Home prices in Hong Kong fell last year by the most since the Asian financial crisis, as more than two years of coronavirus pandemic curbs helped end a 13-year rising trend . A recovery in market-related wealth may herald a quick recovery this year, some analysts said. An index tracking live-in home prices sank 15.6 per cent in 2022 from a year earlier, according to data released by the Rating and Valuation Department on Friday, the most since the 32.5 per cent plunge in 1998. That included a seventh month of declines in December, the longest losing streak since the severe acute respiratory syndrome (Sars) outbreak in 2003. The index has slumped 16.5 per cent since hitting a record high in September 2021. Flats measuring 431 sq ft to 752 sq ft fell the most last year at 16.1 per cent, including a 2.2 per cent drop in December. The city’s economy fell into a recession, with output shrinking at an annual rate of 3.3 per cent in the first nine months last year. Exports tanked while local businesses slumped under one of the toughest Covid-19 curbs in the world. An exodus of expatriates also weakened demand and prices for homes in the city. The market should, however, begin to rebound as a rally in stock prices boosts equity wealth and China’s zero-Covid pivot shores up investor confidence, according to Lee Shu-kam, head of the economics and finance department at Shue Yan University. The reopening of borders earlier this month could also attract fresh capital to the property market, analysts said. “This month, [prices] will stabilise or even edge up as the stock market has improved,” said Lee, who predicts home prices will climb 2 per cent this year. “Coupled with the border reopening, homeowners may get tougher with their [higher] asking prices.” The Hang Seng Index has risen 14.7 per cent this year to the highest in 11 months, the best start to a year since it surged 26 per cent in January 1984, according to Bloomberg data. The city’s stock market has regained US$487 billion of capitalisation in the rally. Mainland Chinese investors have bought US$1.7 billion of Hong Kong-listed stocks in the first three weeks of this year. The supply of new flats in Hong Kong is forecast to reach a record high of 105,000 units in the next three to four years, according to a report released by the Housing Bureau on Friday. The number comprises 16,500 unsold units in completed projects, 75,000 units under construction and 23,000 units from granted sites where construction may start anytime, less 9,000 units under constructions that have been sold through presales. Jason Leung Yeuk-ho, a researcher at Our Hong Kong Foundation, said he is “cautiously optimistic” about the supply of new flats in the next few years, partly due to higher construction activity in 2023 helped by the further relaxation of Covid-19 measures. In 2022, some 21,200 units were completed, up 47 per cent from 2021, he noted. Although this is less than the government’s previous projection of 22,300 units, it was in line with the foundation’s forecast of 21,000 units. Also helping to lift future supply is the accumulation of unsold units due to slower project launches and weak sales in the second-half of 2022, he added. Hong Kong’s property market boomed from 2009 to 2021, a cycle that sent home prices up by 276 per cent and burnished its unwanted reputation as the most expensive city to live, based on an affordability index compiled by Demographia. December was likely the worst month for the market, said Louis Chan, Asia-Pacific vice-chairman and CEO of the residential division at Centaline Property Agency. Home sales during the Lunar New Year have improved over the same festive season last year, he said, although the benefits of border reopening have not filtered in yet. “About 90 per cent of the buyers are locals,” he said. “Most of them are afraid of home prices going up after the border reopening.” Sales in January jumped 49 per cent from December to 418 deals in 35 major lived-in estates, according to Midland Realty. The number, however, remains below the previous spike in April 2022. It may be early days for property owners to rejoice, as the recovery remains tentative for now. A 569 sq ft flat in Harbour Glory in North Point changed hands this week at HK$15.8 million (US$2.02 million), a loss of 20 per cent from the transacted price four years ago, Centaline said on Thursday. It followed another money-losing deal in the same development a week earlier. Some property market analysts expect the lived-in home price index to rise or decline by 1 per cent. A series of interest-rate hikes by the US Federal Reserve last year and the prospect of another increase early next month, continue to cloud the outlook, especially for the luxury residential sector. Hong Kong property investment activity to bounce back in 2023, analysts say “Overall market sentiment is improving, but it is still lacking positive factors to support an obvious rebound in home prices and transaction volumes,” said Martin Wong, director and head of research and consultancy for Greater China at Knight Frank. Prices could swing by 1 per cent either way in January, and fluctuate in the next few months, he added. Hong Kong continued to suffer from the dwindling numbers of wealthy buyers from across the border. The proportion of mainland Chinese buyers of properties valued at more than HK$100 million on The Peak, Mid-Levels and Southside stood at 29 per cent last year, the lowest level since 2016, according to Savills. The number of deals also declined substantially to 34, including 10 involving mainland buyers. Beijing’s zero-Covid holdout, receding business prospects and changing market policies all dampened their appetite for real estate assets in Hong Kong. Savills anticipates town house prices to drop by another 5 to 10 per cent before more mainland funds return to the city towards the end of 2023. Higher mortgage rates and economic uncertainties will outweigh the benefits of the border reopening for most of the year, it added. Luxury flats, however, may perform better with a forecast for a 5 per cent decline, as more mainland professionals aim to settle in Hong Kong and buy new homes, Savills added.