Demand for Hong Kong’s luxury homes slips as trade war, threat of extradition bill rattle wealthy investors
- The proposed law that sparked weeks of mass rallies has made some super-rich investors look beyond Hong Kong to park their wealth, says Savills
- Prices of town houses, typically ranging from 2,000 to 4,000 square feet, fell 1.5 per cent in the second half
The double whammy of the US-China trade war and the threat of a controversial extradition bill that led to weeks of mass rallies in Hong Kong has hit demand for the city’s ultra-luxury homes, new figures show.
Property consultancy Savills said enquiries about homes priced between HK$40,000 (US$5,111) and HK$100,000 per square foot fell in the second quarter of the year, leading to a 1.5 per cent slide in prices of town houses, whose size typically ranges from 2,000 to 4,000 square feet.
It was the first fall in town house prices since the third quarter of 2018 and comes on the back of increases of between 1.5 per cent and 4.3 per cent.
“Sentiment was mostly affected by external uncertainties. And the proposed extradition bill, though retracted, may have also pushed some high net worth [individuals] to at least rethink their asset allocation strategy within Asia,” said Edina Wong, senior director of residential services at Savills.
The proposed new law, and its widely perceived potential to undermine Hong Kong’s judicial and political independence, led ultra high net-worth and high net-worth individuals to look elsewhere to park their wealth, with Singapore, the city’s main financial rival, getting a boost.
Savills defined ultra high net-worth individuals as those with investible assets of at least US$30 million, while high net-worth individuals have at least US$1 million.
“The extradition bill caused some local money to look beyond Hong Kong, with Singapore favoured, followed by the UK and Australia,” said Simon Smith, senior director, research and consultancy, at Savills. “The protests will have an impact on volumes but little on pricing in the near term since there is too much liquidity but too little supply.”
Sentiment has been downbeat in Hong Kong since June 9, when an estimated 1 million protesters took to the city’s streets to demonstrate their opposition to the controversial extradition bill, kicking off several weeks of sporadic protest rallies around the city, which had in recent weeks erupted into clashes between the protesters and police.
The bill would have allowed suspects in Hong Kong to be transferred for trial to mainland China and other jurisdictions that lack an extradition treaty with the city.
Continuing disturbances over the bill had exacerbated existing uncertainties over the trade war between the world’s two largest economies.
“The market is somewhat fluctuating. With many uncertainties, sales volume has slowed down. We may see more buyers or developers walking away and forfeiting deposit payments if the uncertainty continues,” said Bonnie Chan, associate director, residential services, at Colliers International Hong Kong.
That followed Goldin Financial Holdings’ decision to abandon an HK$11.1 billion commercial land deal at the city’s former Kai Tak Airport, forfeiting HK$25 million in initial payment.
On the other hand, data from property consultancy JLL showed a recovery in sales and capital values of luxury houses.
JLL expects the residential market – both luxury and non-luxury homes – to see a price correction after a solid first half.
“[We] continue to hold a negative outlook for the city’s residential property market over the short-to-medium term. The difficulties in resolving the ongoing trade war and slowing global economy will ultimately offset the potential of any interest rate cuts to dampen buying sentiment,” said Joseph Tsang, chairman and head of capital markets at JLL Hong Kong.
“Amid the better-than-expected first half of this year, we maintain our view for capital values of mass and luxury residential properties to correct in the second half of the year with flattish full-year growth and risks on growing towards the downside.”
