Market dynamics

However, some analysts believe the Northern Metropolis initiative, in which Hong Kong plans to develop a 30,000-hectare area near the mainland border, providing housing and jobs, could narrow the property price gap between the SAR and the mainland, while others insist that Hong Kong’s property value remains intact as long as it keeps its status as an international financial hub.

Tang says she expects the housing price gap in some parts of the northern New Territories, particularly in the central area of the Northern Metropolis, and that of the mainland to narrow although this is unlikely to happen any time soon. “The price gap could narrow slightly in the long term, but it would, ultimately, depend on market forces and the pace of regional integration.”

UBS analyst Mark Leung says some Hong Kong retirees or low-income people may consider relocating to the mainland cities of the GBA if cross-border transportation continues to improve, as the cost of living in Hong Kong remains relatively high. Still, few are thinking of buying mainland properties as an investment. “Many elderly people prefer to have Hong Kong’s free medical services, especially for major surgeries. They may not necessarily sell their Hong Kong properties, and may opt to return to Hong Kong when necessary,” says Leung.

“Hong Kong’s rental yields are around 2.3 percent but, in mainland cities like Guangzhou or Shenzhen, they are less than 2 percent, making them less attractive from an investment perspective,” Leung says. “Besides, concerns about home oversupply and the risk of renminbi depreciation have dampened expectations of capital appreciation.”

Leung remains upbeat about the value of Hong Kong properties, viewing it as an asset denominated in Hong Kong dollars and pegged to the US dollar, and characterized by low taxes and high liquidity. “If high-income people continue to come to Hong Kong, it could differentiate the city’s property prices from those on the mainland.”

The Hong Kong dollar’s peg to the greenback has allowed it to trade within a band of 7.75 to 7.85 since 1983.

He Qianru, chief officer of the National Research Center at Midland Realty, notes that Hong Kong people buying residential properties in the GBA focus on Zhongshan, Zhuhai and Foshan due to their lower prices, cultural familiarity and a shared language — Cantonese. “In Zhongshan, numerous housing options are available below 10,000 yuan ($1,380) per square meter. Hong Kong people acquire these properties primarily as secondary homes, for holiday accommodation or retirement.”

To help boost the local economy, Hong Kong is making headway in innovation and technology after the government’s revenues slumped from the real-estate sector, once the linchpin of the city’s economic growth. The SAR government’s deficit ballooned to HK$101.6 billion in the last fiscal year.

Sung Yun-wing, associate director of the Economic Research Centre and the Hong Kong Institute of Asia-Pacific Studies at the Chinese University of Hong Kong, says he is not optimistic about the SAR’s current economic situation, partly because of challenges it is facing in fully developing the technology sector that the government has been trying to rely on to generate substantial revenue.

He notes that a major obstacle in achieving technological success is the short-term mentality of most local businesses that seek instant success and quick profits but are reluctant to make long-term investments that technology and innovation demand. “Engaging in high-tech requires taking risks and embracing entrepreneurship. If there are a lot of young people, it would be a great advantage,” says Sung, noting that the Top Talent Pass Scheme, which attracts talent from the mainland, will help to foster Hong Kong’s startup environment.

“As many professionals from the mainland move to Hong Kong, driven by considerations for their children’s education, Hong Kong should ramp up efforts to develop high-quality primary and secondary schools, particularly in the planned Northern Metropolis,” he says.

Promising job prospects and an advanced education infrastructure are crucial elements in persuading mainland people to buy property in Hong Kong, Sung added.

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