Will home market keep the winning roll beyond 2020?

Ben Kwok September 16, 2020 10:31

Hong Kong residential property market seems invincible. Save for the six years under the first Chief Executive Tung Chee-hwa, there was hardly a sustained drop in arguably one of the best performing asset classes in town.

In this small city, it is understandable why people are brave enough to bottom fish because the theory always worked, like during the periods when SARS, financial tsunami or the introduction of tougher property rules hit the market temporarily. After all, the simple Economics 101 explanation is that housing demand always outweighs its supply.

But the millionaire dollar question is whether it works in 2020 and beyond.

Well, things look more challenging ahead. The global economy is almost losing its heartbeat for much of the year due to COVID-19.

Hong Kong is also different. The city was in turmoil due to social movement before Beijing stepped in with the national security law. But the law scared off many people, some of whom plan to move out from Hong Kong to United Kingdom or other countries.

With this, one can imagine the residential market cannot be good this year given half of the people have been and might as well be still working from home because of social distancing, let alone a looming layoff in the time of economic uncertainty.

The poor home market cannot escape the eye of Regina Ip, the Executive Council member and legislator who made a point on her Facebook.

On her hiking tour from Bowen Road to the Peak, Ip noticed the path is now filled with a number of residential property ads at the lamp and railing post and even pavilion, many of which specified as distressed sales.

And these properties are in the mid-level to the peak area and also include Deep Bay and Repulse Bay.

Ip suspected that the businesses of some of these pretty well-off people must have been much affected by the violence last year and the epidemic this year. In some cases, they are selling at a loss to raise cash.

“More importantly they are very likely to have lost faith in Hong Kong and decide to leave because of the poor outlook,” Ip wrote.

A case in point was a bungalow at 28 Barker Road, which is on sale for HK$550 million, almost back to the same price it was acquired in 2015.

Apart from the property market, one can also detect a similar pattern in the pension market. In the first quarter, some 7,600 people applied to take out their mandatory provident fund due to permanently leaving Hong Kong, up 10 per cent in the first quarter.

From 1 July 2019 to 31 March 2020, there were a total of 24,000 similar cases involving a total asset size of HK$4.1 billion.

More people are expected to take out their pension next year as many families are planning to leave, evidenced by reportedly strong sales of overseas properties recently.

A local advertisement summed it up nicely – a Hong Kong property is worth more than four in United Kingdom. It goes without saying that each unit is more spacious too.

Welcome to the new era of HK home market!

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Ben Kwok

EJ Insight writer