Financial Secretary Paul Chan announced in early May that the city’s GDP shrank 8.9% year on year in the first quarter, the worst shrinkage on record, adding that the “three locomotives” of Hong Kong’s economic growth—exports, retail and investments—all broke down. Walking down the streets of the previously bustling districts of Tsim Sha Tsui, Causeway Bay, Mong Kok and Central, all we see these days are empty spaces. There is no doubt that Hong Kong has entered a deep recession. 

Hong Kong
A high angle view of the whole Kowloon peninsula and Hong Kong Island

Interestingly, despite the economic slump, the numbers of primary and secondary housing transactions saw a drastic increase over the Labour Day long weekend. On the 2nd and 3rd of May, the city’s top 10 housing estates recorded over 30 sales, making it the biggest weekend in seven years. Even with only remaining units available in the primary market and no launch of any large new developments, there was an impressive 260 first-hand property sales across the four-day long weekend.

On top of a large number of transactions, we are also seeing enthusiastic buyers outbidding each other and high prices. A small unit in City One Shatin was sold at an eyebrow-raising HK$6.18 million, while a three-bedroom flat in Fanling Centre fetched a record-breaking HK$7.05 million. Colleagues of mine told me that at present, consumer confidence is very strong. The pandemic has not caused home prices to plunge but homeseekers are anxious that prices would bounce back and continue to soar after the outbreak, so they are rushing into the market now before the pandemic is completely under control.

Like I’ve said before, a decade of cooling measures has transformed the supply and demand in the housing market, which is now driven by those buying homes for personal use and long-term investors. During the viral outbreak, launches of new developments are being stalled while the only available units are pre-owned homes and leftover new units. With a very limited supply and a large demand still unsatisfied, the housing shortage has only worsened.

At the beginning of the outbreak, a number of home sellers attracted buyers’ interest with lowered prices but as purchasers looked into the actual offerings, it was obvious to them that a few—

if any—of these “reduced-price” units were being sold at a loss at all. In addition, in a rare reversal of policies, many of which were originally installed to scare off buyers with a large amount of down payment required, the government relaxed certain mortgage rules last year, now allowing buyers to borrow up to 90% for homes priced under HK$8 million, and 80% for homes selling between HK$8 to $10 million. As a result, the market boom we’re seeing is in fact only found in the HK$10 million-or-under sector. Meanwhile, luxury properties and industrial and commercial real estate, particularly those over HK$30 million, are experiencing severe stagnation and tremendous downward pressure on prices.

It is my belief that once the outbreak is under control and social distancing rules are lifted, developers will start launching new projects, releasing fresh supply that is going to help curb the market frenzy. And it’s unlikely that housing prices will fluctuate drastically in the near future.