Hong Kong's Housing Market Expected to Decline 5 10 in 2024 Amidst Affordability Challenges

Hong Kong's Housing Market Expected to Dip by 5-10 in 2024 Amidst a Decade of High Affordability Woes

August 26, 2024

By Eddie Kwok

Executive Director, Valuation Advisory Services, Hong Kong

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For the past decade, housing in Hong Kong has been among the world's most unaffordable markets, a fact underscored by research from international institutions. Since reaching an all-time peak in September 2021, property prices have experienced a downturn as interest rates rose mid-year 2022, plummeting by 24.2. By halfway through 2024, the removal of stringent housing controls along with border reopening from previous years spurred market dynamics but proved to be short-lived, leading to subsequent declines in both transactions and prices.

In Q1-Q2 2024, Hong Kong witnessed a notable surge in property transactions following the lifting of all property curbs on February 28. A significant rebound in primary sales was observed as developers offered discounts and incentives to accelerate sales for their residential projects. Developers sold a total of 9,419 units by mid-year, nearly matching last year's full-year total around 90 of the annual sales volume.

Meanwhile, secondary market transactions witnessed a 48 increase from Q3-Q4 2023, but growth was more moderate compared to the primary market as buyers favored new projects.

For H2 2024, we anticipate a slowdown in both primary and secondary markets, with an estimated total of around 45,000-48,000 transactions projected for this year, marking a modest 5-10 year-on-year growth.

Forecasting Home Prices: A Dip to 10

While the removal of property curbs led to a temporary stabilization in home prices, this was followed by declines beginning in May. In H1 2024, residential prices dropped by 3.1, according to data from the Rating and Valuation Department.

Ongoing high interest rates, reduced government subsidies on mortgage costs, and the implementation of progressive rating systems have increased holding costs for developers. Coupled with the abolition of curbs, developers were incentivized to sell units at discounts, leading secondary market homeowners to accept lower prices to facilitate sales. This has resulted in a persistent downward tr in property values post-stabilization.

We predict that Hong Kong's home prices will fall by 5-10 for the entire year as the market adjusts to these factors and consumer behavior continues to evolve.

Rental Resilience: A Positive Outlook

Residential rents rose by 1.6 in H1 2024, per data from the Rating and Valuation department. In 2023, rental growth reached 6.0. We forecast that the rental market will continue its upward trajectory with similar growth trs for 2024, driven by influxes of migrants under the Top Talent Pass Scheme, growing numbers of international university students, and couples or individuals opting for rentals as a temporary housing solution.

Key Indicators for Market Bottoming Out:

1. Rent-to-Price Parity: As residential rent hits certn levels, the decision to buy versus renting becomes more balanced for users when mortgage payments are on par with rental expenses.

2. Fixed Deposit Returns Diminishing: Reduced attractiveness of fixed deposits compared to alternative investments as interest rates decrease.

3. Inventory Decline: A reduction in unsold property inventory to a level below 15,000 units.

For further inquiries or additional information about the CBRE 2024 Asia Pacific Real Estate Market Outlook Mid-Year Review, please refer to the provided link.

Copyright ? 2024 CBRE. All rights reserved.

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