Results from squarefoot.com.hk's ‘2019 H1 Hong Kong Real Estate Market Outlook'

Hongkongers’ sentiment toward the property market, the government’s housing policies and home ownership plans.

18

The squarefoot.com.hk ‘Hong Kong Real Estate Market Outlook' has been conducted 15 times since 2012, surveying the market every six months. This is the third time cooperating with Nielsen, who conducted an online questionnaire (from 30 April to 8 May, 2019) to obtain 1,001 responses from people aged between 18 and 65 years old.

According to the latest squarefoot.com.hk ‘Hong Kong Real Estate Market Outlook (2019 H1)', the general perception of property prices in Hong Kong amongst the public is that they are expected to keep rising, or at least remain at the same levels, over the next six months.

With continuous property price increases, it's unsurprising that the proportion of non-owners who expect to be able to purchase property in Hong Kong has gone down by 10 percentage points from 2018 H2 (45% in 2019 H1 to 55% in 2018 H2). People living in Hong Kong have therefore begun looking for alternatives to achieve their dream of property ownership. Haunted flats and co-living spaces in particular are gaining awareness and popularity as options.

Nerida Conisbee, REA Group's Chief Economist, commented that it is external factors causing the Hong Kong real estate market to be much more unstable this year than the last. “The Us-china trade war is heating up and this is already impacting Hong Kong's tourism and retail trade. In addition, the HIBOR is increasing and it is going to get more expensive to get a loan. Hong Kong is undersupplied in housing but a slowing economy and difficulty in getting finance is tempering the outlook.”

Kenneth Kent, REA Group's Country Manager – Hong Kong, stated that, “Property prices are still way too high for most people living in Hong Kong, so many have started to explore other alternatives. A new concept of co-living is gaining awareness in the Hong Kong market, and more than half of the respondents are taking an open attitude; there is big potential in this area.”

Respondents are price-sensitive, even when it comes to haunted flat purchases

With property prices continuing to surge, even haunted flats are being considered by the market. Hong Kong people see buying a “haunted” flat as a practical way to own a house in this residential property bull market. Over half of the respondents (54%) would consider purchasing haunted flats—65% of respondents are motivated by price, more than by the nature of incidents that occurred (39% of respondents), while 45% of respondents see the chance of getting a mortgage from a bank and the re-sale value as criteria for purchasing haunted flats.

On average, respondents felt that a 37% discount would be appropriate for considering a purchase of a haunted flat. 45% would only purchase with a discount of 40% or more, and 40% of respondents will consider buying even with just a 20% to 39% discount. Around 3% of respondents would consider purchasing a haunted flat with less than a 10% discount. The survey also found that haunted flats are relatively more appealing to those aged below 40, with nearly 60% of them (58%) considering purchase as long as the price is right.

Sights continue to shift overseas due to Hong Kong's high prices

With increasing property values in Hong Kong, overseas properties remain as one of the alternatives to achieving property ownership. Mainland China (43%) and Japan (26%) are still the most popular destinations.

38% of respondents considering it (34% in 2018 H2) are looking at better value properties in the Greater Bay Area. Among these cities, Zhongshan (43%), Foshan (38%) and Guangzhou (30%) ranked in the top three, with key factors being nearby transportation (68%), amenities near the property (67%) and convenience for travelling to and from Hong Kong (63%). Respondents are also concerned about the background of the developer (60%), investment value of the property (60%) and development potential of the city (57%).

Nearly half of the respondents (47%) are considering making a purchase in the Greater Bay Area because property prices in Hong Kong are too high, whereas 35% think property in the area would be good value for money as a vacation home. From an investment perspective, over one-third of respondents (34%) believe they can generate good investment value, while 22% rely on property purchases to generate rental income. Some respondents have started planning to extend their ‘living space' to the Greater Bay Area with 26% considering it as an option for living after retirement, while 22% plan to move abroad.

Overall, 87% of respondents who showed interest in the Greater Bay Area are not current owners of properties in China. The recent incident of unfinished buildings in the Greater Bay Area caught public attention, resulting in 73% of all respondents saying they would visit properties in person before buying, while 59% will look more towards the rental or secondhand markets.

63% of respondents interested in Taiwan have plans to move abroad

Taiwan and Thailand have risen in popularity for those looking to purchase property among the younger segment aged 25 or below, increasing by 9% and 8%, respectively, compared to 2018 H2. Surprisingly, 63% of respondents considering Taiwan properties are purchasing for moving abroad and 46% treat it as a retirement home. 71% consider Thailand properties as vacation houses.

HOS still ever-popular

To attain property-owning dreams, Home Ownership Scheme (HOS) properties undoubtedly remain a top choice in the market. The survey shows that non-owners mostly prefer HOS flats (33%), while around a quarter are considering first-hand (26%) and second-hand (23%) private properties. The remaining 18% prefer public housing sold via the market, probably due to lower pricing. Regarding preferences as a first property, HOS is more appealing to the younger segment, especially those aged below 35 years old.

Co-living has gained awareness amongst the general public

17% of respondents showed interest in renting co-living spaces. 61% of respondents who expressed an interest were married, and 62% of respondents' monthly household income was HK$40,000 or above.

Interested respondents explained the key reason of preferring co-living is affordability (57%), while some respondents enjoy living with people with similar interests (40%) and having a better living environment (39%). Less than one third (31%) consider the sufficiency of amenities provided by the co-living space as the most important.