Will the West be won?
West Kowloon is touted to be the next big thing in Hong Kong property. Wil it be?
If we’re honest with ourselves, Kowloon is where all the action is these days. With Hong Kong Island pushing the limits of saturation and heading towards elite corridor status, all eyes have turned to Kowloon and its relatively bountiful space. The New Territories is set for considerable work but Kowloon East and West Kowloon both have become hot spots. Like it or not, more and more of us are going to be living and working there in the future.
Lay of the Land
Technically part of the Yau Tsim Mong district, West Kowloon isn’t the residential wasteland it can be perceived to be. The district includes neighbourhoods around Olympic (the location of Olympian City and nearby The Hermitage, Charming Garden and Island Harbourview) and newer developments clustered around Kowloon Station, where The Arch, The Cullinan, The Harbourside, Sorrento and The Waterfront are all steps from ICC, Elements and two five-star hotels. Austin Station adds another dimension to the area with the Grand Austin. But whether or not this micro-district of Yau Tsim Mong has the appeal of pedestrian-friendly and amenities-heavy areas just a few minutes east and north (Olympic is the next stop up and is walking distance to Mong Kok) of there is another question altogether. Much has been made of ICC’s influence on the office market — more reasonably priced Grade-A commercial space right on top of an MTR and Airport Express station — but for the moment, ICC is the only office game in town in West Kowloon.
A great deal hinges on the development of the long-simmering West Kowloon Cultural District, which, unsurprisingly, will not be dedicated solely to culture. Construction at the base of ICC has finally started, and many expect that the 40-hectare project should give area property prices a boost as well as stimulate the growth of a true neighbourhood atmosphere. This will also serve as the terminus for the new high speed rail to Guangzhou, and in May the Financial Times theorised the final product could move Hong Kong’s “Central” away from Central.
All that makes West Kowloon a seemingly natural fit for both expatriate residents and local professionals working for global financial services firms that are relocating to ICC, as well as investors hoping for better yields than in traditional hotspots like Mid-Levels and Island South targeting those same tenants. As reported by FT, a three-bedroom flat in Happy Valley or Mid-Levels was running roughly $45 million, as high as $90 million on the Peak but a more affordable $25 to $30 million in West Kowloon’s tonier towers. Still, the knock on West Kowloon is its lack of street life. Finding a supermarket, a wet market, pharmacy or hardware store — all staples of fully realised neighbourhoods in Sheung Wan, Stanley, Kowloon City, Sha Tin and scores of other pockets in the city — is tricky business. Armani and Chanel, however, are no problem.
In a case of mimicking London, investors that took advantage of relatively affordable prices now have vacant units in and around Kowloon Station. “Lots of units are available above the Kowloon Station. Most are for sale with a lease,” explains Frank Ng, property consultant with Elements Realty. And Ng agrees the WKCD is a major factor for buyers, even the spectre of it. “The cultural art policy is critical and West Kowloon will be the foundation of Hong Kong cultural and art industries,” he theorises. Even with the Cultural District years away and the only real office space at ICC, the West Kowloon is going to continue to draw attention because of its proximity to Guangzhou, the forthcoming train terminal and the ferry terminal link to the Mainland, all of which will support prices. The first rule of property rears its head here. “It is a convenient location,” finishes Ng.
However, Joanne Lee, manager of research and advisory for Colliers International points to the limited supply, usually a good sign, and agrees that the area’s transport links appeal to Mainland buyers. In addition, “Chinese investors also have a long record of choosing brand new apartments, making West Kowloon a natural fit,” she says. But, “Downside risks, as a result of imminent interest rate hikes, increasing residential supply, stamp duty measures and already-high prices are weighing heavily on investors’ minds,” Lee continues. “Prospective buyers are generally conservative in pricing. Nevertheless, the market is filled with enormous pent up demand and prices in the West Kowloon area will stay resilient. However, it is our view that the rising interest rate environment will gradually lead to a broad base correction in property prices.”
So what might West Kowloon look like a few years from now? Ng: “With the world class art and cultural facilities, landmark architecture and high quality programmes, it will attract lots of locals and tourists. West Kowloon will become the art ‘door’ for the Pearl River Delta area.” Right now, however, for end-users and investors alike, it comes down to how much connection to the rest of the SAR matters. There’s always Kowloon East.