The weather has been heating up, and so has the Hong Kong property investment and China residential markets. Entering into Q2, Backy Fung of Capital Markets & Investment Services observed that investment momentum has spread to the office, retail and site re-development sectors. For the China residential market, housing prices grew at the fastest rate in eight months to the highest level in five and a half years. With high levels of capital and purchasing power from mainland investors, Nancy Chan of Valuation & Advisory Services expects a boost to Hong Kong’s residential market after the re-opening of the borders. Read the latest Weekly Snippet to find out more from our experts.
Property investment market has been more active
The overall property market has seen momentum in Q2 despite COVID-19 prevailing in Hong Kong’s surrounding Asian markets. In Q1, most of the large transactions occurred in the industrial sector, but when entering Q2, the momentum has spread to office and retail sectors, as well as the re-development site sector. For example, in the office sector, the sale of 38/F of The Centre was recorded at around HK$870 million, whereas 2902 United Centre was sold at HK$215 million. In the retail sector, aside from the transaction recorded on community malls such as the retail podium of The Parkville in Tuen Mun, which was sold for HK$300 million, market news also reported that transactions occurred in the core tourist district of Causeway Bay where Shop 1-2 on G/F and B/F of Pearl City Mansion was sold at approximately HK$1.3 billion.
The re-development site sector is also very active with 50% of the shares at Shap of Pat Heung Road and Tai Tong Road in Yuen Long, transacting at over HK$300 million, and 15 Stubbs Road sold for HK$500 million which will potentially be re-developed for residential use.
We foresee the investment momentum continuing and transaction volume set to grow in all sectors, especially after the re-opening of the border where more mainland capital is anticipated to enter the market.
The revival of China’s residential market
The China real estate market has seen a rebound from the COVID-19 pandemic. China’s housing prices grew at the fastest rate in eight months to the highest level in five and a half years. This is despite the government's efforts to tame the market with various cooling measures and to tackle an alarming build-up of debt.
According to the National Bureau of Statistic (NBS) in May 2021, home prices reported a monthly gain in 62 of the 70 cities tracked, while growth in average prices of new homes rose to an eight-month high of 4.8% on a YOY basis, compared with 4.6% in April. In a statement from the NBS that accompanied the data, first- and second-tier cities continued to lead the monthly price growth, with new home prices in those cities growing at an average of 0.6% each month. While smaller cities imposed tightening measures, the market generally expects home prices in first- and second-tier cities to keep climbing and outperforming lower-tier cities.
It was noted that the surging prices in big cities since last year is now spilling over into nearby smaller ones, which has raised concerns about overheating, and puts pressure on the government to impose more measures to cool down the market, particularly targeting home speculators.
In view of the quick price growth in China’s housing market, we can see there is abundant cash and purchasing power from Chinese investors. If the China-Hong Kong border is re-opened, we expect that the residential market in Hong Kong will be boosted by mainland investor activity.