Hong Kong’s property market is seeing more deals as buyers bet the border reopening with mainland China will help channel more capital into the city and stoke a recovery.
(Bloomberg) — Hong Kong’s property market is seeing more deals as buyers bet the border reopening with mainland China will help channel more capital into the city and stoke a recovery.
The number of transactions in 35 major residential projects jumped to an eight-month high in the two weeks ended Jan. 8, according to Midland Realty. That is an encouraging sign for a market where combined new and used home sales slumped last year to the lowest level since at least 1996, according to data tracked by Centaline Property Agency.
The border between the mainland and Hong Kong started to gradually reopen Jan. 8 after being effectively sealed since early 2020 as both governments pursued a Covid Zero policy by shutting themselves to the outside world for much of the pandemic.
“The confirmation of the first phase of border opening can facilitate the exchange between the mainland and Hong Kong, bringing Hong Kong the long-absent Chinese capital,” said Sammy Po, chief executive officer of Midland’s home division. “It will stimulate the asset price to rise.”
Po’s company estimates used home transaction registrations will reach a seven-month high in January.
A family office with Chinese background snapped up more than 10 apartments for about HK$100 million ($12.8 million) in recent weeks, according to Edmund Pang, a senior district sales director at Midland whose team brokered the deals.
The buyer had been on the hunt for nearly five months and news of the border reopening helped speed up the decision to purchase, said Pang. “They think that both talent flow and economic activities will pick up between the two places soon,” he added.
Some analysts are already forecasting a recovery for Hong Kong’s residential sector. Morgan Stanley expects peaking interest rates and reduced exodus following the easing of travel curbs to support the market in the coming year. The firm says that property prices will bottom out in the second quarter and eventually increase by 5% for the full year.
On the broader economy, there is also more optimism. The median estimate in a Bloomberg survey of 12 economists last week was for a growth of 3.3% in 2023, higher than the 2.7% forecast in a survey of 25 economists in November.
To be sure, it is too early to say that the property market is headed for a recovery. It is unclear how much Chinese capital will flow into real estate following eased border controls. Used home values in the city declined about 16% last year as borrowing costs increased along with a shrinking economy.
Still, the property sector and the government are hopeful. In a blog post on the first day of 2023, Financial Secretary Paul Chan said the border reopening with China could lift general sentiment in the real estate market despite an anticipated climb in interest rates.
(Updates with latest data in second paragraph.)
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