The View | Mainland China’s reopening won’t solve all Hong Kong’s property market problems
- The outlook has no doubt improved, particularly in sectors related to tourism and the luxury residential market, but the city’s challenges that predate the pandemic remain
- A chronic shortage of affordable housing and a stalemate in the investment market are just two issues that need addressing
Having suffered a succession of domestic and external shocks over the past several years, Hong Kong’s real estate industry is now firmly on the road to recovery. The sudden reopening of mainland China’s economy has served as the crucial catalyst for a major improvement in sentiment.
Just a cursory glance at some of the performance indicators in the residential and commercial markets since Beijing scrapped its zero-Covid policy shows how the outlook has brightened.
Since mid-December, the Centa-City Leading Index, a gauge of secondary home values, has risen 7.7 per cent, having fallen 18.2 per cent over the course of the preceding 16 months.
In the commercial market, gross leasing volumes in the hard-hit retail sector in the first quarter of this year were more than double their quarterly levels in 2018 – prior to the anti-government protests – while net take-up of office space was positive for the third straight quarter, data from CBRE shows.
Tellingly, more than half the investment transactions last quarter were in the retail sector, the biggest beneficiary of the resumption of cross-border travel along with hotels. “Hong Kong was almost a no-go area in the last few years. Now, I feel like I’m a tourist guide,” said Tom Gaffney, regional managing director at CBRE in Hong Kong.
The fillip provided by the unsealing of the border with the mainland is palpable. In the residential market, the sharpest increase in sales in January and February was in the luxury segment of the primary market – properties sold for HK$19.2 million (US$2.5 million) or more – which accounted for 15 per cent of total transactions, compared with 6 per cent for the whole of last year, data from JPMorgan shows.