Technology may be the answer for Hong Kong’s struggling property investors

● With COVID-19, property vacancies in Hong Kong are at an all-time high while demand
from buyers and tenants have dropped dramatically as more people move away from
Hong Kong.
● Landlords must incorporate technology in property management to compete with other
listings and reduce operating expenses.

Hong Kong’s property market has fundamentally changed over the last two years. Landlords are facing increasing uncertainty and costliness managing their property portfolios with people choosing to emigrate from the city and businesses being impacted by COVID-19. The lack of publicly available market data also continues to be a pain point, especially for small-to-medium property owners who make up almost 45% of the market. With challenges mounting, a greater adoption of technology could be what property owners in Hong Kong need to build resilience and secure their investment.

The past year has seen a record number of tenants requesting for rent reductions on their
leases. At the same time, tenants have expressed a reluctance to allow visitors, which has had
serious consequences on prices quoted by repair vendors and the number of on-site viewings
taking place for potential new tenants. The use of on-demand services and data would ensure
that landlords have better insights on what price reductions they should accept and where to
find the best priced repair vendors based on recent transaction history.
Landlords oftentimes misunderstand the leasing experience and do not use the most effective
incentives for agents to perform well. Video tours of vacant properties drive 1.9x more engagement than still photography and have a 20-30% higher conversion rate. Despite this, the majority of agents in Hong Kong continue to use photos to attract tenants. By providing agents with high-quality videos and relevant information upfront, including viewing details and agency leasing agreements, property owners can speed up the time it takes to advertise a property by up to one week.
In fact, technology allows for listings to reach more agents at a faster rate, together with the
latest details. The current process of updating agents on changes in asking price or images is
inefficient, leaving many agents with outdated information when approaching potential tenants. Property owners can benefit from an automatic notification system so that agents no longer have to call in every few days to check on a property’s status. They can confidently propose a listing knowing that they have the most up-to-date information. This also makes it easier for owners to work with smaller agencies who offer lower commission rates as updated information is more easily accessible.
Another costly area for landlords, in particular those in the small-to-medium category, is
handling repairs. It is very common for landlords to spend a 25-40% premium simply by always using the same sifu. Property repair vendors tend to raise their prices annually, typically between 3% t o 9% per year – a much higher variance than price-transparent industries such as logistics and financial services. Until this point, most landlords have not had any leverage to control this kind of price hike.
Big data and transparent market information is changing all of that. Through collaboration with other property owners, landlords can learn from each other’s dealings while keeping their data private and secure. Records of quotation and transaction data help property owners understand how much they can negotiate with sifus and get a sense of the best vendors for specific tasks. Shared qualified ratings, reviews and pricing history lead to better and faster decisions, with landlords in some cases seeing price differences ranging between $2,300 – $4800 on individual projects.
Finally, one of the challenges most overlooked by landlords is time cost. A day of vacancy is
expensive. Being slow to respond to tenant requests can also be costly because landlords often have to settle for more expensive sifus. Additionally, landlords need to track mortgage
payments, manage accounts, file documents, prepare records for auditors, coordinate between vendors and tenants, all while looking for the best value financing solutions. Technology not only makes it easier to juggle multiple tasks and save both time and money, but also, data-driven insights can help guide an owner’s decision-making so that they can derive the most value from investments.

There are multitudes of asset classes to invest in today – stocks, bonds, businesses, bitcoin -that are completely hassle-free. But real estate offers a unique proposition to investors, being a timeless hard asset that provides stability and comfort. With younger generations playing a more active role in managing investments, the call for decisions to be based on data and logic rather than intuition is growing stronger. The current mechanism for property management in Hong Kong continues to be opaque and requires a lot of human intervention, losing valuable data and insights in the process. Fortunately, this presents a great opportunity for property investors, because by untapping new ways to manage properties better, with the use of technology, it would be easier and quicker to see a significant growth in returns on investment.


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