Average home prices fell by a quarter last year in the world’s most expensive city as protests, trade war sapped demand

The average price of a new flat in Hong Kong fell by the most in 13 years in 2019 as months of civil unrest battered market sentiment. More losses have been predicted in 2020.

The anti-government protests, which started in June and became increasingly volatile, deterred buyers and caused the average price of a new home to drop by HK$3.72 million (US$478,226), or 25 per cent, to HK$10.87 million from an all-time high in 2018, according to real estate agency Ricacorp Properties.

While the average price is at a four-year low, the size of the drop represents the biggest pullback since 2006 when it slumped by 29 per cent, said Derek Chan, head of research at Ricacorp, whose firm has been compiling the data since 1996.

Cracks in Hong Kong’s housing market have appeared as protests escalated through the later half of 2019, forcing developers to offer discounts to clear their inventories. A shrinking economy will push the housing market further into a bear-market territory as industry experts forecast deeper losses this year amid the city’s ongoing political crisis.

Most of the 15 industry players and analysts polled by the South China Morning Post last month said they see home prices sliding 15 per cent in 2020, with one forecasting that luxury homes will drop by as much as 20 per cent.

The residential market is likely to be affected by the political crisis engulfing the city, as well as “the potential for the continuing slowdown of both the local and global economy, plus a possible higher unemployment rate”, said Rosanna Tang, Colliers International’s head of research for Hong Kong and Southern China.