Rich Chinese Businessmen Want Hong Kong HomesBy
Until recently, Hong Kong property agent Clarence Chow didn't pay much attention to would-be buyers from mainland China. In 2008 they represented just 3 percent of revenue for Chow and his team of 58 agents at Centaline Property Agency.
Today Chow hardly thinks of anyone but mainland clients. The nearly $2 trillion in stimulus spending and bank loans pumped into the Chinese economy to fight the downturn has made a lot of business owners rich. These millionaires are flocking to Hong Kong and now account for over 20 percent of sales for Chow's team. His agents are searching for more mainland customers by scouring government documents for people who bought BMWs, Mercedes, Lamborghinis, and other deluxe models. "If they can buy those cars in China," says Chow, "they can invest in Hong Kong."
Chinese buyers are helping drive a rebound for Hong Kong's residential property market, which has yet to recover fully from the crash that followed the former British colony's return to Beijing rule in 1997. Last year the Centaline property index jumped 29 percent and is now at its highest level in a dozen years. Earlier this year a home on the Peak, the most prestigious neighborhood in town, sold for $7,775 per square foot, a record.
People who follow Hong Kong real estate estimate mainland Chinese make up about 35 percent of the luxury market and 15 percent of the mass residential market. Some are buying to avoid taxes: The Chinese and Hong Kong tax agencies are separate entities, and Hong Kong taxes are far lower. Other Chinese sense an opportunity to make a killing. A growing number want immigrant status, which earns them a much coveted Hong Kong passport. They get such status by investing a minimum of $840,000 in property. "People are coming here for themselves or their kids," says Nicholas Kwan, head of research in Hong Kong for Standard Chartered Bank. That price "is not that big an amount for many of the wealthy in China."
Hong Kong developers increasingly cater to Chinese fondness for chandeliers, marble, and other wealthy touches. Unlike local buyers, Chinese don't expect to find luxury homes solely in prestige neighborhoods. Mainlanders also pay top dollar in less upscale districts like West Kowloon and even in middle-class suburbs in the New Territories. "Mainlanders don't know much about Hong Kong," says Joseph Tsang, local head of capital markets for Jones Lang LaSalle.
The only thing that could spoil things is the long arm of China's central government, which is trying to cool its economy and deflate property prices in mainland cities. Beijing's campaign could spill over into Hong Kong. "If we have tighter liquidity, there will be less demand coming through," says Eva Lee, an analyst with Macquarie Securities in Hong Kong.
For now, Centaline's Chow says sales are up 15 percent this year. One Chinese buyer walked in, introduced himself, and said money was no object. Chow's agent showed him various properties, each pricier than the last, until he bought two houses for a combined $74 million. Best of all? "He's still buying," says Chow.
The bottom line: Hong Kong authorities want Chinese business, but they have to make sure no bubble ensues.