Hong Kong Residential Property Will tightened controls on capital outflows, if true, derail the upcycle?

Research evidence excerpt

Hong Kong Residential Property Will tightened controls on capital outflows, if true, derail the upcycle?

15K transactions are from HK-based Mainland Chinese who have resided

in HK for <7 years (or 5-8% of this group have already purchased a flat). This suggests

further upside in home demand from these “new Hong Kongers”.

• Other supportive factors remain in place: Our upcycle thesis on the housing market

does not just rely on demand from “Mainland China-based Mainland Chinese”. Rather,

it is based on various supportive factors, including (1) population growth driven by

incoming talent from Mainland China and return of Hong Kong people who migrated

from Western countries (Figure 5HongKongpopulation); (2) a low vacancy rate of 4.3% which supports

further uptrend in rents (Figure 6VacancyratesinHKprivateresidentialunits), pushing renters to become buyers (31% of private

households are renters) (Figure 8%ofrentersoutofhouseholdswholiveinprivatehousing); (3) a strong financial services industry; (4) optimal

inventory levels (<10 months in primary market) (Figure 9HongKongprimaryunsoldinventory); (5) genuine demand from

HK-based Mainland Chinese; (6) a marginally positive carry (3.0% net rental yield

vs. 3.25% mortgage rate, although effective mortgage rate is likely <3% if considering

cash rebates and mortgage rate-linked interest income) (Figure 10HKrentalyieldovermortgageratevs.secondaryhomeprice).

• Home price growth has been faster than expected; a “slow bull” would lower policy

tightening risk: The pace of home price growth year to date (up 9%) has been stronger

than expected (Figure 11HongKongsecondaryhomepriceindex(withkeyevents)since2024). If potentially lower demand from Mainland China-based