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Hong Kong property defies gloomy predictions

Last year, this time, the forecasts for the Hong Kong real estate market were as bleak as the view it gave of the territory from one of the most polluted days in Peak.

Political uncertainty, travel bans related to the Covid-19 pandemic and the UK’s decision to open the door to Hong Kong residents with British national foreign passports were expected to be wide open, with billions worth of property.

But the land property market, not for the first time, has challenged forecasts full of condemnation.

While rents have fallen, property in Hong Kong has more than doubled in April, according to Property Registry data. In the second market, house prices are on track to reach a 23-year high, according to estimates by real estate agency Centaline. Average house prices are less than 2 percent of historic highs.

“Hong Kong is a unique market. There is a constant demand for a type of buyer who doesn’t care about price. Supply has always been limited. Nothing has changed, ”said Derek Chan, head of research at the Ricacorp Properties property agency.

It was hoped that the property market would be allowed to accept the path to citizenship through the UK decision. BNO passports.

In fact, about 310,000 BNO passports were issued last year, double the previous year. An estimated 153,300 Hong Kongers are expected to settle in the UK this year, according to a study by the UK Home Office. Some BNO passport holders had to be active buyers in the UK.

For Hong Kongers, London seems quite attractive. The territory was the most expensive real estate market in the world last year, with an average home price of $ 1.2 million, or $ 1,987 per square foot, more than double that of London. In addition, its main residential home offers one of the lowest rental earnings in the world, at 1.8 percent. That compares to an average performance of 3.8 per cent in London at the end of last year.

However, neither of these two factors is important for wealthy mainland Chinese investors who are looking for a place to park their money near home. Over the past decade, Hong Kong’s housing prices have gained more than 200 percent. Buyers from the continent who look back on the past are returning to the land to fill the gaps left by the locals.

Home purchases by mainland Chinese buyers in Hong Kong rose by 40% in the first two months of this year. The recent push by Beijing should encourage a greater demand to launch a wealth management connection between the mainland and Hong Kong. It is likely that some of the mainland will see Beijing as an approved seal of investment in Hong Kong.

“At current rates, home prices are expected to rise to 15% this year,” Chan said. It is noteworthy that the demand from mainland Chinese buyers was there, although the borders were largely closed due to the pandemic between Hong Kong and mainland China. “When the boundaries reopen, it should increase tremendously.”

Hong Kong developers have quickly capitalized on this. Following the exhaustion of new developments, Road King Infrastructure and Sun Hung Kai have raised the prices of the latest apartment suite to 11 per cent.

However, in the stock markets, Hong Kong developers have been sidelined for the past year and have underestimated them. They trade at a significant discount to the net asset value, well over 50 per cent, are full of political risks and suffer a steady decline in tourism in the city state.

On closer inspection, however, gains in rents and house prices in the mainland China’s asset portfolio have offset weak retail rents and empty hotels in Hong Kong. This could affect investors ’profits from the central commercial properties in major cities like Shenzhen and Shanghai, removing the debt burden on mainland developers.

Hong Kong developers are overwhelmed with money and have the strongest balances on par. For example, CK Asset’s net gear – total debt and total shareholder equity – is only 4.8 percent, lower than previous levels of the pandemic. Kaisa compares with 98 percent of the continent’s members and 15 percent of Evergrand’s.

The failure of the gloomy forecast over the past year has highlighted opportunities for opposing investors. They should take note of the Hong Kong developers.

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