Hong Kong’s property prices are expected to rise as much as 7% in the second half of this year after a 6% climb in the first half, thanks to a potential border reopening with the mainland, limited supplies and a less-than-expected impact from a wave of emigration.
The Centa-City Leading Index, a property price indicator compiled by the Centaline Property Agency, rose 5.75% to 188.38 at the end of June from 178.13 at the end of last year. The index recorded a high of 190.58 in June 2019, compared with 100 in June 1997 when Hong Kong was handed over to China from Britain.
Since the anti-extradition protests that first broke out in June 2019, the index had been declining gradually in line with the social unrest. It fell to as low as 174.03 in March last year when Hong Kong was hit by the first wave of Covid-19 pandemic. It was then floating between 174 and 180 until it began to rise again early this year.
Chief Executive Carrie Lam said in a radio program on Sunday that she would unveil her last policy address of her current term in October and that it would focus on mapping out her vision for Hong Kong’s future, particularly related to her government’s efforts on land development and housing availability.
However, she said proposed measures would aim for long-term change and would not be able to ease Hong Kong’s current sky-high home prices, increase homebuyers’ affordability or shorten the long queue time for public housing units all within one year.
On Monday, Lam told Metro Radio that if the idea of building flats on the edge of country parks suggested by her predecessor Leung Chun-ying was feasible, it would have been done long ago. She said the government had strong reservations about the controversial proposal due to its complicated administrative procedures.
She also said she had submitted a report to Beijing about a gradual easing of border crossing restrictions and her government was waiting for directives.
Freddie Wong Kin-yip, chairman of Hong Kong-based property agency Midland Holdings, said in a recent interview that the city’s property prices could grow as much as 13% this year and would maintain an upward momentum over the medium term.
Wong said people who planned to enter the market should make up their minds before the reopening of the border between Hong Kong and the mainland, which some analysts anticipate will facilitate a surge of mainland Chinese buying.
Louis Chan Wing-kit, Asia-Pacific vice-chairman of the residential division at Centaline Property Agency, said the sales of new residential properties had received a strong response from homebuyers over the past two months. Chan said people had become more confident in home purchases with the Covid-19 epidemic contained since June.
People also wanted to buy properties as a hedge to global inflationary pressures, he said, adding that the Centa-City Leading Index would probably record a high in July.
New World Development, a Hong Kong-listed property developer, said on July 8 that two of its residential blocks in the third phase of the Pavilia Farm, a popular complex under construction in Tai Wai, would have to be torn down and rebuilt as the concrete of some walls at the two towers did not meet the requirements of the approved design.
The Buildings Department said it was first notified of failed test results of concrete samples involving Tower Eight in June, and had ordered work to be suspended pending another set of tests. It learned earlier this week that similar problems emerged at Tower One, where construction also had to be halted.
Greg Wong Chak-yan, a former president of the Hong Kong Engineers’ Institute, said it seemed that some construction site workers used the wrong concrete by mistake due to a miscommunication between the workers and their supervisor. Wong said there was no incentive for the contractor to replace the stronger concrete C80 with an ordinary one C45 as the price difference was only tens of thousands of Hong Kong dollars.
A total of 846 apartment buyers at the two towers would receive the properties nine months later than the original date on June 30, 2023 due to the incident.
New World Development said it would pay interest to the buyers in the nine months after June 30, 2023 at the prime rate plus 2%, which is currently 7%, and some rental subsidies. Based on a property price of HK$15 million (US$1.93 million), a buyer on a cash payment mortgage plan will receive a subsidy plus interest compensation totaling HK$1.15 million.
While a potential border reopening and limited supplies continue to support Hong Kong’s property prices, earlier forecasts that an emigration wave would hit prices may not come to fruition, analysts say.
There is still no official data to show how many people have left Hong Kong since the implementation of the National Security Law on June 30, 2020.
According to the United Kingdom’s Home Office, a total of 34,300 Hong Kong people have applied for a British National (Overseas) visa to move to the UK during the first quarter of this year.
The visa provides the applicants a pathway to gain UK citizenship in six years. Media reports said others have left Hong Kong with Canadian and Australian passports.
Secretary for Education Kevin Yeung acknowledged for the first time on July 2 that there has been an emigration wave in Hong Kong, given that several students have quit their schools this year. Yeung said the exact figures would be known in September.
Carrie Lam said on Monday that the surge in emigration was not a big problem while those who left would eventually realize how good Hong Kong is. She said Hong Kong would recruit overseas and mainland talent to offset the exodus.
According to a survey published by the Midland Immigration Consultancy, about 85% of those who planned to leave Hong Kong have not yet bought a property overseas. Among them, only 23% would sell their Hong Kong properties to pay their living expenses overseas, while 39% would use their savings and 28% would opt to take out more loans.
About 15% of surveyed people had purchased a home overseas. Of them, only 14% sold their Hong Kong properties. Tina Cheng, director of strategy at Midland Immigration Consultancy, said the recent emigration wave has not had a strong impact on Hong Kong’s property markets.