The willingness of firms to reopen offices here, the expected return of residents who fled harsh pandemic restrictions and low interest rates are just some of the reasons sentiment is turning positive after access to Hong Kong was restored.
Hong Kong is a textbook port city, where goods, cash and people can easily move in and out. That movement very nearly came to a stop in 2020 when Covid
-19 swept the globe.
With the airport closed but for a handful of flights arriving and departing each week, the border with China closed and ferries to Macau halted, rigid pandemic measures essentially made Hong Kong a black hole. When the rest of the world moved on, Hong Kong stayed put.
But what a difference a few weeks makes. First came the relaxed three-day testing and self-monitoring scheme for arrivals. Then, the government dropped the requirement for multiple PCR tests. In December, the mandatory “Leave Home Safe” scans at restaurants, cinemas and other public venues were scrapped.
The feather in the cap came with the announcement that vaccine
passes, PCR tests and home quarantine for close contacts of Covid
-19 patients was over, followed by China’s about-face over its own “zero-Covid
” policies. There are expectations the mainland border will be open for quarantine-free travel on January 8.
It is not a minute too soon. A textbook port city cannot function the way it should – and has – when Hongkongers are locked inside and the world is locked out. The emigration wave didn’t help.
Zoom is great in a pinch, but it pales in comparison to face-to-face meetings. Put simply, the resumption of international travel and reopening the border with the mainland is a game changer.
Aside from the pain suffered by the obvious industries – such as hotels, retail and tourism-related services – Hong Kong’s property market has taken something of a beating in the last three years. Property everywhere is sentiment-driven. That’s not a revelation, but in Hong Kong sentiment is an even more intense factor for buying and selling.
The residential sector has been sustained by local demand during the past 36 months or so, and we saw record pricing levels in 2021 when social distancing rules worked and Covid
-19 was under control. It was in 2022 that we saw a decline reflective of Hong Kong’s continued travel restrictions while the rest of the world was gradually opening up, along with other macroeconomics factors and the stock market falling.
The closed border was the first step in a real estate ouroboros. Travel restrictions and limited access to the city had a direct impact on transaction levels. It’s hard to fault someone about to make a large investment in a second home, corporate residence or pied-à-terre for wanting to actually see the property. Three weeks of quarantine was a lot to ask of someone as a condition of a 25-minute viewing.
If Chief Executive John Lee Ka-chiu wants to make good on his promise to attract talent to the city, which he made during his policy address in October last year, he can’t do it with closed doors.
Hong Kong is remarkably resilient, and its property markets are among the toughest in the world. It is still a place to invest, and investors will return this year. Cash-rich mainland buyers and international investors still see Hong Kong as a tremendous location where assets hold their value and usually gain in the long term.
Predictions of capital values falling this year underestimate the willingness of firms to reopen offices here and do not take into account the expected return of residents from temporary, more accessible havens. The market is quite liquid and low on the debt front.
Yes, inflation is a factor everywhere, but central banks and other analysts are predicting a short inflationary period. Above all, interest rates in Hong Kong are still lower than in some parts of Asia. The city can withstand a modest rate increase, and investors value that solidity.
Those are just a few of the reasons the residential sector is poised to regain its swagger. Anecdotal evidence reveals one thing: the mere mention of putting an end to significant travel restrictions and reopening the border sent sentiment through the roof. Upbeat sentiment is the first step in a rebounding, buoyant market, and that sentiment is floating because accessibility to the city just got better.
Nothing is going to change overnight. As it starts to unwind and live with the virus, China’s year is going to kick off with a wild cycle of ups and downs, closures, delays, absent staff and constantly shifting policy trying to keep pace with Covid
-19. The mainland is now where Hong Kong was 12 months ago and where the rest of the world was 24 months ago.
The road to recovery for Hong Kong’s residential sector goes right through the airport. This year’s keyword will be access. We have seen more transactional activity in the last several weeks than we did in the previous two quarters, and pricing should pick up again in the second half of 2023.
People want to buy residential property in Hong Kong. They just want to know they can come and go to it at their pleasure. The city should brace itself for an active 2023.