Victoria Allan

Concrete Analysis | Hong Kong’s housing market demonstrates its resilience and will continue to roll with the punches in 2022

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Investors and end users alike will be wrestling with the same factors they always have, chief among them high demand and low supply, particularly in the luxury sector

Don’t be surprised if spots like Red Hill, Regalia Bay and Tai Tam enjoy price gains of up to 10 per cent this year, says Habitat Property’s Victoria Allan

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Despite another fraught year and lingering coronavirus concerns, the local property market ‘bounced back with a vengeance’ in 2021. Photo: Edmond So

Victoria Allan

Published: 12:00pm, 4 Jan 2022Updated: 10:12am, 5 Jan 2022

Hong Kong loves its property. Despite another fraught year and lingering coronavirus concerns, the local property market bounced back with a vengeance in 2021.

After some jitters and uncertainty early in the previous year, when the coronavirus was spreading and little was known about it, the residential real estate sector bottomed out. At this time in 2020 markets were trending up again, as if preparing for a buying frenzy in 2021. And guess what? That’s exactly what happened.

Residential sales in the first two quarters of 2021 were strong across the board. The Rating and Valuation Department reported prices in the mid-market grew 4.7 per cent (for flats sized 430 to 752 saleable square feet) and 5.8 per cent (up to 1,075 square feet) between 2019 and July 2021, with demand for small units slipping. That trend started when the Hong Kong Monetary Authority relaxed lending caps in October 2019, but it intensified in the wake of Covid. At the upper end of the residential sector, the first two quarters of 2021 were as active as they’ve ever been, and Habitat alone experienced growth in both sales and leasing: up 42 per cent and 28 per cent from 2020 respectively.

Things cooled off in the third quarter when the Evergrande Group debt crisis really exploded in October and caused investors, shareholders and the central government in Beijing to sit up and take notice. The Evergrande quagmire threw a dampener on Hong Kong’s sentiment-driven market, making investors cautious in light of how the banks may be exposed to the developers massive debt.

That said, authorities in China are unlikely to let the Evergrande fire rage out of control and drag down the entire sector. Coming up on the end of the year, traditionally a quiet period that doesn’t really activate again until after Lunar New Year, prices mostly stabilised – flattening rather than falling – and prospective buyers exercised their conservative muscles.

But look ahead, and the markets are poised for more of the same in 2022. Investors and end users alike will be wrestling with the same four factors they always have, chief among them high demand and low supply, particularly in the luxury sector.

First up, interest rates. One of the fundamentals that has underpinned residential transactions for years is not going to change. A hike in interest rates has been the fear every year for the last 15 years and it hasn’t happened. It’s not likely to any time soon, and if rates do go up, the lowly quarter or half point won’t take us out of a low interest rate environment.