China’s demand may prop up Hong Kong’s property market
Hong Kong property prices have fallen sharply and look set to continue their downward trend until the end of 2019— but there’s no danger of an all-out crash, experts said Monday.
That’s because resilient local economic fundamentals and pent-up demand from mainland Chinese who have moved to Hong Kong will likely stem the decline next year, they told the media.
“If you look at the basic fundamentals, unless we get a financial crisis in China or something like that, I think we’re looking at a correction — not a crisis in the Hong Kong property market,” said Peter Churchouse, founder of Hong Kong-based real estate investment firm Portwood Capital.
Housing is a key economic component in crowded and land-scarce Hong Kong, where about 7.4 million people inhabit small, mountainous islands and a craggy peninsula bordering the southern end of mainland China.
Hong Kong was a British colony for about 150 years until 1997, when the territory became a semi-autonomous region of China. Prices have more than doubled in the last decade, in part due to low-interest rates, scarce housing supply and large inflows of capital from mainland Chinese.
It is one of the most expensive housing markets in the world, but prices periodically go through adjustments such as the current correction cycle where prices fell in the second half of this year as the market began to calibrate asset valuations.
Asian markets can be prone to sharp price swings, Churchouse told media “Squawk Box” on Monday.
“Hong Kong, in particular, is the most volatile property market in the world,” he said. He predicted that the current downturn could see average residential prices decline as much as 20 percent through the end of next year, though a drop far beyond that level is out of the question, he said.
“The basic fundamentals are pretty good in Hong Kong,” Churchouse said, adding there is no large increase in land supply on the horizon.