Mainland buyers in Hong Kong’s luxury home segment hits record lows

The proportion of Mainland buyers was at an all-time low of 29% in 2022.

According to a Savills report, the proportion of Mainland buyers of luxury properties valued above HK$100 million on the Peak, Mid-Levels and Southside reached a new low in 2022 at 29%, the lowest level since 2016. 

The total number of deals (34, ten of which were Mainland) also declined substantially from previous years, as prolonged border closure, receding business prospects in China and changing policies all affected Mainland UHNWIs’ appetite for trophy assets in Hong Kong. 

Here’s more from Savills:

Luxury volumes continued to shrink in Q4 across most price brackets to record 59 deals, a further 20% drop compared to the previous quarter. The few high-profile deals, however, supported volumes in the HK$200m+ bracket with a 40% QoQ rebound.

Market outlook

Border reopening should improve investment sentiment in general, while the potential influx of Mainland professionals and middle management may boost buyer profiles of luxury apartments in emerging areas such as West Kowloon and Tseung Kwan O, while Mainland UHNWIs may once again focus their interest on super luxury homes. 

While interest rate hikes may end early this year, the cost of capital looks set to remain high (HIBOR>5%) for most of 2023 while uncertainties remain for the speed of recovery of both the Hong Kong and China economies. Meanwhile, corporate and public debt levels remain key concerns in the Mainland business environment, and thus the ability of UHNWIs to spend on trophy assets. 

Based on the assumption that the negative impact of higher mortgage rates and Hong Kong/China economic uncertainties on the luxury sector are likely to outweigh the benefits of border reopening during most of 2023, we therefore anticipate townhouse prices to adjust downwards by another 5% to 10% in 2023 before more Mainland HNW capital returns to the local market for luxury homes towards the end of 2023, while luxury apartments may perform slightly better posting a 5% decline as more Mainland professionals aim to settle in Hong Kong and buy new homes.