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Coronavirus Hong Kong: luxury property awaits Shenzhen border opening for the next leap upwards

South China Morning Post logo South China Morning Post 22/06/2021 Sandy Li sandy.li@scmp.com
a large building with a mountain in the background: The Mount Nicholson project at The Peak on Hong Kong Island on June 26, 2019, where 58 per cent of the 15 mansions and 38 luxury apartments are owned by mainland Chinese buyers. Photo: Martin Chan © SCMP The Mount Nicholson project at The Peak on Hong Kong Island on June 26, 2019, where 58 per cent of the 15 mansions and 38 luxury apartments are owned by mainland Chinese buyers. Photo: Martin Chan

An influx of mainland Chinese buyers into Hong Kong's super-deluxe developments since early this year could further fuel home prices in the world's most expensive property market, and the trend will become more obvious once the border open.

Buyers who settled in Hong Kong from mainland China, dubbed "new Hongkongers" unlike locally born residents, have already made their presence felt in the local real estate market. They bought 38 per cent of Hong Kong's luxury homes - each priced more than HK$100 million (US$13 million) - in the first four months, 2 percentage points more than the whole of 2020, and more than 32.9 per cent in 2019, according to data provided by Midland Realty.

"When the border reopens, we expect mainland Chinese to (return) to snap up residential property," said Avan Pau, senior director of investment property & private office capital markets at CBRE Hong Kong.

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Individual and corporate real estate investors from the mainland had been the lifeblood that had sustained the eye-popping prices of Hong Kong's property industry in the past decade, from multimillion dollar mansions to some of the world's most expensive offices in marquee addresses in Central. Their presence in the city, muted since the street protests of 2019, could resume when Hong Kong's northern border with Shenzhen reopens with the easing of the coronavirus outbreak, allowing business travellers, tourists and investors to return.

New Hongkongers already make up 60 per cent of the owners in two of the city's most exclusive residential neighbourhoods: CK Asset Holdings' 21 Borrett Road luxury apartments at the Mid-Levels, as well as Mount Nicholson on The Peak by Wharf Holdings and Nan Fung Development, according to land title searches conducted by South China Morning Post.

Mainland Chinese buyers snapped up four of eight apartments at 21 Borrett Road since February, paying a total of HK$1.3 billion for them, including a buyer named Yin Xi who paid HK$459.4 million for a five-bedroom unit that broke Asia's price record.

At Mount Nicholson, two daughters of the late casino tycoon Stanley Ho, now find 58 per cent of their neighbours being new Hongkongers. Buyers featuring pinyin names, the romanisation system used in mainland China, bought nine houses and 22 apartments out of the project's 15 mansions and 38 units for a combined HK$14 billion since their launch in late 2016.

a large building: CK Asset Holdings' 21 Borrett Road complex at The Mid-Levels in Hong Kong, one of the most expensive residential addresses in the world, as of January 19, 2021. Photo: May Tse © Provided by South China Morning Post CK Asset Holdings' 21 Borrett Road complex at The Mid-Levels in Hong Kong, one of the most expensive residential addresses in the world, as of January 19, 2021. Photo: May Tse

Several of these buyers had also set new price benchmarks. Before Yin's purchase, the record for the most expensive home was set by Lin Zhongming, chairman of Shenzhen developer AIM Investment Group. Lin liked the project so much that he paid HK$1.16 billion for two adjoining apartments at Mount Nicholson in 2017, paying HK$132,060 per square foot, or HK$560.02 million, for unit 12C and another HK$604.7 million for unit 12D.

"Some of the rich mainland Chinese businessman share one thought: to send their money out of China to park in a safe place," said Kevin Tsui, an associate professor at the Clemson University's College of Business in South Carolina, adding that the influx of mainland capital would cause prices to soar in Hong Kong. "That explains why they are willing to pay for a big premium, or even higher taxes, than local residents for property in Hong Kong and overseas."

a statue in front of a building: Close up of Mount Nicholson, one of The Peak's most prestigious addresses with a guarded, gated community. Up to 58 per cent of the 15 mansions and 38 luxury apartments are owned by mainland Chinese buyers. Photo: Handout © Provided by South China Morning Post Close up of Mount Nicholson, one of The Peak's most prestigious addresses with a guarded, gated community. Up to 58 per cent of the 15 mansions and 38 luxury apartments are owned by mainland Chinese buyers. Photo: Handout

China's government had also been mounting a series of campaigns across the country to tamp down on runaway property prices, which had added to the push for tycoons to diversify their holdings abroad, he said.

"It is likely encouraging individuals whose wealth quickly accumulated after they float their firms in Hong Kong or in the mainland stock market to seek other investment alternatives. Hong Kong property market is one of their favourite options," he said.

Payments of the buyers' stamp duty (BSD), a 15 per cent surcharge on the price of property sold to non-permanent residents with less than seven years in Hong Kong, soared last month to HK$913 million, a 23 per cent jump from April, while the number of transactions jumped 84 per cent to 114, according to data provided by the Inland Revenue Department.

"We also noticed a growing number of mainlanders who become Hong Kong permanent residents making property purchases," said Buggle Lau, chief analyst at Midland Realty.

Additional reporting by Lam Ka-sing

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This article originally appeared on the South China Morning Post (www.scmp.com), the leading news media reporting on China and Asia.

Copyright (c) 2021. South China Morning Post Publishers Ltd. All rights reserved.

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