Hong Kong Apartment and Commercial Property Prices Look Set for a Bleak New Year

Posted on 05 January, 2021 | By Property852

The coronavirus pandemic will continue to have an impact on all areas of the Hong Kong Property market in 2021. From mass real estate to luxury residences, from offices to stores, no major section will be spared from the economic downturn and also increasing unemployment, analysts claim.

Twenty analysts, developers and agencies where asked their opinion on property prices in 2021. The response was that 6 expect prices to decrease, 7 didn’t know and 7 expected prices to increase.

The Hong Kong government has predicted a 6.1% shrinkage of the economy for 2020. This is worse than the 5.9% downturn during the 1998 Asian financial Crisis. Unemployment figures are at their highest for sixteen years at 6.4% in July-Oct, and with the government’s wage subsidy scheme coming to a close in November, these are only going to get worse.

Secondary home prices have already been hit by the Covid-19 fourth wave. The home price index dropped for the first time in twelve years in November. We won’t know the figures on the latest coronavirus bout until later in January. Luxury property prices, which are usually less effected by market fluctuations, are also set to go down by 5-10% although this should improve when Hong Kong reopens its border with China.

Grade A office prices will also be affected as working from home continues to be the new normal. As a result office landlords will move from the traditional office sector to a co-sharing, flexi-work space model. If this scenario plays out then we could expect to see an 11-16% decrease in grade A office rental prices. A number of new office buildings are due to launch in 2022 which will add further competition for landlords, who will need to offer larger discounts in order to attract new tenants. 

In the retail property market, experts expect areas such as Queen’s Road in Central and Russel Street in Causeway Bay to be the worst hit. Retail rent is expected to drop by 10-15% in the coming year. Landlords will need to decide whether they are prepared to offer a lower rental rate for tenants who are prepared to take on a longer lease.

Even in spite of the gloomy outlook in the property industry, it is still attractive to private equity fund managers who are looking for ways to invest capital. Property still remains popular amongst investors. 

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