Where Do We Go From Here?
Cooling measures are frightening Hong Kong investors away from China … but for how long?
| Text : Elizabeth Kerr | Photo : www.thinkstockphotos.com |
According to a report released by Land Power on 22 July, Hongkongers have lost their affection for Mainland Chinese real estate. The latest statistics indicate that Hong Kong residents have purchased 28 percent fewer properties in 2010 over the same period in 2009, transactions fell almost HK$10 billion, and Hong Kong investors are on track to buy 19 percent less property in China than they did last year. The preferred destination of Hong Kong buyers — Shenzhen — has even lost its charm: Sales are down almost 50 percent this year so far.
As an indicator of how miserable things are, Land Power chair Michael Choi said, in The Standard, approximately 2,300 transactions were recorded during the same period in 2008 — at the height of the recession.
Most are chalking up the slow market movement to new regulations and restrictions on mortgage lending to foreign nationals and cooling measures designed to curb soaring property prices on the Mainland. Ultimately, it’s been a great deterrent for Hong Kong buyers.
According to research by Colliers International Beijing, the same pattern is evident there. The Chinese government’s policies, “These acts dampened investment demand for Beijing’s overall residential property market, and catalysed a strong ‘wait-and-see’ attitude in the luxury residential segment, as well as intensifying uncertainties in the short term.”
If investment is the backbone of an economy, is China in any danger of losing its appeal because of its fears of a property bubble? Probably not. Colliers: “The rising uncertainties on the length of policy effectiveness and their impacts caused the overall capital values to slow in this quarter and this phenomenon should stand on chance to last in the near term.” Luxury properties in the central business district remained strong, and several key developments’ strata-titles sales were almost complete, “demonstrating a strong but pent-up demand from individual investors, and this became even more apparent in some special cases,” Colliers’ Second Quarter Market report stated.
Choi at Land Power agrees and expects talk of the town to see a rebound in the China market by autumn. “The lack of transactions in the first half has led to pent-up demand,” Choi said. He also expects Hong Kong investors to return to Shenzhen in massive numbers. China’s economic growth is expected to top 9 percent this year, 8 percent in 2011, and that should create the kind of demand particularly for luxury housing that there’s a solid, if slightly low, supply of on the Mainland.
The outlook for investors is, ultimately, rosy. Colliers’ market outlook for Beijing is optimistic given strong leasing demands, stable vacancy rates and an expanding job market for overseas staff. There’s no reason to believe that things will be much different in Shenzhen (which has almost 45,000 square feet of property coming onto the market in 2010) or even Shanghai. As Colliers sums it up, “With respect to rental and capital values, investment yields are expected to rise in the next two quarters. In general, the sectoral investment market should continue to have a positive outlook, underpinned by the economic fundamentals and limited new supply.”
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