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Hong Kong outperforms global gateway cities as favoured investment destination for property over US$10 million

By Lam Ka-sing kasing.lam@scmp.com

/ https://www.scmp.com/business/article/3094388/hong-kong-outperforms-global-gateway-cities-favoured-investment?utm_medium=partner&utm_campaign=contentexchange&utm_source=EdgeProp&utm_content=3094388 |

July 29, 2020 5:01 PM SGT

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Hong Kong remains the preferred destination for luxury housing over US$10 million, but investors are delaying big ticket purchases against an uncertain economic backdrop, with the number of deals plummeting by more than half in the first half.

The city recorded 60 such residential transactions in the first half, 61.3 per cent lower than the 155 seen a year earlier, according to Knight Frank. The number of deals, however, was 15.4 per cent more than Los Angeles, which came second.

"Against the backdrop of quantitative easing in different parts of the world, luxury residential assets are [a] good store of value for investors," said Maggie Lee, senior director and head of residential agency at Knight Frank Hong Kong. "Coupled with the scarcity [of] luxury homes in Hong Kong, the buyers are still optimistic these assets would bring capital appreciation over a longer-term period."

The outlook for Hong Kong's luxury property sector, however, does not look bright. JLL expects prices to fall by 10 to 15 per cent this year because of decreasing capital flow from the mainland to Hong Kong's real estate market, economic recession and rising unemployment rate.

Recent property transactions are an indicator of where prices are heading.

This week, the Cheung family, which controls the bread and biscuit maker The Garden Company, sold a building comprising six flats with an area of 11,696 sq ft on Kowloon Tong's Peony Road for HK$221.28 million (US$28.5 million), 21 per cent lower than the asking price.

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The buyer is a Hongkonger who plans to redevelop it for his own use, said Ronald Yue, senior district associate director at Centaline Property Agency.

In another transaction this week, Poonam Harilela, a member of the wealthy Harilela family, sold a 1,211 sq ft flat in Dunbar Place, in Ho Man Tin, for HK$25 million, which resulted in a loss of some HK$2.1 million including other expenses, according to agents.

"The number of buyers has reduced a lot and those who still [want to] buy are looking to snap up bargains, said Billy Yim, sales director at Century 21 Northern Mid-Level Property Agency, adding that many buyers are waiting to pounce on distress sales, especially expensive homes.

Yim feels that there is still room for another 10 to 20 per cent discount from current levels on homes priced over HK$15 million because of the economic headwinds.

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According to Savills, ongoing border restrictions and social distancing measures may affect the ability of both mainland and local buyers to view trophy assets.

As such, very few existing luxury properties are expected to come to market, while new investment into the local market may be hard to come by, suggesting that luxury volumes may fall, Savills added.

"With the virus recurring and the political situation uncertain, more luxury buyers may be inclined to look at overseas options for future investment," said Simon Smith, senior director of research and consultancy at Savills.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2020 South China Morning Post Publishers Ltd. All rights reserved.

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