Residential buildings stand at Yat Tung Estate in the Tung Chung district of Hong Kong, China, on March 5, 2020. (JUSTIN CHIN / BLOOMBERG)
The Hong Kong Special Administrative Region’s home prices are expected to increase by 5 percent this year, buoyed by a low interest environment and the Chinese mainland’s ongoing economic recovery, according to services and investment management firm Colliers International Hong Kong.
Though reeling from the pandemic, the property market is likely to step up in the Year of the Ox as extended low interest rates and high market liquidity have kept the market stable.
The mainland’s robust economic recovery will continue to support the gradual rebound in the HKSAR’s property market, backed by a stronger renminbi
“It’s important to note that Hong Kong’s capital supply is at an all-time high, when combined with interest rates that are close to the sub-zero range and the removal of the Double Stamp Duty on commercial assets, 2021 has the right environment to deliver a strong recovery in transaction volume,” said Stanley Wong, senior executive director of capital markets and investment services at Colliers International.
The mainland’s robust economic recovery will continue to support the gradual rebound in the HKSAR’s property market, backed by a stronger renminbi.
Lockdowns and the closing of borders have left investors from the north with extra savings and a pent-up demand, fueling up for a post-pandemic investing spree.
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“It is also very likely that we will see more (Chinese) mainland capital invested into the Hong Kong market in 2021. The continued recovery of China’s economy and the strengthening of the RMB against a potentially weakening USD will make the Hong Kong real estate pricing attractive to Chinese investors,” Wong added.
Another buffer is the end-user demand set against the low residential property supply. The latest figures from the Transport and Housing Bureau show that the HKSAR government may yet again miss its private housing supply target.
Out of the government’s private home supply target of 20,850 units last year, only 13,700 were completed by October.
The HKSAR also failed to meet its annual targets for 2018 and 2019. The government adjusted the public-private flat ratio to 70:30 from 60:40 at the end of 2018.
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Colliers International noted that the government’s land revenue has fallen short of budget with the total 2020/21 land sales revenue of HK$46.2 billion (US$5.96 billion) by January 2021, which is less than 40 percent of the estimated HK$118 billion budget.
Of the 15 sites available for residential use, nine tenders were closed this month. Among the estimated six commercial land sales, only two tenders in Kai Tak and Tung Chung were closed. Moreover, the tenders were closed unsuccessfully as the bid prices failed to match the higher reserve prices set by the Lands Department.
The office property market is expected to continue to struggle in 2021. Colliers International anticipates the rental and sales prices for offices to drop 7 percent and 10 percent respectively, following 16 percent and 17 percent respective plunges last year. “The opportunity for cost-conscious occupiers is that we expect to see a front-loaded rental decline and for the rents to bottom out in the first half of 2021,” said Fiona Ngan, head of office services at Colliers International.
She believes mainland companies will gradually take up more office space in the central business district as “the robust IPO market and cross-border financial initiatives will provide impetus building on the demand from mainland finance firms and wealth management companies".
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Colliers expects retail property rentals and sales to stay unchanged this year supported by local consumption and a potential lifting of border controls.
“Rental rates will remain flat against a backdrop of anticipated momentum building in the market in the second half of the year, with the potential reopening of borders and the gradual relaxation in domestic social restrictions as a result of the launch (of) vaccination programs,” said Cynthia Ng, senior director of retail services.
