Hong Kong property slowdown: Investors to turn to UK real estate?

Hong Kong property slowdown: Investors to turn to UK real estate?

Falling stock markets and weaker sentiment is fuelling the belief that the boom in the world’s most expensive property market is ending – so will this prompt buyers in the region to explore high-growth markets internationally?

Summary:

  • Sentiment in Hong Kong’s property sector appears to be softening, amid falling stocks and rising borrowing costs
  • Some sellers and developers have been reported to have slashed asking prices by as much as 30%, in an attempt to stoke interest in the market
  • With lower entry points and strong growth forecasts in key cities, could this slowdown prompt buyers in Hong Kong and Southeast Asia to consider high-performing international sectors such as the UK?

It’s one of the global property market’s biggest success stories, but are Hong Kong real estate investors now beginning to get spooked?

Free falling Asian stock markets, increased borrowing costs and the ongoing US-China trade war have been catalysts, analysts believe, for dampening sentiment in Hong Kong’s property sector in recent months.

Now it would appear the impact of this subdued demand is being realised across the city.

Reduced asking prices have been reported throughout Hong Kong, as sellers and developers frantically look to offload assets amid a more cautious investment landscape.

Illustrating this downturn, the South China Morning Post reported that, in the first week of October 2018, a 1,567 sq.ft. apartment at Celestial Heights in the Ho Man Tin district sold within 24 hours for HK$27.5 million, approximately 30% down on recent prices achieved in the same area.

Elsewhere, a 544 sq.ft. apartment in Tin Shui Wai in the New Territories was sold after the owner cut the price by 13%, while at one new project launch in Tseung Kwan O buyers bought just 20% of the properties available.

“Investors are more sensitive to higher borrowing cost and negative market sentiment,” said Richard Lee, Chief Executive of agency Hong Kong Property. “In general, owners are willing to cut their asking prices by 10%. The market is unlikely to see any big improvement over the next three months.”

The question now, then, is whether this will trigger buyers in Hong Kong and across China and Southeast Asia to reformulate their investment strategies with international real estate.

In the UK, lower asking prices, high yields and strong growth forecasts in key cities continue to attract investors from Asia to its property sector.

Manchester, home to Britain’s highest yields and one of Europe’s fastest growing cities, is becoming a popular investment destination for buyers in China, in particular. Juwai.com recently reported a 200% increase in demand for property in Manchester in August 2018 alone, compared to just 12 months earlier.

 

Investors looking to capitalise on the opportunity in Manchester should download our latest guide Manchester: An introduction to the UK’s strongest investment city.

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