Table of Contents
Hong Kong property market analysis: property prices fell to an eight-year low, while rents rose against the trend
Summary of current situation
- House prices continue to fall：The private residential sales price index has fallen for three consecutive months, with the monthly decline widening to 0.8% in February and the annual decline to 5.8%, the lowest since July 2016.
- All area units fell：Large units ranging from 753 to 1,075 square feet saw the largest drop (-1.2% per month), while small and medium-sized units ranging from 430 to 752 square feet saw a drop of 1%.
- Rents are rising against the trend：The rent increased by 0.3% month-on-month, marking the third consecutive month of increase. The year-on-year increase reached 4.9%, indicating that the rental market is active.
Key data interpretation
| index | Monthly change | Year-on-year change | trend |
|---|---|---|---|
| Overall Property Price Index | -0.8% | -5.8% | Falling for 3 consecutive months, a new low in 8 years |
| Large units (753-1075 sq. ft.) | -1.2% | – | Biggest decline |
| Small to medium units (430-752 sq. ft.) | -1.0% | – | Main demand pressure |
| Rental Index | +0.3% | +4.9% | Rising for 3 consecutive months |
Analysis of the reasons for the decline in housing prices
- Weak economic environment
- The global interest rate hike cycle (such as the US Federal Reserve's interest rate hike) has pushed up Hong Kong's mortgage rates, weakening the willingness to buy houses.
- The local economic recovery is slower than expected and residents' income growth is lagging, affecting their ability to purchase homes.
- Policy and supply factors
- The government continues to increase land supply, and the completion volume of public housing will increase in the next few years, diverting private market demand.
- Although some of the "tough measures" in the property market have been relaxed (such as the adjustment of stamp duty), market confidence has not yet recovered.
- Investor sentiment is low
- Stock market fluctuations and immigration waves have led to an outflow of high-net-worth funds, and the demand for high-priced properties (such as large units) has dropped sharply.
- The proportion of mainland buyers has declined, relying on local rigid demand for support, but high housing prices are out of line with purchasing power.
The logic behind the rent increase
- Buy and sell market to lease
- During the downward cycle of housing prices, potential buyers turn to wait and see, and rental demand increases in the short term.
- Some owners "sold to rent", supply increased but demand also rose at the same time, supporting rents.
- Changing demographics
- Talent introduction schemes (such as the “High Talent Access”) have boosted housing demand among migrant workers, with a particular preference for small and medium-sized units.
- Students and young families are delaying home ownership and prefer to rent a home in the interim.
- Inflation pass-through effect
- As management fees and maintenance costs increase, landlords pass on the pressure by increasing rents.
Market Impact and Future Outlook
- For buyers：The adjustment of housing prices may provide an opportunity to "buy at the bottom", but we need to be vigilant about interest rate risks and downward pressure on the economy.
- For owners：Owning large units may face greater depreciation pressure, while small and medium-sized properties will see a slower decline due to rigid demand.
- For tenants：The rent increase trend may continue, and the cost of locking in long-term lease contracts needs to be evaluated.
Short-term forecast:
If the United States starts cutting interest rates this year, Hong Kong's mortgage costs are expected to ease and the decline in housing prices may narrow, but recovery will have to wait until after 2025. Rents benefit from talent policies and may maintain an increase of 3-5% throughout the year.
Risk Warning:
Geopolitics, local consumption recovery that is weaker than expected, and the low-price launch of new properties have increased pressure on the secondary market.
