What happens to a global financial center when hundreds of thousands of residents head for the door? The jury is still out on London after its Brexit- and pandemic-inspired exodus. Now it’s Hong Kong’s turn to pose the question.
The U.K. starts taking applications as of Jan. 31 under a new immigration program for Hong Kong residents, introduced in response to a national security law that was enacted by China’s legislature last June. The British government calls the law a “clear and serious breach” of the Joint Declaration that governed the former colony’s return to Chinese sovereignty in 1997, which guaranteed that Hong Kong’s rights, freedoms and way of life would remain unchanged for 50 years.
In an impact assessment in October, the U.K.’s Home Office projected a central estimate of 179,300 main applicants for the five years through 2025. The figure, which excludes dependents, was based on the then-current trend of applications for British Nationals (Overseas) passports (a preliminary step before joining the visa program) continuing through to the end of 2020.
Most of those applying for BN(O) passports are likely to emigrate, and therefore can be expected to sell any property they may own in Hong Kong.
That’s a lot of potential selling pressure. To illustrate, the chart below maps the U.K.’s mid-point estimate for annual visa applications in 2021-2025 to Hong Kong’s residential property transaction volumes over the past five years.
The 2021 projection of 85,500 applicants is almost 50% higher than the average annual volume of Hong Kong home sales over the past five years.
The number is seen tapering off in subsequent years, but this is only the central estimate. The U.K. government’s highest forecast is 278,600 main applicants in 2021, and a total of 584,600 for the five-year period. The low-end forecast is 2,500 this year and a five-year total of 5,300.
This prospective overhang may be one reason why Hong Kong’s home prices have failed to recover over the past several months, even as interest rates have declined and the Hang Seng Index has rallied by more than a quarter from its September low.
https://www.bloomberg.com/opinion/articles/2021-01-30/u-k-passports-for-hong-kong-bankers-will-disrupt-property-markets