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Hong Kong Property Trends for 2020

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With 2020 around the corner, we’re evaluating the state of key property markets around the world. 2019 has been an eventful year and market performance has been impacted by plenty of external factors, as new trends start driving the direction of the property market.

For example, UK property market continues to suffer from chronic undersupply, creating a highly-competitive sector with plenty of potential. As foreign investment continues to pour into regional cores, prices in these key areas are rising against the traditionally popular London market.

In Hong Kong (HK), the outlook is less than positive. With the country seeing a major political crisis, the ‘most expensive property market’ in the world is expecting declines as the number of buyers drops and both local and international politics causes uncertainty. Looking to 2020, it’s expected that many HK investors will be looking overseas for more stable, robust markets. 

As part of our wider 2020 trends forecasting, we’re examining the outlook for the UK and Hong Kong markets as we head into the new year, as well as some of the global property trends that will shape real estate in 2020.

Hong Kong Trends

The Hong Kong (HK) property market has been the least affordable for the past nine years, driven by a problematic housing shortage. With HK property prices increasing by 200% over the last ten years, many HK residents are looking to more affordable markets overseas, where they can find more value for their money. 

It’s these factors driving Hong Kong natives to buy abroad. Anne-Marie Sage, Head of International Residential for Asia Pacific at JLL says: 

“The majority of our Hong Kong customers are investors looking for properties that are going to give them an attractive rental yield, where capital values are going to increase, or where their children might go to school or university.”

According to CK Asset Holdings, the second largest developer in Hong Kong, house prices could be set for a downward trend next year. Justin Chiu Kwok-hung, executive director at CK Asset Holdings, believes prices ‘could drop by 10% in 2019 and up to 10% in 2020’ due to trade tensions between China and the US alongside the uncertainty that comes with local political unrest.

Hong Kong Property Market Outlook 2020

In a report published at the start of 2020, JLL predicted that Hong Kong would face subdued investment after surging rents and capital growth since 2009 – confidently announcing that “the longest bull market in Hong Kong’s property market history has come to an end”.

The advisor has even gone as far to say that a correction in prices may be a good thing for the most expensive property market in the world, providing much-needed relief for occupiers – particularly in the commercial sector.

CBRE, on the other hand, believe the market remains resilient and stressed that for 2020, overall confidence in both the economy and property market will remain unshaken. Driven by supply constraints and loose financial conditions, CBRE’s head of research in Hong Kong described the current crisis as a ‘blip’ that does not threaten the city’s status as Asia’s premier financial hub.

Moreover, market sentiment towards Hong Kong has improved significantly since early December, with the Hang Seng Index up 11.5% – a gain of more than 5% since the political unrest began. While the city’s foundations should remain strong, this crisis has caused a broad impact and while a correction in prices has been long overdue, it’s clear that the fallout from this unrest shouldn’t be understated.

Investing in UK Property from Hong Kong?

Discover the key information and insights that you need to know if you’re an investor from Hong Kong looking for a UK property investment.

Politics Impacting Property 

With no sign of political issues being resolved soon and currency control restricting buyers, many mainland Chinese purchases are also leaving the market. Joseph Tsang, Chairman of Hong Kong business at JLL, believes: 

“The active players in the Hong Kong property market are mostly locals because foreign buyers think prices are too high in comparison to properties back home. Looking ahead, not looking good. We foresee, over (the) next year, another 10 to 15 corrections downwards.”

This would put further strain on a market that is struggling to recover from both external factors and a local housing market that many domestic buyers are increasingly struggling to purchase in. According to Tsang:

Housing is always one of our major issues. It creates a lot of anxiety in society. Young people are finding it frustrating for buying their own house and to be successful.”

Concerns over the Hong Kong housing market has even led to HK leader Carrie Lam introducing a series of housing policies in her recent annual speech in the hopes of mitigating challenges heading into 2020.

The UK Remains Stable Alternative for Hong Kong

UK property continues to provide stability in the wake of political uncertainty. 95% of Hong Kong respondents to the SevenCapital Brexit Survey didn’t consider Brexit the most critical factor in their decision to invest, instead prioritising market stability. 

The UK market continues to demonstrate incredible demand against a backdrop of undersupply and increasingly, provide stability for investors that prioritise it. During 2018, the top investor into London property was Hong Kong at a value of around £2.5 billion. In 2019, Hong Kong remains the top buyers but the leading target is now the London Commuter Belt, where regeneration and affordability have created stronger opportunities for buyers. 

Referring back to the survey, the long-term view of the UK market from Hong Kong is equally positive. 55% of the respondents believe the market will be ‘good’ to ‘very strong’ in 18 months time, a figure that rises to 64% in three to five years. This long-term outlook is incredibly encouraging for a country that is going through a particularly turbulent political event and demonstrates the robustness it can provide across the world.

Conclusion For Hong Kong Internationals

Property has long been recognised as one of the most stable and consistent investment assets. Heading into 2020, UK property, in particular, is demonstrating both of these qualities, especially as undersupply continues to create a much more competitive market for Hong Kong buyers. 

With the Hong Kong Dollar (HKD) reaching one of its highest peaks earlier this year, the strength of the currency is helping overseas investors find value in more affordable markets that are also seeing ‘Brexit discounts’ thanks to uncertainty in the industry.  

As the outlook for Hong Kong property in 2020 continues to worsen, many of the signs are pointing to an overseas investment that can start delivering consistent returns quickly. 

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