Hong Kong property offers pockets of value for bargain hunters as pandemic eases, analysts say

Lived-in home prices are set to fall in 2020, the first decline in 12 years, according to Ricacorp Properties
Rents are also retreating as recession in the city sparks pay and job cuts, eroding demand from a shrinking pool of expatriates

Hong Kong property

Lam Ka-sing

Published: 8:30am, 6 Jan 2021

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Homes in housing estates catering to middle-income earners offer the best value for bargain hunters in Hong Kong with prices headed for their first drop in 12 years, industry analysts said.

Increasing emigration, coupled with shrinking headcounts at multinational companies in the city, could ensure they continue to remain a buyers’ market. The same factors could also depress rates of higher-priced homes, they added.

“The number of emigrants in the last year has risen, and those who are rushing to sell are more willing to negotiate and offer bigger discounts,” said Derek Chan, head of research at Ricacorp Properties. Rents will also come under pressure as demand wanes, he added.

Among 50 housing estates tracked by Ricacorp, Lake Silver in Ma On Shan, Island Resort in Siu Sai Wan, Ocean Shores in Tiu Keng Leng and Park Avenue in west Mong Kok saw the biggest pullback in November year on year. Home prices fell by 7.4 to 7.7 per cent in the period, compared with the citywide equivalent of 1.3 per cent based on the index from the Rating and Valuation Department.

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Home prices in Hong Kong were little changed in the first 11 months of 2020, according to official data. December’s data, which is only due later this month, is likely to weaken and cause a drop for the full-year, Chan estimated.

The window for bargains may not last for long as prices may rebound later this year as efforts to contain the Covid-19 pandemic gain traction and vaccination drive accelerates. Hong Kong could exit from its worst recession this year, Financial Secretary Paul Chan Mo-po said over the weekend.

If Covid-19 vaccines can be provided and turn out to be effective, estates with bigger drops in prices in 2020 will become bargains and see more significant rebounds in prices in 2021, Chan of Ricacorp said.

With the government’s anti-pandemic efforts and vaccine roll-out, “the sector will get an immediate uptick and boost the confidence of homebuyers”, said William Budden, chief operating officer of real estate agency Nest Property. “We expect the market in Hong Kong to bounce back as it always does.”

The city has witnessed four major bear markets in the last four decades, following major economic upheavals marked by the Asian financial crisis in 1998, the post-dotcom bubble in 2001, the US subprime crisis in 2008 and the current Covid-19 pandemic.

A sharp decline in rents at Valais, Sheung Shui has attracted some tenants. Photo: Handout

There are also more luxury homes offered at bargain rents or prices due to pay and job cuts in industries most impacted by the pandemic, such as the aviation, catering and tourism-related businesses.

An example of a big drop in rent in a luxury estate is Valais in Sheung Shui, where Hong Kong actor Chapman To rented a villa measuring 1,846 sq ft with a garden for HK$46,000 (US$5,933) a month, or HK$25 per square foot, agents said. At its peak before social unrest unfolded in 2019, a villa measuring 2,774 sq ft fetched up to HK$100,000 per month, or HK$36 per square foot, in March 2018.

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Whampoa Garden, a housing estate in Hung Hom first developed in 1986, saw average rent sink 15.8 per cent to HK$34 per square foot in November from HK$40.4 a year earlier, the biggest drop among the 10 major housing estates tracked by Centaline Property Agency. At South Horizons in Ap Lei Chau and Heng Fa Chuen on Island East, the drop was 8.7 per cent and 8.4 per cent, respectively.

Over the January to November period, the three housing estates recorded a slide of as much as 11.5 per cent from the same period a year earlier. The broader market slipped 3.7 per cent in that time, according to government statistics.

Some of the analysts are confident a recovery will arrive later this year. Seven of the 20 analysts polled by the Post in December, including Colliers International, offered some upbeat forecasts. They expect 3 to 5 per cent gain in prices, citing the prospects of getting the pandemic under control.

“We anticipate a buoyant and healthy luxury residential market in 2021 as consumer confidence returns to Hong Kong and travel or quarantine restrictions are lifted,” said Naomi Budden, founder and managing director of Nest Property.