Ghosts Create Bargains in Hong Kong Housing

Many buyers are wary of bad vibes from unnatural deaths

There’s a grim phenomenon in Hong Kong’s real estate market: discounts of as much as 50 percent for home seekers willing to live in an apartment where a murder has occurred. Unnatural deaths typically result in rental discounts of 10 percent to 20 percent and can be more than double that for killings, says Sammy Po, head of the residential department of realtor Midland Holdings. Chinese believe such places, known as hung jaak, the Cantonese term for haunted apartments, are unlucky, he says, adding that “the Chinese really do care” about living in these places.

The rent for an apartment in the luxury J Residence, where police found the bodies of two murdered women on Nov. 1, was HK$29,000 ($3,740) a month. That will probably drop by half when the dwelling is released from being a crime scene, cleaned, and rented again, says a director of the company that owns the unit, who didn’t want his name or firm identified because he isn’t authorized to speak publicly. The sales value of the unit would decline to HK$6 million from HK$9 million if it were sold immediately, the person says.

This year, Hong Kong had almost 190 apartments or homes where an unnatural death took place, including murders and suicides, according to a database compiled by Square Foot. The website lists the date of the incident, the address, the district, and a brief description of the death. Among recent listings were an apartment where an 18-year-old male student slipped a plastic bag over his head last month and jumped to his death; one where a middle-age couple, plagued by financial troubles, committed suicide by inhaling burning coal smoke; and another where a mother was hacked to death by a mentally unstable neighbor while protecting her two daughters.

Hong Kong is Asia’s priciest real estate market. Residential sales prices, which have more than doubled since the start of 2009, hit a record in October despite government measures to curb demand. In a comparably tight market such as New York City, a crime or other negative event generally has less impact on prices, says Jonathan Miller, president of real estate appraiser Miller Samuel. In the U.K. a particularly notorious crime can cause a home to become unsaleable, requiring it to be knocked down and rebuilt, says Richard Sexton, a director at E.surv, the country’s largest provider of residential property valuations. “Equally, if it’s a folklore situation,” he says, “the house with the friendly ghosts can sometimes be marketed that way as a positive.”

C S Group, a Hong Kong property-services firm, auctioned off a 351-square-foot hung jaak for HK$1.91 million in November, 14 percent higher than the starting price. That was still about 16 percent cheaper than an apartment of the same size in the same complex sold for last month, according to Midland data. “The demand is there, whether from investors seeking rent or for self-use,” says Alger Cheng, general manager of C S Group’s auction department. Also, expatriates tend to be less concerned with living in “haunted apartments,” says Asif Ghafoor, founder of property-listing website Spacious.

Superstition and geomancy beliefs run deep in Hong Kong, where people also shun sites close to cemeteries, hospitals, and churches, which can be considered unlucky. Buildings typically omit the fourth floor because the number is a homonym for the Chinese word for death—much as many U.S. buildings don’t have a 13th floor. Property developers rely on feng shui, the Chinese practice of arranging the physical environment in harmony according to beliefs about energy and design. “For those growing up in Hong Kong, feng shui is hammered into your mind, even if you don’t believe or understand it,” says Ng Wai-pok, a former lecturer in feng shui at the University of Hong Kong. “A large part of it is psychological, but there is also the metaphysical.”

    Before it's here, it's on the Bloomberg Terminal. LEARN MORE