As Dickens wrote: “It was the best of times, it was the worst of times,” and while most will fall on the “worst” side for a variety of reasons, there were indeed a handful of good things to emerge on the property front this year. If every cloud has a silver lining, there were just as many darts as laurels in 2019.

Best: Relaxing the loan-to-value policy

Most industry analysts agreed that relaxing the loan-to-value ratio for first-time homebuyers on flats worth under HK$10 million was a good move that could potentially reinvigorate the sector due to pent up demand and buyers that have been waiting for this kind of opportunity. Lowering the initial, and often substantial, down payment required in the secondary market is also likely to free up a massive amount of latent supply that hasn’t been exploited, and should stimulate the sub-market usually appealing to first-timers for its (on average) lower prices.

Worst: Escalating social tensions

Colliers International and Knight Frank both cited unrest in Hong Kong, as well as external, macro headwinds as being the biggest challenges of the year. “In the wake of the prolonged China-US trade war and the worst political crisis in its history, Hong Kong’s property market has been seriously impacted, resulting in poor market sentiment across all sectors,” said David Ji, Knight Frank director and head of research and consultancy, Greater China. “Residential prices recorded [their] largest fall in September since December 2018. The retail sector was hit the hardest, with sales dropping tremendously and lots of store closures. Leasing activities in the office market remained weak, with rents continuing to swing downwards.” Vacancy rates in Central commercial addresses are starting to creep up (admittedly from record lows) and rents are starting to trend down: 3.7% quarter-on-quarter in the third. That said, existing tenants find themselves in a better bargaining position for lease agreements, and the firms that do venture into the SAR in the near future will also be seeking office space from a position of strength.

Best: Residential land supply boost

Aside from lowering the LTV ratio, Chief Executive Carrie Lam’s Policy Address outlined several key land supply measures, chief among them the Lands Resumption Ordinance. That crucial piece of legislation enables the involuntary re-appropriation of 700 hectares of private land for public use, including 450 hectares of private land in brownfield sites and squatter villages. That’s a slow, long-term plan, so in the meantime, Hongkongers can expect 10,000 new transitional homes in the next three years, increased public/private housing split to 70% and new ownership schemes that will supply nearly 55,000 flats.

Worst: Retail woes… again

The hospitality industry has made no secret of the fact that falling tourist numbers (off 23% in the third quarter over 2018) are hurting: hotels are running at approximately 65% occupancy, which is roughly 20% below normal. As a result, retail sales are down just over 17.2% this year so far. Though international brands still consider Hong Kong a key consumer market (brands like fast food chain Five Guys and discount department store Don Don: Donki are performing well) and high street rents wavered again (dropping 7%) and expansions were put on hold—not cancelled. Research by Cushman & Wakefield determined Causeway Bay was, once again, the world’s most expensive retail location (as of June) and current conditions, as in commercial, are actually an opportunity to return to high streets.

Best: Stoking the local market

On the bright side, staycations at some of the city’s toniest five-star hotels have never been more affordable for Hongkongers, and the retail sector is following suit. With tourist dollars thinning, retailers have turned their attention to local consumers and embraced new “retail-tainment,” retail+art and leisure+lifestyle concepts. K11 MUSEA was perhaps the most high-profile location to unveil its art-forward, experiential shopping, but Citywalk in Tsuen Wan, Citygate in Tung Chung and others are positioning to be more educational, active and interactive malls, with facilities that transcend just shopping.

K11 MUSEA

Best: Resilient industrial investment

Ironically, despite the Sino-US trade war showing no signs of abating, the city’s industrial sector is proving to be one of the most stable property sectors this year. Though the Beijing-Washington conflict has reduced total trade value by 8% through November, lack of supply has buoyed warehouse rents and kept them level. In addition, the Revitalisation Scheme 2.0 continues to reduce overall industrial stock, creating a boon for investors holding stock, be it for staying in the industrial sector or future commercial conversions.

Best: Resilient luxury and robust primary sectors

Despite poor overall sentiment, the few developers that launched new projects in late summer were rewarded with robust sales, and discounted units are expected to hit the market ahead of the looming vacancy tax. For those who are cash-rich, the luxury residential sector proved resilient. Some headline-grabbing transactions unfolded; sales at Mount Nicholson, 45 Tai Tam Road and Jardine’s Lookout racked up numbers in the neighbourhood of HK$85,000 per square foot and $1 billion price tags. Ji: “Our research into price correlations also revealed that the luxury prices are a lot less sensitive to economic conditions and are proving inelastic.”