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Think Hong Kong: long slog ahead

Harry Tan
Head of Research, Real Estate, Asia Pacific
Hong Kong
Hong Kong entered a technical recession in Q3 2019. Growth contracted -12.2% annualised, based on the advance estimates, on top of the -2.0% fall in the Q2 2018 (Fig.1). This negative outcome should not surprise as the economy has been overshadowed by strong headwinds over the past year: the global slowdown, particularly in China; rising risks and uncertainties around the world; and, over recent months, the protests in Hong Kong.


Figure 1
But what does this mean for real estate investors? Hong Kong’s difficult months and years ahead suggest that an extended downturn of the property market looks imminent. Residential prices are at risk of a significant pull-back and not just from any drag on buying sentiment due to weak and uneven growth prospects. Political pressure to ease the housing shortage will be the key uncertain variable weighing on the market.

However, the commercial property market provides a more interesting investment proposition against the current backdrop. Over the past few years, there has been a shift in occupier and investment demand towards decentralised office markets.

This provides good opportunities for investors looking to diversify their global portfolio and enter the market, noting that despite recent unrest, Hong Kong should remain one of the most dynamic, vibrant and transparent global real estate markets over the long term.

Hong Kong’s highly favourable geographic proximity to China and its well accepted international status as a global finance, logistics and services hub, will continue to position the city favourably over the long term. Highly ranked as one of the most dynamic and competitive global cities, the long-term future of Hong Kong remains well underpinned, as evidenced by our cities’ filtering approach.


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