© Reuters. Potential buyers wearing protective masks wait in line outside the Hong Kong sales office for New World Development's Pavilia Farm project following the coronavirus (COVID-19) outbreak
From Clare Jim
HONG KONG (Reuters) – Hong Kong shows that its affinity for real estate has not been affected by a year of anti-government protests and concerns about the coronavirus. A major housing project started this month and received the highest response in over two decades.
When Pavilia Farm in the New Territories District opened for subscription, avid shoppers filled with food and water as they prepared for a long wait at the end of a line where the signs read, "Expected Wait: 8 hours."
The budget project near the bustling Kowloon neighborhood received nearly 23,000 subscriptions for its first 391 units. When it is completed at the end of 2022, there will be 3,000 apartments.
All 391 units were sold, the developer said on Sunday evening, with more units coming soon.
Brokers said the adoption at Pavilia was the strongest in more than 20 years in one of the world's most expensive real estate markets, reflecting the frenzy seen at the time the former British colony was handed over to China in 1997.
But it comes after last year's social upheaval about China's plans to introduce a national security law in Hong Kong, which has led many investors to question the future of the global financial center.
However, property prices in Hong Kong fell only 4% from a peak in May last year, before the protests and the spread of the coronavirus broke out, driven by strong demand, severe land scarcity and low interest rates. This followed a six-fold increase in the index of household prices since 2003.
"The real estate market has been piling up for over a year since the social movement last June. The monthly transaction volume has been lower than usual," said Richard Lee, CEO of Broker Hong Kong Property Services.
"People's trust has returned after (residential) prices remained stable even during the COVID-19 outbreak."
However, real estate consultancy Knight Frank's managing director Thomas Lam said the real estate market would continue to be under pressure in a recession and high unemployment economy. He expected house prices to fall around 5% this year before stabilizing next year.
"Now the real estate market is very" deformed "; real estate prices remain high, but … commercial and retail rents and prices are falling continuously," said Lam.
Pavilia Farm is owned by New World Development (HK 🙂 and MTR Corp. (HK 🙂 will be built above Tai Wai Station on the railway line to Kowloon and Hong Kong Island and will have a large shopping center on the lower floors.
On one of the early days of the launch, organizers stopped the queues at 11:30 a.m. local time (3:30 a.m. GMT) as the lines extended from an exhibition space to an outdoor pedestrian bridge despite social distancing concerns.
Buyers said they were not concerned about the resident exodus following last year's protests, as well as the possibility of prices falling.
Grace Wong, a 40-year-old fitness instructor, said she wanted to buy a one-bedroom house for investment, although she said if prices fell she would live in it herself.
Wong said she was staying in Hong Kong because she is single and doesn't have to worry about children's futures.
"(Otherwise) I would choose to migrate elsewhere and not buy property here," she said. "I'm not young anymore. If I don't buy a property now, it will be more difficult to secure a mortgage in the future."
Real estate agents said Pavilia Farm's prices were 10% lower than nearby developments, making it attractive to buyers who have been waiting for opportunities.
"The overwhelming response to this project shows a rebound in the Hong Kong property sector and the confidence of home buyers looking for quality property as the new normal re-emerges," New World deputy chief financial officer Edward Lau told Reuters.
26-year-old Candy Lau, who works in the consumer goods industry, was also confident about the Hong Kong real estate market. She said she expected it to stay stable or increase slightly in the near future and had committed to buying and renting a one bedroom apartment in Pavilia.
"Real estate is still a better way to preserve capital. There are currently limited investment channels. Equity is volatile," said Lau.