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Hong Kong property
Business
Victoria Allan
Victoria Allan

Concrete Analysis | Hong Kong landlords and sellers should brace themselves for a more realistic property market in the near term

  • Impossible to predict where the residential property market – or any property sector – is headed
  • A sudden bump in supply has create a more grounded, a more realistic, market

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In any other year, Hongkongers would have been theorising about pricing and lease trends in Wan Chai North after the launch of the MTR’s Exhibition Centre station on the East Rail Line. Photo: Nora Tam
Victoria Allan
In May, Exhibition Centre, the latest addition to the MTR’s East Rail Line, opened. It now takes 18 minutes to get from Sha Tin to the city’s primary central business district. It is a game changer for sure, and in any other year but this one, we would all be talking about the transit link’s potential impact on property prices from Central all the way to Causeway Bay and Mid-Levels East, particularly on offices.
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Even with the knowledge that the so-called MTR Bump would have made its presence felt years ago – probably right after the announcement of the extension – we would have been theorising about pricing and lease trends in Wan Chai North. In any other year. But sentiment is very different from what it was in the past, and different still from what it was last year at this time. For lack of a better word, Hong Kong has entered into a realistic property cycle.

Despite rigid quarantine restrictions and lingering Covid-19 and economic concerns, 2021 was a record year for Hong Kong property prices. Local end-user demand was strong – and remains that way – and the drive to take advantage of sudden supply due to people moving away created a robust environment for both sales and leasing. We clearly were not going anywhere so when a great flat, with a soothing view, a usable roof and fresh modern decor became available in Island South, a bidding war was not far behind.

But as 2021 dragged on and then Omicron wracked the city around the Lunar New Year holiday early this year, Hong Kong’s property markets flipped from enthusiastic to realistic.

Right now it is next to impossible to predict where the residential property market – or any property sector really – is headed. The remainder of 2022 is likely to be defined by uncertainty, not so much surrounding the value of real estate, the fundamental demand for it, or its long-term appeal. The uncertainty will be related to the laundry list of unknowns that traditionally influence its behaviour. Incoming Chief Executive John Lee’s policies will play a part in how the markets react. So will the interest rate hikes we are finally going to see by year’s end. Most significantly, how long the border remains closed will have a significant impact on the long-term outlook.
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The reality is that there is more supply in both rentals and sales simply because after almost three years of not seeing family and close friends many Hongkongers are tired of waiting and have relocated to other parts of the world – local and expatriate alike. Multinationals cannot make plans to import staff as long as travel restrictions remain in place. The result is that luxury rents have softened and prices have come down by between 3 per cent and 5 per cent from last year.
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