The New Normal! BETTER HOMES AND GARDENS

Hong Kong’s property market reinvents itself yet again following the fundamental work and lifestyle shifts of 2020. Elizabeth Kerr reports

The Hong Kong real estate market is no stranger to external shocks, and unlike many places around the globe, it is incredibly resilient. Little surprises the SAR’s property sector, as it seemingly goes from strength to strength, if the 400%-plus price gains in the last couple of decades are any indication. But 2020’s global coronavirus pandemic and the near shutdown of most major economies seemed like the kind of shock that might finally throw a wrench into the property sector. “We have seen more transactions between the first half of 2020 and the first half of 2021 despite the pandemic, as the purchasing price has become more attractive …

luxury residential prices are now sitting in the HK$80,000 to HK$100,000 per square foot range,” begins Colliers’ Hannah Jeong, head of valuation and advisory services. “Amid growing optimism of Hong Kong’s economic recovery and the pandemic being brought under control, the demand will remain healthy.” While HK$100,000 is indeed Repulse Bay pricing, the market rebound is happening in all districts, including Discovery Bay. Activity in traditional luxury districts – Island South is in particularly high demand – has been buoyant since early in 2021, but according to JLL, B and C class flats between 430 and 1,075 square feet have seen demand rise against nano-flats and outperform, with prices climbing as much as 5.8% in the 18 months starting in November 2019, versus 2.9% overall and 2% in the luxury sector. A continuing low interest rate environment, relaxed LTV ratios in the mass sector, a liquid market with relatively little debt and flush with stock market cash (180 IPOs generating over HK$600 billion since the start of 2020) make a cocktail for demand – compounded by what can be referred to as the new COVID lifestyle.

COVID-LIFESTYLE HOMES

With borders still closed, residential sales and leasing in 2021 have been defined by local investors and, most significantly, local upgraders looking to realign their homes with our new collective lifestyle. As working from home gains more traction (it’s also more cost effective for corporate occupiers as evidenced by the battered office sector) buyers and tenants alike are opting to upgrade their homes to accommodate the new normal, putting those B and C class flats and traditional luxury on everyone’s radar. “Anything that ticks so-called COVID boxes is demanding a lot of attention from both upgraders and investors,” says boutique broker Habitat Property managing director Victoria Allan. Flats with up to four bedrooms, ample outdoor areas, interior space for studies, offices and family rooms, and walkability to restaurants, beaches, hiking and everyday conveniences are drawing the most interest. A view helps. Large flats that have been recently renovated to a high specification are getting even more attention. As Victoria sees it, upgraders are unwilling to wait, and are looking to address lifestyle changes as soon as possible. “That’s a new factor for potential buyers but it’s become a time-saving measure that allows families to move in immediately, with minimal work. Those properties are demanding a premium. On the rental side, there’s also a lack of stock on anything ready to move into.”

MARKET REBOUND IN DB

Those same trends have impacted DB, where despite the impression that families are fleeing the city (with few new arrivals) a lack of available stock is putting pressure on prices in the wake of rising demand. “We are seeing fewer properties on the market than last year,” agrees Headland Homes partner Charles King. “Given that people are more commonly working from home it makes sense for them to get more bang for their buck by getting more space.” Also a plus, DB buyers still aren’t compelled to pay HK$100,000 per square foot, or HK$228 per square foot to rent (as was the case at 73 Mount Kellett Road). Victoria echoes Charles, noting ongoing travel restrictions “are having an enormous impact on people’s decisions to stay or leave. That said the stock still isn’t coming to the market.” First time buyers are making their way to DB alongside upgraders looking to take advantage of quickly dwindling rental reductions and sales discounts. Though rents in Hong Kong have fallen 16% since late-2019, vacancy rates for larger flats have also fallen as local families are making the leap to COVID lifestyle homes.