Mainland Chinese Investors Drive Resurgence in Hong Kong Luxury Property Market

In the latest Residential Market Monitor unveiled by JLL this week, a notable resurgence of mainland Chinese buyers has been observed in the Hong Kong luxury property sector. Following the announcement of the removal of all cooling measures in the budget speech at the end of February 2024, mainland Chinese buyers have swiftly reemerged as dominant players, accounting for approximately 70% of recent primary sales in luxury residential properties valued at HKD 30 million or above. This surge marks a significant rebound from the previous proportion of less than 50% prior to the removal of cooling measures, signaling renewed confidence and enthusiasm among mainland Chinese investors in the Hong Kong property market.

Within a mere nine days following the elimination of all cooling measures, the primary market has witnessed a remarkable uptick, recording a total of 1,275 transactions. This surge underscores the eagerness of buyers to capitalize on the newfound market opportunities, marking a stark departure from the cautious wait-and-see approach that prevailed earlier. Notably, non-local buyers stand to benefit the most from these policy relaxations, with recent sales of new projects witnessing a notable influx of mainland Chinese buyers, particularly in the luxury residential segment.

Norry Lee, Senior Director of the Projects Strategy and Consultancy Department at JLL in Hong Kong, emphasized the anticipated resilience of primary market transactions in the second quarter, driven by strengthening demand. Lee noted, “Mainland Chinese buyers have emerged as primary beneficiaries of the removal of cooling measures. The introduction of the Top Talent Pass Scheme has further spurred the influx of mainland Chinese buyers into the primary market, and we anticipate their continued activity in the coming months.” However, Lee highlighted that non-local buyers have yet to fully return to the market, citing challenges such as heightened foreign exchange restrictions, rigorous mortgage application processes, and property viewing protocols. Lee expressed optimism that the overall transaction volume would witness a more significant surge once these restrictions are alleviated and the Chinese economy experiences improvement.

The surge in primary property sales can be attributed to two primary factors. Firstly, significant corrections in primary market prices, with pricing on select projects witnessing a decline of up to 30% compared to 2021 levels, have rendered properties more accessible to cash-rich buyers. Secondly, the release of pent-up demand stemming from the addition of households has contributed to the surge in transactions. Analysis indicates that for every 1,000 additional domestic households, an average of 542 primary transactions were recorded between 2012 and 2021. While this figure declined to 466 in the past two years, a return to the long-term average could unleash pent-up demand equivalent to an additional 3,500 primary transactions.

Cathie Chung, Senior Director of Research at JLL in Hong Kong, cautioned against prematurely predicting the long-term implications of the removal of cooling measures on the housing market. Despite consensus suggesting that the removal of cooling measures will eventually buoy home prices, challenges such as high mortgage rates, tepid local economic growth, and lingering concerns over negative equity continue to cast shadows over the market outlook. Chung underscored the need for a cautious approach, maintaining a vigilant stance on the market outlook amidst evolving economic dynamics and regulatory landscapes.