2020/2021 Hong Kong Property Market Update - a new Covid Lifestyle

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• In 2020 despite the market initially coming off in terms of value and sentiment, people still saw long-term value in the market.
• Covid-19 did soften the market and dent sentiment, however as HK stabilized, particularly in the global context, this gave Buyers a lot more confidence to come back, resulting in a very strong Salesyear (+10% y/y).
• A key trend has been Buyers looking for beautifully renovated properties & interiors as people spend more time at home, working, home schooling and entertaining given travel restrictions so home & lifestyle has become more important than ever.
• High demand sales areas have been Southside: Repulse Bay, South Bay & Stanley where values have held up well and will continue to increase as Lifestyle continues to be important - outdoor space, space for home entertaining, views, beach access, hiking et.
• Rentals have come off (-10-15% y/y) - as everyone remained in HK with limited travel, there has been lots of transactions as people take advantage of rental declines, either downgrading to save money or upgrading to adjust to this whole new 'Covid Lifestyle' where priorities have shifted.
• Rental hotspots of HK $40/50 - $100k has seen alot of competitive bidding as people re-prioritize, especially in the $80-110k price range.
• High demand rental Neighbourhoods include Sai Ying Pun, Sheung Wan and the Southside.
• Looking to 2021, we expect the market will continue to stabilize with the Sales trend continuing, as Investors return looking for yield with lower tolerance, sentiment improves and lower interest rates prevail.

Most of us agree that there hasn’t been a year quite like 2020 in recent memory. Global events have certainly left their mark to some degree or other across the board, and property markets all over the APAC region have seen varying levels of uncertainty, particularly towards the beginning of the year.

The market initially suffered a sharp shock with COVID-19 and values slid somewhat, but buyers were able to see past current events to the long-term value of the Hong Kong property market.

As the first weeks of 2020 turned to months, a pattern of ebb and flow was established that saw periods of growth and activity interspersed with stagnation. Despite the quiet moments, the general mood within the region’s property market was one of optimism and opportunity.

How is the property market in Hong Kong?

Hong Kong experienced a period of social unrest through 2019, but following this, the market began to show signs of revival and resurgence. Sadly, this progress was hampered when the novel coronavirus pandemic made headline news and changed the ways we live and do business for the foreseeable future.

Speaking globally, the real estate market is perhaps one of the most reactive especially in terms of sentiment and this is certainly true in Hong Kong. Before much was understood about the virus, uncertainty led to a reduction in the number of property sales in Hong Kong. This effect was short-lived, and as the region’s relatively effective response to the coronavirus outbreak became apparent, confidence strengthened and grew.

As things began to stabilise in Hong Kong, the area’s global standing in terms of property value was able to recover. Despite the challenges, our sales year ended on a high note with a 10% increase on 2019’s performance as more buyers returned to bolster the real estate market. It’s safe to say, the property market in Hong Kong is doing well indeed.

How have current events affected property values in Hong Kong?

By March of 2020, the housing and property market seemed set for an uncontrolled decline which increased nervousness among APAC-based buyers. Dented sentiment was a strong factor in market losses through the first quarter, leading analysts to question the long-term outcomes and draw parallels with the SARS crisis of 2003 which led to an eight-month period of stagnation.

While housing prices in Hong Kong bottomed out in April, this was followed by a steady but promising rebound. Though 2020 was off to a somewhat shaky and uncertain start, residential prices ended the year at only 1% lower than those of 2019, and the luxury sector which was hit a little harder ended at just 8% below the previous year’s performance. This property valuation recovery is testament to the strength of the real estate market in Hong Kong and the wider Asia-Pacific region.

Current trends in property valuation demonstrate that market activity is on the increase with more people looking to rent and buy in Hong Kong. Buyers, renters and landlords alike are coming into a reinvigorated property market that favours their needs.

Opportunities in Hong Kong real estate

As 2020 progressed there was an understanding that COVID was something global and unprecedented, and mixed responses were seen country by country with varied success. Hong Kong’s resilience in the face of upheaval paired with a strong, comprehensive response to coronavirus contributed greatly to its stability, giving buyers confidence in housing opportunities.

Hong Kong is known as one of the most sought-after property markets in the world. In particular, it’s a hotspot for expats and locals alike looking for the choicest apartments and houses to rent and purchase. Opportunity arises from a blend of social, economic and behavioural factors. These conditions were met early in 2021 with the timely combination of a COVID vaccine launch, a change in administration in the USA and the resultant optimism seen in property valuation trends.

Improved sentiment among buyers had a positive impact on property values in Hong Kong, and buyers were keen to take advantage of the 15% decrease in purchase prices and up to 20% reduction in rental rates. These conditions along with improving social factors favoured those looking to rent or purchase property in Hong Kong, making for a consumer market full of potential and opportunity.

Hong Kong property buyer profile

As well as Hong Kong Chinese locals, the area is home to a booming population of well-travelled professionals and business owners. While many of these residents from overseas are currently based outside of Hong Kong due to travel restrictions, locals have been able to take advantage of increased market saturation. Most of the locals looking to relocate at this time fall into two categories: those looking to take advantage of decreased rental rates by downgrading, often to equivalent properties, and those looking to upgrade to properties which better suit their work priorities, and educational and social needs.

Hong Kong is a thriving economic hub which attracts residents from around the world. Events of 2020 have dramatically reduced the numbers of expats living in the region, freeing up property which has otherwise been inaccessible to the local population. For many locals, this mix of reduced fees and purchase prices, and a sudden increase in the number of available properties provides an opportunity that is just too good to miss.

