Developers release urban inventory ahead of the border opening

Hong Kong Developers think it’s an excellent time to release their urban stock. In fact, they started their campaigns in the middle of last year on speculation that the boundary with mainland China would open soon. And, on 26 December, the National Health Authority gave everyone a belated Christmas gift by announcing that COVID-19 would be downgraded from category A to category B, signalling Beijing’s decision to “live with” the virus.

The NHA said COVID-19 had become less virulent and would eventually become a common respiratory infection. Under the current policy, inbound travellers to the mainland must spend five days in a government-supervised quarantine facility, followed by three days of home isolation.

From Saturday, inbound passengers will only have to produce a negative test result obtained within 48 hours of boarding. Now foreigners will find it far easier to enter the mainland for business and leisure.

Hong Kong dropped almost all pandemic measures on 29 December, including mandatory polymerase chain reaction (PCR) tests for arrivals, its vaccine pass scheme and quarantine requirements for close contacts. The Special Administrative Region will reopen its border with the mainland on or before Saturday. Those travelling to the city for business or family will enjoy priority in visa processing.

The Rating and Valuation Department announced that the private residential price index stood at 339.4 at 28 December, down a further 3.33% from 351.1 points in October, the most significant monthly drop in 14 years. The index has fallen for six consecutive months. In the first 11 months of 2022, property prices fell by 13.84%, a cumulative drop of 14.75% from the historical high of 398.1 points in September 2021.

Classified by unit size, prices of small and medium-sized units (Classes A, B, and C) reported 340.9 points, down 3.4% month on month and 13.9% year-on-year. Class B units (431 to 752 sq. ft.) were at 326.6 points, down 3.5% MoM, and large units (Classes D and E) reported 301.2 points, down 1.5% MoM and down 8.9% YoY.

November’s rent index was 175.2 points, down 1.35% from October’s 177.6. Rents fell 4.1% in the first 11 months of 2022. Small and medium-sized units (Classes A, B, and C) were at 178.1 points, down 1.5% MoM; large units (Classes D, E) were at 142.9 points, up 0.28% MoM.

According to Midland Research’s Department, up to 29 December 2022, 47,062 private residential transactions were recorded, for HKD408.57 billion, down 39.5% in volume and 44.4% in value from 77,807 cases and HKD742.602 billion in 2021.

When I analysed residential transactions from the last four years, I found that 2022’s average secondary sales value was down 5.3% YoY but slightly better than 2018 (2.5%), 2019 (1%) and 2020 (0.5%).

From the information we have from 2022 so far, private residential transactions are valued at HKD408.570 billion, 45% down YoY, 25.7% off 2020, 26.8% off from 2019 and 27.3% down from 2018.

The industrial market recorded 2,491 transactions for HKD25.31 billion up until 29 December 2022, down 34.6% and 34.2%, respectively, from 3,808 sales totalling HKD38.446 billion in 2021. The average value of each transaction up until 29 December was 0.6% (HKD10.16 million), higher than 2021’s HKD10.1 million.

The office market recorded 815 transactions for HKD21.67 billion up until 29 December, down 39% and 57.7%, respectively, from 1,335 cases and HKD51,177 billion in 2021. The average value of each transaction was HKD26.59 million, 30.6% lower than 2021’s average of HKD38.335 million.

The retail market recorded 1,174 transactions for HKD20.17 billion up until 29 December 2022, down 34.3% and 36.9%, respectively YoY, from 1,788 cases and HKD 31.982 billion. The average value of each transaction YTD was HKD20.17 million, 3.9% down on 2021’s HKD17.887 million.

Hong Kong has lifted almost all pandemic restrictions, accelerating its reconnection with the mainland and overseas.

Residential transactions froze in the 4th quarter of 2022, so local purchasing power has been accumulating for a long time. In addition, mainland purchasing power has also been suppressed – for three years!

The new arrangements will also attract many mainland visitors in the new year, which is bound to stimulate property transactions. The property market’s purchasing power means a "revenge" rebound in early 2023 is on the cards.

Hong Kong’s top four property agencies predict prices could swell by 5% to 10%, and barring any unforeseeable setbacks, Q1’s transaction volume could increase by 10 to 15% QoQ. When the residential market returns to normal, we expect the positive sentiment will infect the commercial sector, which will likely become a magnet for investment from the local, mainland and overseas sectors, boosting market activity.

New day, New year, New hope!

新的一天，新的一年，新的希望!

Thank you !!