaline's Hong Kong home price index showed that the average home price is now 96.98 per cent of the peak level reached in 1997. In Shanghai, however, record home prices have prompted authorities to cool the overheated market to avoid asset bubbles.
Shanghai has becoming popular among foreign professionals because of its cheap living costs and the proximity to the mainland's hinterland, says Nigel Heap, managing director of UK recruitment agency Hays' Asia-Pacific operations.
Foreigners and even Hong Kong residents are now allowed to own a flat in Shanghai as long as they have worked in the city for at least a year. They can also take a mortgage from banks to buy property in Shanghai.
'It is obvious that Shanghai's home prices are much cheaper and more attractive than in Hong Kong,' said Albert Lau, managing director of Savills China. 'Indeed, the gap is widening since there are no signs of any price decline in Hong Kong.'
He said the market downturn on the mainland not only created opportunities for residential property buyers but also attracted overseas developers to seek lucrative projects in the mammoth market.
'Overseas investors have started actively looking for investment targets now that the local developers are grappling with tighter monetary policies,' Lau said.
Feeling the chill
The mainland's efforts to cool the property market are having an effect
The expected drop in Shanghai property prices this year, according to consultants Jones Lang LaSalle: 10%
