Emerging Trends in Hong Kong's Property Market: Short-Term Speculative Gains

HSBC recently released a survey titled “Mortgage Market Conditions and Property Market Prospects,” revealing that one in six respondents is considering purchasing property within the next five years. This translates to over 300,000 households, with one-third identified as first-time buyers. Notably, the survey also found that 62% of existing homeowners plan to acquire new properties within the next two years.

Conducted in September, the survey aimed to gauge respondents' considerations when selecting a mortgage bank and their perspectives on the outlook for the Hong Kong property market. It involved 3,170 residents aged 18 to 65, with 950 qualifying respondents who had used mortgage products in the past three years or intended to purchase property within the next five years. According to the Census and Statistics Department, this figure aligns with over 300,000 households. Among potential buyers, two-thirds are existing homeowners, while the remaining one-third are first-time buyers. In comparison to the government’s earlier housing supply targets, the next decade is projected to see the availability of 132,000 private housing units and 123,000 public subsidized sale units.

The survey indicates that existing homeowners exhibit more confidence in the market compared to first-time buyers. While 62% of existing homeowners plan to purchase a new property in the next two years, over 60% of first-time buyers will base their decision on personal or family needs, such as marriage or welcoming a new family member. For those considering a second property, 72% view investment and passive income as primary motivations. Additionally, around 31% of first-time buyers also intend to use property for investment purposes, underscoring the continued appeal of real estate as an investment option for many in Hong Kong.

In recent years, the prices of small flats have significantly decreased. This trend has attracted both first-time buyers and investors seeking to reallocate funds into high-yield "micro-apartments," which benefit from a minimal stamp duty of just HK$100. This year, the number of buyers in this segment surged by 80%, outperforming the broader market.

According to Centaline Property data, between 2018 and 2022, transactions for private residential properties priced below HKD 3 million were fewer than 2,000 annually, accounting for about 3% of total sales. The lowest point was in 2020, with only 1,419 transactions, marking a historical low since records began in 1995, a stark decline from the peak of 73,000 in 1996.

The 2023 Budget significantly reduced stamp duty for flats priced below HKD 3 million to just HKD 100, easing entry for buyers. Combined with a nearly 30% drop in property prices, this has benefited the market for nano-units and low-priced properties. This year has witnessed a remarkable turnaround, with both prices and transaction volumes increasing. "Micro-apartments," priced below HKD 3 million, have seen a resurgence, recording up to 6,746 transactions, a 41% increase compared to 2023, reaching the highest levels since 2016. Their overall market share has also risen to 9.4%, the highest in a decade, indicating that under new housing policies, these properties are outperforming the market.

In terms of transaction volume, the most active segment includes properties priced between HKD 3.01 million and HKD 7 million, with 26,511 transactions this year, accounting for 52.5% of total sales. Properties priced between HKD 7.01 million and HKD 10 million recorded 8,160 transactions. To date, the total number of transactions for private residential properties priced under HKD 10 million amounts to 41,444, constituting 82% of total sales.

The high yield of low-priced properties, along with the government's full withdrawal of cooling measures in February, has increased the appeal of "micro-apartments," drawing in investors for rental income or quick resale. Recently, an investor purchased a two-bedroom unit in Tai Wai's Golden Lion Garden for HKD 2.73 million in August and sold it for HKD 3 million in December, realizing a profit of HKD 270,000 in just three months.

As interest rate cuts and market rescue measures begin to stimulate a slight rebound in residential prices, flat prices are expected to stabilize and gradually rise. Secondary flat prices have started to stabilize and rebound, leading to a rise in profitable short-term speculative opportunities.

Notable Speculative Cases

Case 1: Trinity Tower, Sham Shui Po

Flat B on the 16th floor, Tower 2 with a saleable area of 601 sq. ft., was recently sold for HKD 6.65 million. The previous owner acquired it for HKD 5.76 million on September 25, netting a profit of HKD 624,000 in approximately three months, representing a 15% gain.

Case 2 & 3: Nassau Street, Mei Foo Sun Chuen

In November, Mei Foo Sun Chuen recorded 24 secondary transactions. Among them, Unit B, 19/F at 15 Nassau Street sold for HKD 5.78 million, with a saleable area of 507 sq. ft. The original owner, Mrs. Lam from the Mei Foo "Housewife Army," purchased the unit for HKD 5.15 million in 18 April and held it for about seven months, realizing a profit of about HKD 460,000. Another unit, Unit D, on the 6th floor at 11 Nassau Street, was purchased for HKD 5.3 million in 14 March and sold for HKD 5.7 million in 13 August, yielding a profit of about HKD 228,000. In total, Mrs. Lam made a net profit of HKD 688,000 from both transactions.

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Case 4: Locwood Court, Kingswood Villas

Flat H on the 16th floor, Block 12 with a saleable area of 549 sq. ft., recently sold for HKD 4.8 million. The previous owner acquired it for HKD 4.42 million on September 20, realizing a net profit of HKD 269,500 in approximately three months, representing an 8.6% gain.

Case 5: The Regent, Tai Po

Flat C on the 2nd floor, Tower 12 with a saleable area of 524 sq. ft., recently transacted for HKD 6.28 million, equivalent to HKD 11,587 per sq. ft. The previous owner purchased it for HKD 5.28 million in 29 August, resulting in a net profit of HKD 828,400 after a three-month holding period, reflecting an appreciation of nearly 18.9%. This highlights significant gains after recent policy adjustments.

More such short-term speculative cases of "micro-apartments" are anticipated. Centaline Property currently lists nearly 39,507 online secondary flat listings, with about 1,235 priced below HKD 3 million, available for investors to explore.

In the current Hong Kong residential market, a strategic alignment of multiple factors is crucial for maximizing profitable short-term speculative opportunities. Investors must carefully balance the associated risks before entering the market, as timing and unique circumstances play a critical role in successful short-term property speculation. Market dynamics and buyer behavior are influenced by government policies, such as interest rates and economic growth.