Hong Kong’s lived-in home prices will drop 5 per cent in 2022 as people, capital head for the exit, UBS says
- UBS is the second investment bank to forecast a decrease in the world’s most expensive property market, after Morgan Stanley
- An emigration wave and an exit of capital because of tightened mainland regulations will contribute to the drop, says the Swiss bank
A mass emigration wave, the slowdown in mainland China’s economic growth, an exit of capital because of tightened mainland regulations and an imminent interest rate rise in the United States will all contribute to the drop, said John Lam, head of the China and Hong Kong property team at UBS Research.
Many left in the wake of the national security law imposed by Beijing, fearing mainland China’s tightening grip was eroding some of the city’s freedoms.
The exodus has had an impact on the market, as some owners lower their prices in their rush to leave.
A 469 square-foot, two-bedroom flat in Tuen Mun was sold for HK$5.18 million (US$660,000) recently, after the owner decided to emigrate and cut the original asking price of HK$5.7 million by 9 per cent, according to a Many Wells Property regional director.
Another flat spanning 388 sq ft at St Barths in Ma On Shan, changed hands for HK$7.3 million earlier this month, after it was bought for HK$7.55 million in 2018, said a Centaline Property regional sales manager.
“New Hongkongers,” or residents who have acquired permanent residency in the city, account for 12 per cent of second-hand home apartment sales, said Lam.
“Although this number is expected to rise even further, [this alone] can’t offset the aforementioned negative factors.”
Analysts are divided on the prospects for 2022, given the stock market slump of recent months.
Morgan Stanley last month predicted a 2 per cent drop in lived-in home prices that will halt a 13-year bull run, due partly to the stock market losses. Centaline Property Agency, the city’s biggest network of sales agents, sees a 10 per cent gain.
Hong Kong’s lived-in home prices fell to a seven-month low in November after peaking in August, according to an index published by the Rating and Valuation Department.
Lam was more optimistic about the retail property market, especially shops selling mainly to local people and therefore unaffected by the huge drop in tourism. Retail rents will rise 6 per cent, Lam predicted, though sales will remain under pressure.
“Border reopening remains key to the recovery of the sector,” said Lam.
Over the past two years, the Covid-19 pandemic has steered consumers’ demand more towards mainland China. More luxury brands have opened new flagship stores in Shenzhen and Guangzhou.
“Even if the border reopens, shoppers won’t necessarily come to Hong Kong as before,” said Lam. “Retail sales won’t return to the high level of 2018. Maybe 10 per cent lower.”
Office space is the most undervalued property asset, Lam said. He estimates that overall rents will increase at most 3 per cent in 2022.