Guangzhou may open up for Hong Kong buyers but insufficient to help to boost sales

PUBLISHED : Monday, 07 March, 2016, 2:30am
UPDATED : Monday, 07 March, 2016, 2:33am

Guangzhou is tipped to be the first of the mainland’s four tier-one cities to lift restrictions on property buyers from Hong Kong and Macau.

But industry experts believe the move is not enough to speed up sales in Guangzhou or help Guangdong meet its target of clearing 160 million square metres of empty housing stock by 2018.

The new measure is not expected to create an exodus of buyers from Hong Kong, where prices have fallen by nearly 11 per cent after reaching a peak in September last year.

“The relaxation, if it materialises, will create potential demand from Hong Kong but not in a big way,” said Joseph Tsang, managing director at JLL Hong Kong.

On February 29, the Guangdong provincial government said Hong Kong and Macau buyers would be able to enjoy the same benefit as locals in “eligible cities”. It is expected that Guangzhou will be added to the 19 cities in the province where restrictions have already been removed. Restrictions remain in the other tier-one cities of Shenzhen, Beijing and Shanghai.

Thomas Lam, head of valuation and consultancy at Knight Frank, said Hong Kong was still a favourable investment among local investors.

“What investors are concerned about is the mainland slowing economy,” he said.

On Saturday, Premier Li Keqiang announced that China would set a gross domestic product target of between 6.5 per cent to 7 per cent for this year. He unveiled the highest deficit budget since 1976 – 3 per cent of GDP, or 2.18 trillion yuan (HK$2.6 trillion).

In contrast to Hong Kong, home prices on the mainlandare rising due to the central government rolling out a series of easing measures to revive the market.

In Guangzhou, prices for new homes saw a month-on-month increase of 0.64 per cent in February, according to property research house China Real Estate Index System.

Hong Kong’s property correction followed a rise of 88 per cent since 2010, according to Midland Realty. In Guangzhou, prices for new flats – which dominate total residential transactions – rose just 36 per cent over the same period, said Real Estate Information, a mainland data provider.

With an average budget of HK$5 million to spend on overseas property, Lam said investors from Hong Kong had other options. In Guangzhou, investors could purchase a 1,000 sq ft unit in Yuexiu district, said Lam. That budget would be just enough to buy a new flat of 420 sq ft in terms of saleable area in Yuen Long, a 550 sq ft in Canary Wharf, London, or a 600 sq ft in Shinjuku district, Tokyo.

Lam said London was more attractive than Guangzhou in property terms of investment return.

“Flats in London have a track record of being rental-income proof,” he said.

In London, buyers were required to pay an initial down payment of about 15 to 20 per cent for an off-plan flat with the balance being paid when the developers hand over the keys, he said.

“That will be about two years later. As the pound is falling, the lump sum value will also decline. That’s is another incentive to investors.”

Ellis Wong, general manager at Centaline China’s Guangzhou branch said the Nansha district, about an hour’s drive from the city centre, could open up for Hong Kong buyers. “Speculation has been hotting up over the past two days about which districts will be the first to have restrictions lifted. But the market is widely expecting Nansha as it is a pilot free-trade zone” he said.