(Bloomberg) -- Hong Kong real estate broker Habitat Property used to count on the city’s Western professionals for the bulk of its business. Things are different nowadays.
Mainland Chinese clients now make up 40% of transactions, compared with 10% before Covid, said founder Victoria Allan. Another 40% are from Hong Kong, while clients from the West are down to just 20%.
“Literally everyone now I want to employ has to speak Mandarin,” said Allan, who founded Habitat in 2001. Many articles on Habitat’s website, previously English-only, are now available in Mandarin. Social-media posts are subtitled and cover topics of interest to the Chinese community, such as bilingual international schools.
Allan’s is one of thousands of Hong Kong businesses adapting to the enormous changes happening to the city’s economy in the wake of an exodus of foreign and local professionals. Increasingly reliant on Chinese money, they are targeting social media popular in the mainland and embracing Mandarin in a city once dominated by Cantonese and English.
“Either you change, or you die,” said Allan. “You’re in a new Hong Kong and it’s not worse, it’s just new and we’ve got to move forward with the way it is.”
Mainland Influx
Strict pandemic restrictions, political unrest and growing US-China tensions all contributed to Hong Kong’s population dropping by roughly 216,000, or about 2.8%, in the two years through June 2022, according to census data.
In an effort to reverse that trend, the government introduced a new visa program to attract skilled workers. Mainland Chinese made up 95% of the roughly 50,000 approved under the program last year, government data shows.
Tourism in the city cratered after the pandemic and remains down 40% from 2019, according to Hong Kong Tourism Board data. Visitors from the mainland accounted for 77% of visits as of May, but China’s slowing economy and property crisis means they are spending less.
The changes can be seen on Hong Kong’s biggest shopping streets. Once known for their luxury tenants and world-topping rents, neighborhoods like Canton Road and Russell Street are plagued by empty shop fronts. But head to Central’s Soho and its even busier than before covid, thanks to its popularity with visitors from the mainland ditching luxury consumption for selfies with iconic buildings, boutique cafes and hipster murals trending on Chinese social media.
See also: Chinese Swap Hermes for Cafes in Blow to Hong Kong Tourism
To win business, many Hong Kong retailers who were promoting on Facebook and Instagram have adopted Chinese equivalents, including Xiaohongshu, a lifestyle app that has hundreds of millions of users posting travel guides, dining reviews and brand recommendations.
That includes Bakehouse, a bakery chain that opened its account after mainland Chinese users raved about its egg tarts — an iconic Hong Kong dessert — on the app.
During the week-long Easter holiday in April, Bakehouse’s sales grew about 17% from the year before, said founder and chef Grégoire Michaud. That is far better than the overall food and drinks industry, which suffered a 40% plunge in business during the break, according to Simon Wong, president of the Hong Kong Federation of Restaurants and Related Trades.
“It’s very apparent — when you’re going on the street and observing which are the restaurants that see queues outside, they’re usually the ones recommended on Xiaohongshu,” said Prudence Lai, a consultant at market research provider Euromonitor International.
The changes in restaurant industry clientele has resulted in a series of high-profile closures over the past year, including nine establishments operated by decades-old Castelo Concepts that were popular haunts among the city’s expats.
Property Market
The influx of mainland Chinese workers provided some relief to a struggling property market, but its been concentrated in districts that they favor, like Tseung Kwan O. There, residential rents are back to pre-Covid levels, but in some other parts of Hong Kong they remain down almost 10%, according to data from property platform Spacious.hk.
At property showrooms, agents are no longer hustling for walk-in customers. Instead, they have their eyes fixed on selfie sticks, livestreaming for their audience on Xiaohongshu. One of them is Tom Chen.
The 32 year-old, who boasts hundreds of thousands of followers across China’s social media platforms including Xiaohongshu, ByteDance Ltd.’s Douyin and Bilibili Inc., said that focusing on mainland buyers helped him to establish a company and open a second office location in Hong Kong’s prime Tsim Sha Tsui distrct. His employees must be fluent in Mandarin, but it doesn’t matter whether they speak Cantonese or English.
“Many industry peers suddenly want to enter Chinese social media because Hong Kong’s wealthy have already ‘finished’ buying property locally,” said Chen, adding that he has seen agents who stick to traditional marketing tactics lose out. “The new wave of mainland nationals have strong buying power.”
--With assistance from Rachel Yeo.
©2024 Bloomberg L.P.