JPMorgan sees higher home prices from Hong Kong’s recovery as a buyer snares an apartment at the uber-expensive Mount Nicholson address

·3-min read

Home prices in Hong Kong are likely to increase this year, extending a multi-year uptrend as the city’s economic rebound brightens the employment market and offset the dampening effect of emigration, according to JPMorgan Chase.

Residential prices could gain 5 to 10 per cent despite a blip in the latter half of 2021, the US bank said, adding that still-low borrowing costs will support buying demand. The chance of the Hang Seng Index rebounding is higher than a further decline, according to the bank’s managing director and head of Asia property and Hong Kong research Cusson Leung.

The optimism is underpinned by recent transactions in luxury homes as locals and “new Hongkongers” lighted up the market despite restrictions on cross-border travels to contain the Covid-19 pandemic. Wheelock Properties this week sold another flat on Mount Nicholson to keep Asia’s most expensive address at record highs.

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“Whether there is a border reopening or not, [people] still need a place to live in, therefore I don’t think that will actually affect demand,” Leung said, adding that “investment demand is still high” and will probably continue this year.

Wheelock this week sold Flat 15C at the third phase of Mount Nicholson, a four-bedroom unit measuring 4,230 sq ft for HK$583.2 million (US$74.75 million) that includes two parking spaces. The price works out to about HK$137,870 per sq ft, trailing the HK$140,800 psf tag in November for Flat 16D as the most expensive in Asia.

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The newest transaction, however, surpassed the HK$136,000 psf deal in February 2021 for a five-bedroom unit known as Flat 1 on the 23rd floor of 21 Borrett Road in Mid-Levels, of a luxury residential project developed by CK Asset Holdings.

Even so, analysts are still divided on the prospects for 2022 given the stock market slump in recent months. Morgan Stanley last month predicted a 2 per cent drop in lived-in home prices to halt a 13-year bull run, due partly to stock market losses. Centaline Property Agency, the city’s biggest network of sales agents, sees a 10 per cent gain.

The Centa Valuation Index, which tracks banks’ valuations for used homes in 133 housing estates compiled by Centaline, has been in a doldrum since falling below 40 points in November, a threshold indicating a bearish view on the market.

The reading increased 8.27 points in the week to January 2 from 23.12 points in the preceding week, which was the lowest since March 2020. The Hang Seng Index of stocks fell about 15 per cent in 2021, the worst performing major indices worldwide, as the broader market lost HK$5.14 trillion in capitalisation.

Lived-in home prices fell to a seven-month low in November after peaking in August, according to data from the Rating and Valuation Department.

While stock losses could sour sentiment, Leung said he was not convinced the index would be going down further. JPMorgan noted that there may be market-cooling regulatory measures by Asian governments if prices increase by more than 10 per cent.

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