2021 Hong Kong Property Market Update - Covid Lifestyle Fuelling Hong Kong’s Luxury Sector Rebound
Our founder and Managing Director Victoria Allan shares her latest market news on Hong Kong real estate in 2021, explaining how and why the Luxury Residential sector continues to be in demand.
After a subdued start to 2020 due to the coronavirus pandemic and a modest rebound in the second half of last year, 2021 got off to a roaring start, with first quarter Hong Kong real estate market transaction volumes rising amidst a clutch of headline-grabbing sales, predominantly on The Peak — where three properties on Peak Road went for prices starting at HK$550 million. With interest rates remaining low, local Hongkongers, Mainland residents of Hong Kong and other Expatriates have simply acted on lingering demand, buoying the market. This pent-up demand along with what is now definitely the ‘new normal’ Covid lifestyle have combined to make key districts in Stanley, where we opened an office in June and the greater Southside — Repulse Bay, Tai Tam, Pok Fu Lam and then Sai Kung the most desirable addresses in Hong Kong. And that’s unlikely to change any time soon.
The secondary market is experiencing the kind of confidence I have not seen in many years, if ever. Both investors and end-users are once again considering Hong Kong Luxury Residential property a strong asset class founded on long term growth. Prices in the luxury sector grew 3.9% in the first half of 2021, and we forecast they’ll gain another 5% by the end of the year. Those low interest rates were complemented by high liquidity and low debt in the market at all price points, which went a long way towards the property market’s rapid recovery this year. Those price discounts and rumoured distressed Hong Kong property for sale of a year ago are long gone, and rising prices are, ironically, giving prospective buyers the confidence to pay more for a property. We’ve had a record year so far at Habitat: Transaction and price volumes are up nearly 20% over this time in 2020, and we’re on track to beat our previous best in 2018.
Whilst the market is indeed rebounding, some properties are faring better than others at the moment. Last year we were all asking ourselves if the COVID contingencies were here to stay: online education, working from home, dining, leisure and entertaining restrictions that were keeping us in our homes. Even as vaccines roll out worldwide and COVID is coming under a semblance of control (at least in Hong Kong), travel is still restricted: we are going to be here for at least another year, possibly longer. Add to that the realization in 2020 that we could conduct business just fine with a computer and a strong Internet connection — 5G is coming and that’s only going to make things easier — and working (and to some degree learning) from home is poised to become more common.
All those factors mean anything that ticks a lot of COVID lifestyle boxes is demanding a lot of attention. Homes with four bedrooms, a little bit of outdoor space, and areas that can be dedicated to studies, offices and family rooms are first to draw interest. New to this mix, however, are properties that have been recently and beautifully renovated. That’s a little unusual until you recognise how completed renovations save time, and how they allow buyers to move into new homes almost immediately. These properties are demanding a premium. Add green views and walking access to restaurants, beaches, hiking and everyday conveniences and premiums can be as high at 10%. A prime example is a property in Shouson Hill, which sold faster, had more bidders and finally went for HK$101 million — against an asking price of HK$92 million.
The luxury market hasn’t peaked for this cycle yet; there’s room to grow. At the high end we forecast the Hong Kong property price index to climb as much as 10% in 2022, but there will be increases across the board. Market liquidity, stabilising business and low rates for the foreseeable future mean owners willing to hold for the next five to 10 years can be assured of secure capital growth. The result of that is Hong Kong property reclaiming its status as an attractive asset class. Supply is tight, demand is high, and activity is going to pick up even more once borders reopen. It’s only a matter of time.