11,737 Vacant Hong Kong Properties Could See the UK Market Soar
Amongst overseas investors, the UK property investment market is renowned for its reliability and strong returns, but for Hong Kong investors in particular, it has always been a popular destination. Now, following changes to Hong Kong law, we’re seeing this popularity grow for different reasons.
Since the country announced controversial new security laws back in 2020, many Hongkongers have been searching for an opportunity to leave the country. With 2021 bringing with it a new British National Overseas (BNO) Visa, the UK is now a destination for both investors and citizens.
What is the BNO Visa?
The BNO Visa scheme came into effect on January 31st 2021, after UK Prime Minister Boris Johnson announced the passport in July 2020. With China’s new security laws targeting ‘succession, subversion and terrorism’ – a move deemed ‘a serious breach of the 1985 Sino-British declaration’ by Johnson – up to three million Hongkongers are being given the opportunity to move to the UK.
The passport scheme offers Hong Kong residents and their family members the chance of UK citizenship for up to five years, before they have the choice to apply for a permanent, settled status.
While predictions vary, it’s expected that the effects of the BNO passports will be undeniable for both the UK and Hong Kong. With applications for this scheme having opened at the end of January, reports suggest that by the end of February, almost 5,000 Hongkongers had made an application for the passport.
However, as the political uncertainty throughout Hong Kong continues, UK government officials expect up to 1,048,000 applications could be made.
In welcoming these citizens to live and work in the UK, it’s expected that the UK economy will thrive. Estimates anticipate that over 75% of Hongkongers relocating with the BNO visa will be educated to university level or above, earning 50% higher than Hong Kong’s median income.
What does this mean for the Hong Kong property market?
By putting downward pressure on Hong Kong’s population, knock on effects on the city’s property market were inevitable. Although applications have only been open a short while, 11,737 households have already swapped out Hong Kong for the UK. As a result, the number of vacant properties across the city is climbing.
Should this exodus continue, the number of vacant properties throughout Hong Kong could reach 66,683 in 2021 alone – a significant increase from last year’s 52,370. This would equate to more than five times the number of total units throughout Taikoo Shing housing estate in Hong Kong.
With the potential to push the vacancy rate as high as 8.2%, the number of empty properties in Hong Kong could reach 101,000, which would be an 18-year high. A shift of this size would inevitably lead to dwindling demand, resulting in the property market seeing major shifts in both rental and property prices.
As a notoriously expensive market, the demand for property in Hong Kong has always been unpredictable. While the average rents suffered a 6% decline during the global pandemic, 2021 could see falls of 10%, as the city continues to navigate Coronavirus, and thousands of families flee the country.
What does this mean for the UK property market?
The unsteady past performance of Hong Kong property has been pushing the appeal of the UK market for many years, with almost 10% of SevenCapital enquiries over the past two years originating from the region.
However, as more citizens vacate the country, the subsequent effects on demand will continue to reduce the appeal of Buy-to-Let property in Hong Kong. With this demand translating into the UK property market – alongside exceptional forecasted growth – investors are likely to continue looking to the UK for Buy-to-Let opportunities.
The UK property market is still booming from the Stamp Duty holiday, and this additional demand from Hongkongers will continue to outweigh the country’s supply. Over the past 12 months, we have already seen the average UK house price surpass £300,000, and average rents (outside of London) increase by 8%, which could continue surging as the BN(O) passports materialise.
Although this could mean that entering the Buy-to-Let market is more competitive, the combination of rising demand and increasing undersupply will likely make for more promising rental incomes. With specific areas across the UK, such as Bracknell, nearing 4% rental yields, coupled with below average property prices, Hong Kong investors will continue incorporating this asset into their investment strategy.