Mainland buyers could substantially push up demand for Hong Kong housing, says CLSA
Hong Kong’s property market could experience a significant demand boost if a small fraction of new home buyers in mainland China cast their attention to the city, according to CLSA.
Demand for Hong Kong homes could surge by 10 per cent if 1 per cent of the transaction value of new homes in tier one cities in China were to redirect towards Hong Kong, said Nicole Wong, managing director of property research at CLSA.
Eva Liu, from Shanghai and now studying at Hong Kong Baptist University, plans to buy a flat in Hong Kong in the future..
“In 2003, my family bought a house in Shanghai at about 1 million yuan. Its value has risen to about 10 million yuan now,” said Liu.
“As our family plans to move to Hong Kong in the future, we will sooner or later sell the house in Shanghai for a smaller one in Hong Kong,” Liu added.
In 2016, the value of new flats sold in tier one cities in China amounted to HK$1.8 trillion (US$230.36 billion), while new homes sold in Hong Kong totalled HK$190 billion, according to statistics compiled by CLSA using data from CEIC Data and Midland Realty.
Of the 613 cities in mainland China, only Beijing, Shanghai, Tianjin, Chongqing and Guangzhou are classified as tier one.
Wong also said the increasing number of mainlanders getting right of abode in Hong Kong could potentially create strong user demand for Hong Kong property.
“Many of them have worked here for a long time and can get Hong Kong identity cards after they live here for seven years. Then they no longer need to pay extra stamp duties for purchasing a flat with right of abode,” Wong said.
“Many of them have good family support and earn a high salary as well. They consider Hong Kong as their place of residence so they will consider buying property in Hong Kong,” she said.
According to the Immigration Department, 12,307 entry permits were processed under the admission scheme for mainland professionals.
An additional 29,578 permits were granted to Chinese nationals under the capital investment entrant scheme in 2016.
According to Cary Wong Leung-sing, associate director of research at Centaline Property Agency, mainland individual buyers accounted for 23.1 per cent of the total transaction value of Hong Kong’s primary market value in the second quarter.
“The number of mainland buyers significantly increased in Hong Kong’s booming primary property market,” he said.
For someone without a permanent Hong Kong identity card, stamp duties can significantly increase the costs of purchasing a Hong Kong home.
These include twice the standard stamp duty rate from 1.5 per cent to 8.5 per cent, as well as a buyer’s stamp duty, which is set at 15 per cent of the purchase price regardless of the transaction amount. So all together the stamp duties can amount to 23.5 per cent.