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Buyers from China steer clear of Hong Kong real estate

Buyers from China steer clear of Hong Kong real estate

HONG KONG • The world’s priciest property market has lost its most important source of inbound investment.

Chinese buyers are shying away from real estate in Hong Kong as the coronavirus pandemic clouds the economic outlook and keeps investors from travelling to the territory.

No commercial property transactions in the first quarter involved a buyer from China, the first time that has happened since 2009, according to CBRE Group, which tracks deals worth over HK$77 million (S$14 million). It is in stark contrast to a few years ago when Chinese investors were snapping up offices and retail space for eye-popping prices.

While Hong Kong has won plaudits for keeping the spread of Covid-19 under control, the virus hit just as the city was starting to recover from months-long pro-democracy protests that sparked pitched street battles and violent clashes.

Bloomberg Economics estimated that the city’s small and open economy will be whipped by convulsions in global demand and trade, contracting around 2 per cent this year.

“A lot of mainland buyers are taking a step back because of the economic outlook and the conflicts that made them feel unwelcome,” said Mr Reeves Yan, head of capital markets at property services company CBRE.

Capital controls imposed by Beijing on money flowing out of China are also hurting real estate in Hong Kong, Mr Yan said.

The absence of Chinese investors has contributed to lower prices, considering how aggressively some used to bid. Last year, little-known Chinese company Henglilong Investments teamed up with Hong Kong-based Gaw Capital to buy a pair of office towers from Swire Properties for US$1.9 billion (S$2.69 billion), the biggest office transaction that year.

Office prices in Hong Kong declined 8.5 per cent in February from a year earlier, latest data from the city’s Rating and Valuation Department shows.

The city’s luxury residential market is feeling the impact too. Covid-19 has deterred people from travelling to Hong Kong for site visits because all travellers arriving in the city are required to undergo a 14-day quarantine period.

Wealthy individuals from China used to dominate the high-end home market, with about 60 per cent of international buyers hailing from the mainland over the past 10 years, according to Savills.

Prices for luxury properties across Hong Kong dropped an average of 4.5 per cent in the first quarter from a year earlier. The area around West Kowloon station, particularly favoured by those from China, slumped almost 7 per cent, Savills data shows.

Prices for luxury properties across Hong Kong dropped an average of 4.5 per cent in the first quarter from a year earlier. The area around West Kowloon station, particularly favoured by those from China, slumped almost 7 per cent, Savills data shows.

“The majority of the buyers are locals,” Mr Raymond Lee, Savills’ chief executive for Hong Kong and Greater China, said at a media briefing last month.

What domestic demand there is, however, remains robust. Hong Kong recorded its best weekend for secondary apartment sales in seven years last weekend. There had been no new local Covid-19 infections in the city for 14 straight days as of Sunday.

“Hong Kong people expect Covid-19 to be under control gradually and this has improved market sentiment,” Mr Louis Chan, CEO for Centaline Property’s residential division, said.

This content was originally published here.

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