Hong Kong’s residential property price index fell sharply by 13.2% in Q1 2024 from the same period last year, its ninth consecutive quarter of year-on-year decline, according to data released by the Ratings and Valuation Department (RVD). It was its third biggest year-on-year fall in the past two decades. When adjusted for inflation, residential property prices were down by 14.9% over the same period.

Variations in price movements per property size and region:

• Apartments smaller than 40 sq. m: prices fell by 16.2% y-o-y in Q1 2024, to an average of HK$134,020 (US$17,154) per sq. m.
• 40-69.9 sq. m. apartments: prices were down by 16% y-o-y to HK$141,129 (US$18,064) per sq. m.
• 70-99.9 sq. m. apartments: prices dropped 16.6% y-o-y to HK$169,177 (US$21,654) per sq. m.
• 100-159.9 sq. m. apartments: prices fell by 6.5% y-o-y to HK$209,668 (US$26,837) per sq. m.
• Apartments with sizes bigger than 160 sq. m: prices fell by 4.8% y-o-y to HK$219,438 (US$28,088) per sq. m. in Q1 2024.

  Demand continues to fall. During 2023, the number of property transactions in Hong Kong dropped 4.5% y-o-y to 43,002 units, following a huge 39.4% fall in 2022, according to the RVD. Likewise, sales volume declined by 4.5% y-o-y to HK389.25 billion (US$49.82 billion) over the same period, following a 44.4% drop in 2022. Then in the first two months of 2024, the number of property transactions plunged further by 20.2% y-o-y to 5,852 units while transactions value dropped 24.5% to HK$46.89 billion (US$6 billion).

  “Over the past year, interest rates have risen significantly, various economies have shown moderated growth, and transactions of the local residential property market have declined alongside a downward adjustment of property prices,” said Hong Kong Chief Executive John Lee.

  Completions plummeted by 34.6% y-o-y to 13,852 in 2023, following strong growth of 47.1% in 2022, according to figures released by RVD. However, residential construction activity seems to be improving this year. In the first two months of 2024, there were already 3,594 dwellings completed in Hong Kong – on track to surpass the completions recorded in the full year of 2022.

  Hong Kong continues to suffer a chronic housing shortage – a problem that has dragged on for over two decades.

• From 2008 to 2013, Hong Kong’s dwelling prices skyrocketed by 134% (95.7% inflation-adjusted), driven by a flood of money in the wake of the global financial crisis.

  The market slowed in the first half of 2014, but bounced back in the second half, with prices rising by 13.6% in Q4 2014, 19.6% in Q1 2015, 20.4% in Q2 2015, and 15% in Q3 2015.

  After a brief housing market slowdown, house prices surged again by 41.5% (35.5% inflation-adjusted) from H2 2016 to H1 2018.

  The housing market slowed from the end of 2018 until the first half of 2019 due to macro uncertainties and social unrest. After a short-lived recovery in the second half of 2019, the housing market struggled again in 2020 due to pandemic-related travel restrictions and lockdown measures imposed worldwide. Then in 2022, things got worse, with house prices plunging by 15% (-16.7 inflation-adjusted), following a modest increase of 3.7% in 2021 and a meager growth of 0.2% in 2020. In 2023, the market remained depressed, with house prices falling further by 7% (-9.2% inflation-adjusted).

  HK’s housing market woes will continue in the medium term, with house prices expected to fall further by double-digit figures this year. Citigroup and UBS project HK house prices to fall by another 10% this year.

  Yet the overall economic situation is improving. Hong Kong’s service-oriented economy grew by 3.2% in 2023 from a year earlier, in stark contrast to the contraction of 3.5% recorded in the prior year, according to government figures. To boost economic activity, the HK government unveiled several measures last year, including offering cash handouts to residents, cutting salaries tax, and attracting more workers and foreign investments.

  In the first quarter of 2024, the HK economy recorded a moderate growth of 2.7% over a year earlier, its fifth consecutive quarter of year-on-year growth. On a seasonally adjusted quarter-on-quarter basis, real GDP grew by 2.3% in Q1 2024.

  The government forecasts the HK economy to grow further by 2.5% to 3.5% this year.

  Hong Kong property market remains the world’s most unaffordable

  Hong Kong’s housing boom in the past decades has been propelled by a combination of stringent government regulations on development, low interest rates, and currency stability; while the supply of land, which the government controls, continues to diminish.

  Hong Kong’s currency peg to the dollar kept borrowing costs near record lows, fuelling continued property demand.

  Despite improved affordability because of the recent decline in house prices, Hong Kong’s property market remains the world’s most unaffordable for the twelfth year in a row, according to the Demographia International Housing Affordability Survey 2023. Average home prices were 18.8 times the gross annual median household income in 2022, down from 20.7 times in the prior year and the lowest level since 2016.

  Despite the substantial improvement, “Hong Kong’s current housing affordability remains more severe than that of any other market over its period of coverage by Demographia (12 years),” said the report. “Hong Kong has been given a clear responsibility by the central government to improve housing affordability, and increase house sizes.”

  Similarly, in Mercer’s 2023 Cost of Living Survey, Hong Kong was ranked as the world’s most expensive city for expatriates to live in, followed by Singapore and Zurich.

  Hong Kong, along with Zurich, Tokyo, Miami, Munich, and Frankfurt, also tops the 2023 UBS Global Real Estate Bubble Index.

  “Between 2003 and 2018, real house prices in Hong Kong nearly quadrupled while incomes stagnated and rents increased by just 50% in inflation-adjusted terms. Housing is barely affordable: A skilled service worker requires more than 20 times the average annual income to buy a 60 sqm flat. The city has constantly been at bubble risk levels since the first edition of this study in 2015,” said the UBS report.

  “After declining 7% between mid-2022 and mid-2023, inflation-adjusted house prices in Hong Kong are back to levels last seen in 2017. Household leverage stabilized and rents have been virtually unchanged in the last four quarters as population inflow increased. However, high mortgage rates and a slow economic recovery in mainland China put pressure on house demand. Overall, we now see the city in overvalued territory,” the UBS report added.

• https://www.globalpropertyguide.com/asia/hong-kong/price-history