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Hong Kong economy
Opinion
Nicholas Spiro
Nicholas Spiro

The View | Why Hong Kong property market still faces a long, hard slog to recovery

  • The much-anticipated reopening of China’s economy after the pandemic has not translated into a steady upturn for Hong Kong’s property market
  • The city’s ability to bounce back from previous crises offers hope, but patience is essential while the recovery tries to take root

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A view of commercial buildings in Central. Despite the mainland economy reopening following the lifting of the zero-Covid policy and the start of a return to the pre-pandemic normal, Hong Kong’s property market has yet to see the fruits of a recovery. Photo: Dickson Lee
Nicholas Spiro
They say patience is a virtue. This is certainly true when it comes to the elusive recovery in Hong Kong’s real estate sector. When Beijing abruptly ditched its zero-Covid policy last December, putting an end to three years of self-imposed isolation, some property advisers believed the crucial catalyst for an improvement in sentiment had finally materialised following a succession of domestic and external shocks dating back to 2019.

For a while, there were signs that the city’s property market was firmly on the road to recovery. The Centa-City Leading Index, a gauge of secondary home values, rose 7 per cent in the first quarter of this year after a 14.5 per cent decline in 2022, while gross leasing volumes of grade A office space reached their third-highest quarterly level since the pandemic erupted, according to CBRE.

However, even the crucial reopening of China’s economy has failed to turn the green shoots into a sustainable upturn. While few expected a rapid, V-shaped recovery given the acute vulnerabilities in the global economy, the performance of Hong Kong’s property market in the first half of this year can best be described as a cross between a drawn-out U-shaped recovery and a faltering, W-shaped one.
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In the residential market, secondary home values fell 2.6 per cent in the second quarter. Moreover, the total number of transactions in the secondary and primary markets last month dropped to 3,613 compared with 6,690 in March, according to Cushman & Wakefield.

The prime culprit is the renewed spike in the one-month Hibor rate. The main reference rate for mortgage loans has surged from close to 2 per cent in mid-February to 5.2 per cent, its highest level since 2007.

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The abrupt tightening in liquidity, which has led to a further increase in mortgage rates, underscores the enduring problem facing property markets the world over. There is persistent uncertainty over the direction of interest rates, particularly in the United States, where markets underestimated the Federal Reserve’s resolve to tighten policy aggressively even at the risk of inducing a recession.
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