China property

Hongkongers brush off weakening local dollar to continue buying homes in Shenzhen

Currency fluctuations will not dissuade homebuyers looking to get on the property ladder, says Hong Kong Polytechnic University professor

PUBLISHED : Wednesday, 09 May, 2018, 9:04am
UPDATED : Wednesday, 09 May, 2018, 9:04am

Hong Kong homebuyers continue to desire properties in Shenzhen, despite the Hong Kong dollar falling to a 35-year low against the US dollar recently. The yuan, meanwhile, has been the fourth strongest currency in Asia in the past 12 months, and has surged by about 8 per cent against the local currency over the period.

“If I had made up my mind a year earlier, I could have saved more than HK$400,000,” said Cecelia Chan, a freelance television show writer. “I will not continue to wait and see, and miss my chance, since this is the dream home I would like to live in.”

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Chan has just made an offer for a second-hand property in Shenzhen, and is hoping that a bit more than 4 million yuan (HK$4.95 million) will help her nail down the apartment and get on the property ladder. 

“The price is rather cheap, even with the runaway trend on the mainland these days,” said Eddie Hui, professor of construction and real estate at Hong Kong Polytechnic University. “Even when you factor in the exchange rate, it is still comparably cheaper than homes in Hong Kong, both the total amount and the price per square foot.” 

The apartment Chan wants has an area of more than 750 sq ft with two rooms, one of which she would like to use as a study with a big shelf that she has dreamt about having for years. These are all luxuries that cannot be accommodated in the smaller-than-400 sq ft, three-bedroom house she shares with her parents and a younger sister in Hong Kong. 

If everything goes according to plan, Chan’s dreams may come true at a price tag of about HK$6,600 per square foot, slightly more than a third of the average price for a similar flat on Hong Kong Island – HK$17,549 per square foot. 

Another reason the decline in the Hong Kong dollar has not soured the desirability of owning an apartment in Shenzhen is that, at this stage those who choose to cross the border are buying property for their own use, and not for speculative purposes, according to Hong Kong Polytechnic University’s Hui.

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“Unlike the last wave of Hong Kong buyers in the 1990s, who swept a bunch of units in Shenzhen and Guangzhou, now a lot of the buyers, particularly young buyers, are crossing the border to meet their dream of owning a home,” said the professor. 

About 70 per cent to 80 per cent of Hong Kong clients coming to Shenzhen want to buy apartments for their own use, said He Qianru, chief analyst at property brokerage Midland Holdings China. 

“Young Hong Kong people under the huge pressure of getting on the property ladder, once they choose to live a double-city life, working in Hong Kong and living in Shenzhen, short-term fluctuations will not change their strategy,” said He. 

Midland data shows there was no sign that a weakening currency had reduced Hong Kong buyers’ interest, as they still contributed 4.2 per cent of the total deals signed by the agency in Shenzhen in the first quarter of this year, maintaining a similar level in 2017. 

Unlike the last wave of Hong Kong buyers in the 1990s ... now a lot of the buyers, particularly young buyers, are crossing the border to meet their dream of owning a home
Eddie Hui, professor of construction and real estate, Hong Kong Polytechnic University

Shenzhen, often dubbed “China’s Silicon Valley”, has lured big Chinese technology companies, such as Tencent Holdings, Huawei and DJI, and young entrepreneurs from Hong Kong are flocking to the city to try their luck. 

This inflow has contributed to an increase in the demand for housing. And although government data shows that average home prices of new flats in Shenzhen have continued to decline for 18 months, market observers said the prices of lived-in homes have continued to rise. Midland data shows such apartments reported an average price increase of 2.7 per cent in April, year on year. 

“In some districts, for example Shenzhen Wan and Xiangmi hu, there were 20 per cent to 30 per cent increases,” said Tao Wenjie, a veteran Shenzhen property observer. “Some units in Houhai, Nanshan district, saw prices soar by 10,000 yuan per square metre within three years.” 

Soaring property prices mean Hongkongers in Shenzhen can’t afford to move home

Hong Kong buyers are, however, required to pay a year’s worth of social security before they can buy a home in Shenzhen, and are not allowed to buy more than one home, according to Midland Realty.