Hong Kong home prices plummet to five-year lows and could drop further

View of the Hong Kong skyline from Hong Kong Island.

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Prices of Hong Kong’s residential properties plunged to a close to five-year low as rising rates of interest and a mass exodus of expat staff drove down prices in one of many world’s most costly cities to work in.

And trade insiders warn that the worst is but to come.

Hong Kong’s home price index for October fell 2.4% to 352.4 in contrast to the earlier month, marking the bottom stage for the gauge since November 2017.

According to a Natixis report, the town’s property prices could plummet 25% from its earlier peak in late 2021 earlier than it begins to get well. 

The stoop is anticipated to deepen by 12% in 2023, and subsequently by simply 2% in 2024, analysts led by Alicia Garcia Herrero mentioned.

Hong Kong, the world’s least affordable housing market, noticed dips in a few of its largest personal housing estates. In YOHO town, a 393-square ft condominium that is at present listed for five.98 million Hong Kong {dollars} that is about HK$15,216 per sq. foot, and a 20% drop in worth in contrast to the earlier month.

A confluence of things together with weaker development predictions and mainland Covid insurance policies contribute to the grim outlook, however Hong Kong’s immigration disaster and snowballing rates of interest stay salient sticking factors. 

While there may be stress from the deteriorating fertility rate and the quickly getting older inhabitants, the collapse of immigration and the heated emigration wave have added gasoline to the hearth.

Hong Kong recently hiked benchmark interest rates to 4.28%, pushing up borrowing prices to the highest since March 2008.

“The weak economic environment both in Hong Kong and globally, and rapidly rising borrowing costs are the most important contributors to the decline in property prices,” Nelson Wong, govt director of analysis at actual property company Jones Lang LaSalle advised CNBC.

“The magnitude has been somewhat deeper than expected primarily due to the escalated geopolitical risks [from the Ukraine war] and the sharp interest rate hike trajectory,” Wong continued.

Population development a key issue

Hong Kong’s rising inhabitants performs a decisive position in its home demand.

“While there is pressure from the deteriorating fertility rate and the rapidly aging population, the collapse of immigration and the heated emigration wave have added fuel to the fire,” Natixis mentioned.

Hong Kong’s residents have left the town in droves since 2021, pushed partly by strict Covid measures carried out in 2020 which was solely lately relaxed in October. In his inaugural speech as chief govt of Hong Kong, John Lee pledged to draw expertise from world wide.

Hong Kong chief govt John Lee throughout a press convention following his coverage tackle session at Central Government Complex on October 19, 2022 in Hong Kong, China the place he delivered his maiden coverage tackle with measures to appeal to abroad expertise and enterprises to the town by providing incentives. (Photo by Anthony Kwan/Getty Images)

Anthony Kwan | Getty Images News | Getty Images

What could stem the autumn

While the property market downturn will possible lengthen, the tempo of decline might sluggish within the subsequent two years, in accordance to Natixis.

The French funding financial institution mentioned there will probably be restricted declines in 2024 if there aren’t any further financial and coverage adjustment to shore up sentiment.

However, the analysts say {that a} carry in China’s Covid restrictions could restore investor confidence.

Further easing of stamp duties for non-permanent residents and for everlasting residents intending to purchase a second property could additionally assist bolster the property market, they mentioned.

— CNBC’s Monica Pitrelli contributed to this report.

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