New property agency looks beyond Hong Kong gloom to promise of Greater Bay Area opportunities

Cheryl Heng
·4-min read

Amid the fourth wave of coronavirus cases in Hong Kong, a new property agency opened its doors on Wednesday riding on optimism about the Greater Bay Area development zone.

Hong Kong’s property market has taken a beating from the pandemic, but Kenneth Kwok, the co-founder of Xifeng Property Group, has instead cashed in on lower retail rents and manpower costs to set up his 200 sq ft office in Mong Kok. He pays a monthly rent of about HK$15,000 (US$1,934), half of what it would have been during pre-pandemic times.

Noticing the rising demand for residential property in the Greater Bay Area, Kwok and Jason Shum, his co-founder, chose to hone this as their niche. Their venture comes amid rising home prices in bay cities. For instance, according to an index compiled by Centaline Property Agency, the prices of new and used homes in Shenzhen scaled a fifteen-month high in November, rising by 32 per cent.

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Four cities – Guangzhou, Foshan, Shenzhen and Dongguan – last month saw home prices rise to their highest levels since March 2016, when Centaline began gathering data in the development zone.

The zone is a Chinese government scheme that links Hong Kong and Macau with nine neighbouring cities in Guangdong province – including Guangzhou, Shenzhen and Zhuhai – to form an integrated economic and business hub.

Transactions remained active in these nine mainland cities last month, with Shenzhen in particular seeing its first-hand transaction volume hit a five-year high, Centaline said. Hong Kong’s transaction volumes and home prices were, however, subdued by the fourth wave and is expected to remain under pressure.

In the first few months of the pandemic, Kwok observed that most Hong Kong buyers were reluctant to buy mainland Chinese property, as it was where the coronavirus was first reported.

“Half a year later, people in Hong Kong are buying mainland properties again, even though they cannot visit. If we can provide them live videos through WeChat to communicate with salespersons in the mainland, there are clients who will buy,” he said, adding that the agency planned to target middle-incomers aged above 40.

“It’s a good time to start the business – the costs are lower, yet demand [for mainland property] is increasing,” he added.

Kwok acknowledged the competition presented by large property agencies and pointed to the projects that his agency had, such as 400 to 500 sq ft flats in Dongguan going for HK$500,000 (US$64,495) and claiming return rates as high as 6 per cent.

And while he is banking on stronger interest from Hong Kong buyers, Andy Lee Yiu-chi, chief executive of Centaline for southern China, said such demand was likely to be dampened by the pandemic and its resulting travel restrictions.

“With the quarantine restrictions in place, most Hongkongers cannot return to the mainland to buy property. I believe there could be a 70 per cent to 80 per cent decrease this year in the number of Hongkongers buying mainland property,” Lee said.

There could be a small proportion of investors who make purchase decisions from Hong Kong, but Lee said such a scenario would likely be for properties priced at between 1 million yuan (US$152,907) and 2 million yuan.

Lee said he expected more Hong Kong buyers would buy mainland properties from the second half of next year, if the coronavirus pandemic is contained. Demand for bay area properties was currently being propped up by favourable policies by the Hong Kong government, he said, particularly with the Greater Bay Area taking centre stage in Chief Executive Carrie Lam Cheng Yuet-ngor’s annual policy address this year. Lam touted integration with the bay area as the city’s priority, alongside major transport projects to enhance cross-border connectivity.

Zhuhai and Zhongshan have emerged as popular bay cities for property, Kwok suggested, because of accessibility thanks to transport links such as the Hong Kong-Zhuhai-Macau Bridge.

Home prices in Zhongshan fell in November by 1 per cent year on year, while Zhuhai saw a 0.7 per cent gain over the same period.

Lee backed Kwok’s picks and added Zhaoqing, which saw a fall of about 3 per cent year on year in home prices, to the list of cities to keep in mind.

While residential property in Shenzhen used to be a favourite, Lee said soaring home prices, which have risen to as much as 50,000 yuan per square metre recently, have made the city unaffordable for Hong Kong buyers. Instead, investors might flock to cities such as Zhuhai, Zhongshan and Zhaoqing for property where prices are around 1 to 2 million yuan, compared with Shenzhen’s 5 to 10 million yuan, he added.

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