Covid-19 a view from Hong Kong

Having learnt from the SARS outbreak in 2003, Hong Kong was quick to implement travel restrictions for incoming passengers and flights from mainland China, close schools and encourage social distancing. Whilst many of these measures are still in place, there is still economic and housing market activity and the city has avoided lockdown.

In February, according to data from the Land Registry of Hong Kong, the total number of residential transactions fell by 13% when compared to February 2019. However, secondary sales (resales) and increased by 5% year-on-year. The fall in primary (new-build) transactions is more symptomatic of a lack of supply rather than underlying demand with many developers taking a more cautious approach to bringing units to the market.

One project, in Tseung Kwan O, has sold 90% of apartments generating over HK$1.5 billion (US$200 million) in sales volumes and saw 17 times the demand compared to the number of units available. This example underlines that pent-up demand remains in part due to robust market fundamentals namely the demand/supply imbalance. In addition, demand has been boosted by lower mortgage rates, with The Hong Kong Monetary Authority mirroring The Federal Reserve’s moves over the past two weeks and cutting the policy rate to 0.86%, plus developers are offering discounts.

As many containment measures remain in place the number of transactions is expected to continue to fall, year-on-year, in March. However, some analysts have been cautiously optimistic and forecast that a recovery could begin from May, four months since the initial outbreak.