Table of Contents
The following areUBSThe core ideas and the logic behind them:
1. Macroeconomic pressures
– Rising interest rates and funding costs
Hong Kong implements a linked exchange rate system to keep pace with the US interest rate hikes. As the Federal Reserve continues to raise interest rates, Hong Kong's mortgage interest rates have climbed to multi-year highs (for example, the prime lending rate P of major banks will rise to 5.75%-6% in 2023), significantly suppressing housing demand, especially the affordability of the middle class and investors.
– Weak economic recovery
Hong Kong's post-epidemic economic recovery was lower than expected, with GDP growing by about 3.2% in 2023, but the real estate market did not recover at the same time. The slow recovery of pillar industries such as retail and tourism has affected the employment market and consumer confidence, and indirectly weakened support for the property market.
2. Imbalance in supply and demand structure
– Increased supply
The SAR government continues to promote land supply, and the potential supply of private housing will remain at a high level of about 105,000 units in the next 3-4 years (according to data from the Rating and Valuation Department). At the same time, public housing and the "minimalist public housing" scheme diverted some of the rigid demand, intensifying competition in the private housing market.
– Weak demand
Population outflow and immigration have led to a decline in the permanent population (net outflow of approximately 60,000 people in 2022), directly reducing housing demand. In addition, foreign-funded enterprises have reduced their scale in Hong Kong, and the office vacancy rate has risen (the vacancy rate in the core area will reach 12%-15% in 2023), dragging down commercial real estate.
3. Policy regulation and market sentiment
– The property market’s “tough measures” have not been relaxed
UBS believes that policy adjustments are not strong enough to reverse market expectations.
– Downward cycle of asset prices
By 2024, residential prices will have fallen by approximately 7%, and transaction volume will have fallen to a historical low (less than 11,000 first-hand private housing transactions were completed throughout the year). The falling prices have led to a strong wait-and-see sentiment among buyers, forming a negative feedback loop of "falling both volume and price".
4. International capital flows and alternative markets
– Intensified regional competition
Singapore, the Middle East and other places are actively attracting cross-border funds to diversify Hong Kong's position as Asia's real estate investment hub. UBS pointed out that Hong Kong's commercial real estate investment in 2023 fell by more than 40% year-on-year, with a clear trend of capital outflow.
– RMB asset diversion
The rental return rate of office buildings in core cities in the Mainland (such as Shanghai and Shenzhen) is relatively stable, and some funds have shifted to the more cost-effective Greater Bay Area market.
Market Divergence: Pessimism vs. Cautious Optimism
– Pessimistic camp (represented by UBS)
It is predicted that residential prices will fall another 5%-10% in 2024, and the downward pressure on office rents will continue. Investors are advised to avoid risks.
– Optimistic view
Some institutions (such as local real estate agencies) believe that policy relaxation will gradually release demand, and coupled with the government's promotion of long-term plans such as the "Northern Metropolitan Area", the market may bottom out and rebound in the medium and long term.
Investor response strategies
– Short-term risk aversion: focus on highly liquid assets and reduce long-term property holdings.
– Policy sensitivity: Closely monitor stamp duty adjustments, interest rate peak signals and the effectiveness of talent introduction programs.
– Structural opportunities: Emerging real estate categories such as data centers and cold chain logistics may benefit from economic transformation.
UBS's pessimistic forecast reflects its cautious assessment of the "internal and external troubles" in Hong Kong's property market, but market turning points often lag behind changes in policies and economic cycles. Investors need to combine their own risk preferences and dynamically analyze the marginal improvement signals of supply and demand, interest rates and policies.
UBS(English:UBS Group AG）It is aSwitzerlandEstablishedtransnationalInvestment BankingandFinancial Servicescompany. UBS has two headquarters, located inSwitzerlandofZurichandBaselAs the world's largestSwiss banking institutionsUBS has offices in major financial centers around the world. UBS is known for its strict confidentiality policy for client information and its culture of banking secrecy.
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