Shenzhen home prices seen catching up with those in HK

September 03, 2018 10:44
With the Greater Bay Area plan expected to lead to more inflow of capital and talents into Shenzhen, the city is likely to witness a further spurt in property prices. Photo: Reuters

Hongkongers have been hearing a lot about the Guangdong-Hong Kong-Macau Greater Bay Area plan, yet have only a vague idea about the whole thing. Given that details have been sparse, most people are for now focusing just on potential property market investment opportunities.

CBRE last week released a research report on the Great Bay Area, in which it suggested that home prices in Shenzhen are likely to catch up with those in Hong Kong due to continued population inflow.

The central government has yet to release the long-awaited master plan for the Great Bay Area. It's widely known that the area would cover Hong Kong, Macau, and nine cities in Guangdong province. However, there are little details available on the positioning of the 11 cities, and on aspects such as further opening-up of the economies, industrial development roadmap, etc.

CBRE report has divided the 11 cities into three groups. Hong Kong, Macau, Shenzhen and Guangzhou will continue to lead the region's development. Dongguan and Foshan are in the second-tier and will benefit from spillover effect.

Zhuhai, Zhongshan, Jiangmen, Shaoqing and other cities in the western part of Guangdong province are expected to gain from regional infrastructure projects, such as the Hong Kong-Zhuhai-Macau Bridge and Shenzhen-Zhongshan Bridge, as some industries may move to the western part of the Pearl River.

The report noted that Shenzhen might attract more population since the Greater Bay Area plan will facilitate the flow of capital, talents and information. Therefore, housing prices in the city may catch up with those in Hong Kong.

Like other top Chinese cities like Beijing and Shanghai, national average income or the average income of Shenzhen people may not be the key factor determining the property price trends.

The purchasing power of the richest 5 percent of people in the country may instead be a more relevant factor, because these top cities are preferred by Chinese and thus keep drawing talent and capital from other parts of China.

As such, Shenzhen property prices may one day catch up with those of Hong Kong.

But that does not mean Hong Kong property prices would stand still. Certainly, Hong Kong will continue to be a financial hub, given its advantages in free capital flow, simple taxation regime, sound legal framework, etc. The city will continue to attract mainland talents and the rich.

Given this, we can say overall that housing prices in both Shenzhen and Hong Kong will trend higher over the long run.

This article appeared in the Hong Kong Economic Journal on Aug 31

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal columnist