RMB depreciation will have more impact on luxury home sales

Especially those involving PRC buyers.

It has been noted that expectation on further RMB depreciation will make HK properties, which are assets dominated in a USD-pegged currency, more attractive from a wealth protection point of view.

According to a research note from Bank of America Merrill Lynch, meanwhile, existing PRC owners may tend to hold their properties longer to enjoy HK dollar appreciation against RMB.

Data from Centaline showed that PRC buyers represented 25% (by transaction value) of HK's total primary home transactions in 2Q16, which was meaningfully higher than 12.5% a year ago but still lower that in 2011-12 (30%+) before the introduction of Buyer-Stamp-Duty (BSD).

In 2Q16, the PRC buyer percentage was higher at 32% for luxury homes and lower at 11% for small/medium-size units. As such, Bank of America Merrill Lynch believes the impact will be more apparent for luxury home sales.