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Hong Kong housing
OpinionComment
Nicholas Spiro
Nicholas Spiro

The View | Expect a sharp, sustained drop in Hong Kong housing prices? Think again

  • Despite a pessimistic turn in sentiment, the underlying factors that have made Hong Kong’s housing market the world’s most expensive have not changed
  • Any prediction of a residential property bear market looks implausible when taking into account persistent impediments to boosting housing supply

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Lohas Park in Tseung Kwan O. In the absence of a sharp increase in supply in the coming years, it is unlikely housing prices will fall into bear market territory any time soon. Photo: Sun Yeung
Nicholas Spiro

What a difference several months make. As recently as last autumn, many analysts and commentators were still talking up the resilience of Hong Kong’s residential property market, with prices for homes hitting a record high in August despite a succession of domestic and external shocks.

Even when prices began to fall towards the end of last year, the consensus view was that home values – which increased 3.6 per cent in 2021 – would continue to rise this year. In early January, JPMorgan predicted the city’s property market would shrug off renewed pandemic-induced restrictions and the prospect of higher mortgage rates.

Three months on, sentiment has become distinctly pessimistic. Prices have continued to drop and are down almost 7 per cent from their peak last August, according to an index produced by Centaline Property Agency.

The combination of the disruption wrought by the government’s draconian response to the surge in Covid-19 cases and the uptick in mortgage rates stemming from the knock-on effects of a sharper-than-expected tightening in US monetary policy has darkened the outlook for Hong Kong’s property market.

Transaction volumes have fallen steeply this year, falling to 2,869 in March. That is down from 5,409 as recently as October last year and a 61.5 per cent drop year on year, according to data from the city’s Land Registry.

In early March, Cushman & Wakefield noted that prices at City One Shatin in Sha Tin, a proxy for the mass market, were down 5.2 per cent compared with the corresponding period in the previous quarter.

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