Weekend Property

Splurging mainland Chinese dominate Hong Kong’s luxury residential market this year

Buyers defy China’s capital control measures and Hong Kong’s property values soar by up to 24 per cent in the first quarter

PUBLISHED : Friday, 31 March, 2017, 9:51am
UPDATED : Friday, 31 March, 2017, 12:39pm

Wealthy mainland investors were key players in Hong Kong’s luxury residential market in the first quarter of this year, snapping up properties at staggering prices.

Property agents and developers say that the transactions in the luxury market continued to be active from the start of the year, with investors from across the border accounting for the majority of deals completed during the first three months of this year.

According to a report by DBS private wealth unit, measures taken by the central government to stem capital flight have proved partially effective. Last December, only a net US$900 million left China via yuan payments. That was a mere 2.7 per cent of November’s amount, and compared with the monthly average of US$25.8 billion in 2015.

Nonetheless, despite capital control measures, mainland buyers have continued to pour into Hong Kong’s property market, which has seen prices rising almost 24 per cent in the first quarter in some sectors.

According to statistics quoted in a recent report by international property consultancy JLL, the luxury residential market remained very active in the first three months of the year. Mount Nicholson on The Peak, for instance, saw two houses sold for more than HK$70,000 per square foot in February.

Transaction records from the Land Registry show that big-ticket deals completed so far this year include: the sale of a 8,087 sq ft house at Mount Nicholson on The Peak for HK$720 million; another Mount Nicholson house, of 4,566 sq ft, changed hands for about HK$308.2 million; a 4,952 sq ft flat at 39 Conduit Road sold for about HK$226.6 million; a 3,056 sq ft flat at Grenville House in Mid-Levels sold for HK$128 million; and a 2,870 sq ft flat at The Mayfair in Mid-Levels changed hands for HK$113.8 million.

While there are no public records disclosing whether the five registered buyers were Hong Kong permanent residents, the names of three of them were in pinyin, indicating a mainland background. Despite mainland tycoons’ continued interest in Hong Kong’s prime residential property, local affluent families and other rich investors also helped fuel the luxury market’s growth in the first quarter.

The concentration of potential primary launches in the second half may boost volumes further, while halting the current price rally
Simon Smith, head of research and consultancy, Savills

According to developers, the government’s tough cooling measures have discouraged foreign investors from entering the Hong Kong property market since last November, when a punitive stamp duty of 15 per cent was introduced on second-home buyers.

Simon Smith, head of research and consultancy at Savills, wrote in a recent report: “While we expect both the townhouse and luxury apartment markets to prosper over the first half of 2017, the concentration of potential primary launches in the second half may boost volumes further, while halting the current price rally.”

According to Chung Chi-lam, executive director at Wing Tai Properties, of Homantin Hillside, a luxury apartment complex co-developed by Wing Tai and Nan Fung, more than 80 per cent of the units sold were bought by owner-occupiers.

“From my observation, the bigger apartments on higher floors were mainly purchased by local families. Some of the lower level, smaller units were bought by parents for their children. There are only a small number of them being held as buy-to-let, and a very small number of mainland buyers who actually paid the buyer stamp duty,” Chung says.

Wing Tai plans to market two prime residential developments in Kau To Shan shortly, Le Cap and La Vetta, around the second and third quarters. Both projects, comprising garden houses and family-sized apartments, occupy a hilltop position, he adds.

Further down the supply pipeline, a number of luxury townhouse and apartment projects are expected to hit the market later this year or next, including St. Moritz, which will consist of 35 apartments and 24 houses; a project in Kau To Shan by Sun Hung Kai Properties, which is also working on a Stubbs Road project, expected to have 53 apartments and 19 houses; CK Property’s Borrett Road project with 181 apartments; and Nan Fung’s Deep Water Bay Drive project, comprising 52 apartments and two houses.

Property analysts also say that the high prices paid by mainland developers for sites, especially at Kai Tak, would translate to higher-priced units, and prices would continue to rise in the months ahead.

Mainland-based property company HNA Group and companies associated with it have arguably succeeded in resetting prices in Kai Tak, snatching four residential plots for an average HK$13,415 per square foot. Riding on the recent land-price rally, One Kai Tak increased the pricing of its Phase II by about 13 per cent from its from its Phase I level to HK$18,100 per sqft. Likewise, K City saw its prices rise to HK$18,900 per sq ft, while the first batch of units at Poly Property were close to HK$20,000 per sq ft. JLL says these new levels represent a surge of as much as 50 per cent from market expectations prior to HNA’s bids.

With additional reporting by Jimmy Chow