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Real Estate Situation

The cancellation of PCR testing triggers market rebound

 

Damon Ho

21st January 2023

After the normal customs clearance on January 8 between China and Hong Kong, the number of travelers entering Hong Kong remained at about nine thousand per day. Compared with the fifty thousand travelers entering Macau each day, Hong Kong’s travelers has fell far behind. The reason may be that Hong Kong Customs and Excise Department still requires Mainlanders must have a negative PCR testing report within 48 hours. On the contrary, Macau government has cancelled this policy. Only if Hong Kong government adopts the same policy as Macau government, the entering travelers will at once increase significantly.

 

The Hong Kong Government knows that PCR testing will hinder the number of entering travelers, so it recently said that the relevant policies are being reviewed. According to the current development of policies reform, the mass media estimates that the Government will abandon the relevant policies before of the Lunar new year public holiday.

 

Based on the experiences in Macau, if the policies are scrapped, the market observers evaluate that the number of entering travelers of Hong Kong will bounce to fifty thousand or more per day. The effect of this second self-guided tour travelers from China will stimulate different industries in Hong Kong. Since the surge number of self-guided tour travelers in Macau, the retail shops are full of customers and the gambling revenues also has been rebounding sharply. As a result, whenever the PCR testing requirement is scrapped, Hong Kong’s economy and property price will rebound.  

 

Until recently, property developers have cut part of the discounts from the on sale firsthand listings due to the rising transactions. The owners of secondhand properties also start to raise the asking prices of their listings either. Those optimistic owners even withdrew their listings from the public market until the end of Lunar new year public holidays. In general, property owners are looking   forward to the official announcement of the termination date of PCR testing.

 

The recent property buyers have taken the advantages by entering the market at the lowest price. For those buyers already have 5 or 10% book value premium, and the level of rebound is still moderate. However, once Hong Kong Government cancels the requirement of the PCR testing, it is reasonable to foresee the property price which will bounce up 10%. The proprietors may wait patiently for one or two weeks to welcome this important date to come. 

 
 
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1. Unemployment rate fell to 3.5% 2023-01-21 18:33:14

The unemployment rate fell by 0.2 percentage points to 3.5%  for the period betweenOctober and December 2022 when compared to September to November 2022.

Based on the data from the Census & Statistics Department (C&SD), the total number of unemployed people between October and December was  126,000, a drop of around 12,700  from the preceding three-month period.

The number of underemployed individuals likewise dropped by 4,400  to 55,300, translating to a rate of  1.5%.

2. AuD Dollars will appreciate 5% vs USD 2023-01-22 12:25:17

Europe and the US are expected to see economic recovery in 2023 following their “shallow recession path,” supporting most commodities.

“As the US Dollar turns around, the currencies of commodity-exporting countries such as Australia, Canada, and Norway seem to have catch-up potential,” Holtze-Jen said.

Standard Chartered said Australian dollars (AUD) and Canadian dollars (CAD) are likely to “trade range-bound over the next one to three months as the risk of a global growth slowdown is likely to cap commodity prices.”

“However, as we move through 2023, the broad-based USD weakness, expected improvement in China’s growth outlook and the correction of the fundamental undervaluation based on Terms of Trade, especially for AUD/USD, are likely to enable commodity currencies to appreciate by 3-5% vs the USD,” Standard Chartered reported.

3. Quota on travel canceled after holiday 2023-01-23 10:50:49

Hong Kong will have the conditions to cancel the quota on cross-border travel after the Lunar New Year holidays the soonest, chief secretary Eric Chan Kwok-ki said. 

Chan added the government is now mulling the details of the next stage of cross-border travel between the SAR and mainland, and is hoping to replace the PCR test requirement with the rapid antigen test, or even to completely call off all the Covid tests. 

Speaking on a radio program Sunday, Chan said the infection number has been dropping two weeks into the border reopening, indicating that the move doesn’t impact the overall pandemic development. 

4. Border reopening well for investment 2023-01-24 11:15:57

Border reopening bodes well for investment sentiments in Hong Kong’s residential market, Savills reported. 

In 2022, the proportion of buyers from Mainland China of luxury properties valued over HK$100m on the Peak, Mid-Levels, and Southside reached a new low at 29%, the lowest level since 2016. 

The total number of deals also declined substantially to 34, of which 10 were made by Mainland buyers

“Luxury volumes continued to shrink in Q4 across most price brackets to record 59 deals, a further 20% drop compared to the previous quarter,” the report also read. 

5. Business sentiments slightly improved 2023-01-25 12:59:47

The overall sentiments of businesses in Hong Kong is “slightly” more optimistic for the first quarter of the year, the Census and Statistics Department (C&SD) reported. 

In its Q1 report, the proportion of respondents that expect business situations to improve in the first quarter of the year stood at 19%, higher than the 16% recorded in the previous quarter. 

This is also higher than the 13% that expect business situations to be worse in the first quarter. 

6. Grade A office vacancy rose to 12.1% 2023-01-26 10:01:01

The vacancy rate of Grade A offices  rose to 12.1% by the end of last year on the back of new completions in non-core areas, JLL reported.

Based on JLL’s latest Hong Kong Property Market Monitor, vacancy rates increased across all submarkets.

In Central and Wanchai/Causeway Bay, the vacancy rate marginally rose to 8.8% (vs 8.7%) and 10.2% (vs 10.1%), respectively.

Meanwhile, vacancy rates increased to 11.1% in Hong Kong East, 11.0% in  Tsim Sha Tsui, and 19.5% in Kowloon East. 

7. Residential transaction rebound in 2033 2023-01-27 10:26:23

Hong Kong’s residential transaction volume is seen to post a “healthy rebound” in the first half of 2023 due to a low base comparison, CBRE said in a report.

During the residential property price correction from September 2015 to March 16 when it dropped 11.3% from its recent peak, and from July to December 2018 when it was down 9%, transaction volume also dropped significantly within a short period, CBRE said.

“With price correction bottoming, transaction volume rebounded immediately, as buyers took a wait and see approach entered the market without hesitation,” it said.