Mainland Chinese buyers showing more interest in Hong Kong property

Demand for property in Hong Kong from mainland Chine buyers has continued to gain momentum despite a higher rate of property tax, the latest analysis suggests.

It is thought that stricter controls on residential development in tier one mainland cities in China is pushing property investors towards Hong Kong and the survey report from international real estate firm Knight Frank confirms this.

A net balance of 42% of respondents reported an increase in enquiries from mainland residents in March despite the Chinese government enacting fresh capital controls as recently as January.

The survey also shows that a net balance of 91% of respondents reported higher prices in March, the most since the survey’s inception in March 2015, while a net balance of 44% reported an increase in agreed sales over the past month.

Indeed, a net balance of 82% of respondents expect prices to continue to increase over the next three months, while 68% of respondents expect volumes to increase rather than decrease.

The headline one year price forecast on a three month moving average rose to 3.8% from 2.8% in the February survey, and the most bullish forecast since the survey’s inception.

Expectations were particularly strong in the New Territories and Kowloon with the three month moving average forecast hitting 4.6% and 4% respectively, while that for Hong Kong Island was 1.6%.

The report points out that tight supply is supporting prices as vacancy rates in the city remain near 20 year lows, however more respondents are reporting an increase in new instructions to sell than a decrease for the third consecutive month. This was broadly driven by an increase in instructions to sell in Kowloon, while instructions on Hong Kong Island and the New Territories were much more subdued.

The report also shows that momentum surrounding the lettings market remained robust in March, with a net balance of 53% of respondents reporting an increase in headline demand and 41% reporting an increase in landlord instructions to let.

Respondents expect this robust demand to be sustained as a net balance of 78% expect rents to increase over the next quarter. The strength was spread relatively evenly throughout all regions.

The three month moving average for one year rental expectations increased to 3.1% from 2.8% in February’s survey and forecasts for the New Territories remain the most bullish, with respondents expecting rents up 4.1%, followed by Kowloon and Hong Kong Island which are forecast to rise 2.3% and 1.8%, respectively.

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