Unfortunately, Mainland Chinese buyers have so far been unable to take advantage of the favourable housing market conditions in Hong Kong due to travel restrictions and border closures. Property agents in Hong Kong have had to think creatively by providing virtual tours of houses and apartments, but these simply can’t compare to in-person viewings when it comes to giving buyers and renters the peace of mind and confidence to purchase.

Hong Kong property market trends

With most parts of the world experiencing some form of lockdown or other, many of us are spending much more time in the home than ever before. This increased time at home has made plenty of people thirsty for a change of scenery, and so there has been an increased appetite for properties in the luxury, high-end market. Beautifully refurbished homes and apartments, particularly those which are on the larger side, are in high demand because residents are going to be spending much more time at home.

In post-coronavirus Hong Kong, people are looking for homes which fulfil a much more meaningful requirement than simply a place to lay your head at night. There has been a surge in the numbers of people looking for Hong Kong property for Sale across the region. Genuinely livable homes that are a pleasure to spend time in are strongly favoured, particularly if they provide enough space for work, study, and leisure time as well as everyday life. This housing market trend is seen at all price points, allowing buyers and renters to be choosy with their planned move.

Remote working has seen office life invade our living spaces like never before, and having a place to work that is separate from other parts of the home is a valuable asset. Properties with more bedrooms are desirable as a spare room can easily be converted into a personal office, and the fact that it’s separate gives residents much-needed headspace during their downtime.

Students and families with school-age children are finding that now is a great time to move to large properties in Hong Kong. Online classes have become an educational staple, allowing students to manage their curriculums safely from a spare room or corner of the bedroom. By opting for properties with a little more space, the impact of working and studying at home can be minimised dramatically, making things a lot more convenient, efficient, and enjoyable.

A key trend that’s reflected in the Hong Kong property market is the idea that our homes are now much more than a place to rest and sleep at the end of the day. They have become our offices, our gyms, our schools, our favourite date night destinations — making space for all these aspects of our lives in a changed social landscape calls for the comforts that the right property provides.

In-demand areas for renting and buying property in Hong Kong

While each part of Hong Kong has its own unique personality, Southside is a hot topic in the Hong Kong property market right now. Values in the area have really held up to recent stresses and this upward trend is set to continue for the foreseeable future due to lifestyle factors.

Changing lifestyles have brought key Hong Kong districts and neighbourhoods into the spotlight, increasing demand for properties locally with Southside being chief among them. Among families looking for Hong Kong property to rent or buy, Southern District is a popular option with lots to offer, while Central and Western District are favoured by renters.

Other areas in Southside that are attractive to purchasers include Repulse Bay, South Bay and Stanley, all in Southern, which have demonstrated resilience in terms of value. High-end properties in the area are still able to generate headline-making prices: a house at 90 Repulse Bay Road commanded HK$470 million in April.

Beyond the properties themselves, Southside is known for its nearby beaches, hiking trails, and stunning outdoor spaces, as well as boasting apartments that are larger than the Hong Kong average. These generously sized flats are perfect for entertaining and are conveniently located for commuters travelling by public transport and private cars. Southside also has a choice of Hong Kong’s best international schools offering world-class educational programmes, so it’s the ideal place to raise a family.

It’s no surprise that Southside and its neighbourhoods are in high demand; the location is hard to beat for young families and professionals alike. Having said this, Sheung Wan and Sai Ying Pun attract individuals and families from the same demographic who are looking for a similar lifestyle in a more urban setting. Located just outside the Central and Mid-Levels corridor, both are closer to the city’s core business district and its bustling dining and cultural precincts. These are quieter than usual at the moment, but as Hong Kong’s situation improves there is the promise of a vibrant urban village lifestyle to draw in newcomers.

What are the trends in Hong Kong’s rental market?

Hong Kong’s rental market has long been known as one of the most competitive in the world and recent events have made things even more competitive. Rental rates in Hong Kong have spiked and bidding wars are common as tenants re-prioritised their property searches looking for rents between HK$40,000 and HK$100,000.

Flats in the HK$80,000 to HK$110,000 range tend to offer generous square footage, comprehensive building facilities and highly desirable sea views making them some of the most sought-after properties in Hong Kong. As with most development in the sector, this trend is set to continue.

Coronavirus vaccines are much anticipated, but despite a rapid rollout scheme travel restrictions are set to lag behind somewhat. Closed borders and a decrease in overseas movement have allowed tenants to reassess their rental budgets and allocate funds to finding the perfect rental properties in Hong Kong to meet their new lifestyle needs, as such, many renters are taking this opportunity to flood the Hong Kong property market with activity.

Forecasting Hong Kong’s property market for 2021

Despite the small losses in 2020, the coming year is showing all the signs of a market on the rise. Upward property valuation trends and an engaged consumer pool prove that the volatility of the last 18 months has stabilised, and the commercial property market in Hong Kong has been helped along by government policy to eliminate extra stamp duty fees. This move stimulated sales of non-residential properties in the region and has helped ensure that interest rates remain low - encouraging vigorous stock market activity in the Greater Bay area and luring investors seeking low tolerance leads back to Hong Kong.

In effect, these elements work in harmony to foster an improved sentiment among those seeking residential and commercial properties in Hong Kong, providing the perfect conditions to right the ship in the second half of the year and mark 2021 as the start of a new, brighter property market cycle.