Hong Kong Home Prices, One of the Highest in the World, Expected To Dip by 5-10% in 2024

For the past decade, Hong Kong property market have been considered as one of the most unaffordable in the world, according to research from various international institutions. Property prices have trended downward since the all-time high in September 2021, dropped by 24.2% as the interest rate hike cycle began in mid-2022. Halfway through the year 2024, the market witnessed the removal of property curbs as well as border reopening last year which stimulated the housing market. Yet, following the short rebound, both transaction volume and housing price resumed the downwards trend. How will the housing market play out for the rest of the year?

Active Primary Market May Slow Down in H2

After property curbs were all lifted on 28 February, the market recorded a surge in transaction volume with improved market sentiment. In terms of primary market, developers offered discounts and incentives to speed up the sale of their residential projects. In H1 2024, a total of 9,419 primary units were sold by developers, equivalent to almost 90% of total primary sales in 2023. Notably, majority of these transactions took place after the removal of property curbs, which captured the pent-up demand in the market.

In terms of the secondary market, 18,357 secondary units were transacted in H1 2024, marking a 48% increase compared to H2 2023. However, the rebound was milder as compared to primary market as buyers favours first hand units under current market condition.

We expect transactions in both primary and secondary markets to slow down in H2 2024, with an estimated total of around 45,000-48,000 transactions in 2024, representing a year-on-year increase of 5-10%.

Home Prices Expected to Fall by Up to 10% in 2024; Rentals Remain Strong

The scrapping of property curbs at the beginning of 2024 ended the residential price correction that lasted for 10 consecutive months. Home prices stabilized for merely two months before falling again in May 2024. In H1 2024, residential prices dropped by 3.1% according to data from the Rating and Valuation Department.

High interest rates, reduced rates concession from government and the introduction of the progressive rating system have increased holding costs for developers. Coupled with the removal of curbs, developers were willing to offload their units at discounts. As such, secondary market homeowners need to accept lower prices if they would like to offload their units. This has led to a continued downward trend in property prices after a temporary stabilization. We expect Hong Kong’s home prices continue to fall during H2 2024, with a forecast of 5-10% decline for the entire year.

In terms of rental market, residential rent went up by 1.6% in H1 2024 according to the data from Rating and Valuation department. In 2023, residential rent grew by 6.0%. We expect the rental market to continue its upward trajectory with similar growth in 2024, as driven by the influx of migrants under Top Talent Pass Scheme, growing non-local university students, and married couples and end users who opt to rent for the time being.

When Will Property Price Bottom Out?

The housing market may bottom out if the following scenarios occur:

1. With residential rent increasing to a certain level, end users may weigh between renting or buying a flat if the amount of renting a unit and mortgage payment is similar;
2. Fixed deposit returns become less attractive as interest rates decline;
3. Overall inventory drops to 15,000 units or below