Hong Kong Apartment Prices set to Rise According to Goldman Sachs

Posted on 10 June, 2021 | By Property852

Goldman Sachs, a prominent investment bank in the U.S., has joined property market experts, Cushman, Centaline, and Morgan Stanley, in forecasting rising home prices in Hong Kong this year.

With property prices high, interest rates very low, and improvement in the economy, a gradual increase in property prices is expected. This rise corresponds with growth in household income in the HK residential market, according to a bank report led by Gurpreet Sing Sahi, an investment analyst. Sahi said they believe that the easing of Coronavirus related restrictions between the mainland China and Hong Kong border are beneficial to high-end residential flat sales, take-up of central offices, and rent of retail premises.

Optimism is increasing for the prices of homes to rise to record levels, while concern about rising unemployment, recession, and the COVID-19 pandemic have recently decreased significantly. Some reports, for example, retail sales, as well as vigorous new launch sales, point to initial recovery signs in Hong Kong’s economy.

The city’s property prices for the residential market year-to-date have already risen 4 percent. Goldman stated, according to its June 4th report, that it is expecting a 5 percent increase for 2021. Prices may rise by an additional 5 percent next year, with the opening borders, prior to easing up to a 3 percent increases in 2023.

As for industrial and retail property, Goldman expects a 5 percent recovery in 2021, following the painful two years in 2019 and also 2020. Goldman believes that prices have meaningfully corrected and see retail sales rising in mainland China and Hong Kong. After a steep correction in the past two years, prices year-to-date have recovered past the steep correction of the past two years, they stated.

Prices of offices, in contrast, declined 5 percent in 2021, and are expected to be flat during next year. A modest 2 percent recovery is expected in 2023. Goldman believes the market may continue to see pressure from the work-at-home trend. However, this negative factor will be offset somewhat by the opening of the mainland China and Hong Kong border, the bank stated.

HK property developers saw their highest relative results since 2012, which was driven by low interest rates, prices, and residential market sales, Goldman stated.

A major Hong Kong agency, Centaline Group, had a particularly bullish prediction, expecting a 15 percent home price surge in 2021. Centaline was expecting a 15 percent home price surge in 2021. They predicted a breakthrough in home prices during the third quarter, followed with a substantial rising trend, according to Shih Wing-ching, founder, on Tuesday. prices were just two to three percent beneath the 2019 record, he added.

The agency's Centa-City index that tracks residential prices of one hundred housing estates was at 185.16 last month, only 2.8 percent below its 190.48 peak as of June 2019. According to Shih, his forecast did not even factor in the reopening border.

With the improved economy and short supply, buyers have greater confidence in the HK property market, especially luxury homes, Shih added.

For example, at the Sino Group’s luxurious St. George’s Mansions located in Ho Man Tin, a 3,695 square foot flat was sold at HK$260 million or US$33.51 million this week. It marked the highest price in Kowloon for a flat this year, the developer stated.

In addition, real estate companies, Knight Frank, Cushman and Wakefield, as well as Morgan Stanley, a U.S. bank, forecasted increases of three to five percent in home prices. Morgan Stanley’s April report estimated HK home prices to rise three percent this year, as well as five percent in 2020. The increase will be driven by the combination of the following factors: fair demand, low supplies, good interest rates, and the limited scope of tighter regulations.

On Tuesday, Cushman stated that they expected home prices would rise five percent during the latter half of 2021 and, during the third quarter, would rise to the peak level of June 2019.

According to the agency, the Hong Kong economic recovery had created a 20 percent surge in residential transactions quarter-over-quarter. This upsurge was a nine-year record high and the peak level since 2012. They added that supplies of new homes over the following two years remained at a low average level of approximately 19,100 units sold per year.

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