View of the Hong Kong skyline from Hong Kong Island.
Ingo Schulz | imageBROKER | beautiful pictures
Hong Kong’s residential property prices fell to their lowest level in nearly five years as rising interest rates and a massive exodus of foreign workers sent house prices down in Hong Kong. one of the most expensive cities in the world to work in.
And industry insiders warn that the worst is yet to come.
Hong Kong’s October House Price Index down 2.4% to 352.4 month-on-month, marking the lowest level for the measure as of November 2017.
As reported by Natixis, the city Property prices could plummet 25% from their previous peak in late 2021 before starting to recover.
The drop is expected to Analysts led by Alicia Garcia Herrero say it will increase by 12% by 2023 and then only 2% by 2024.
Hong Kong, the world most affordable housing market, saw declines in some of its largest private residences. In YOHO towna 393 square meter apartment is currently listed for HK$5.98 million — that’s about HK$15,216 per square foot and a 20% decrease in price from last month.
A confluence of factors including weaker growth predictions and the mainland’s Covid policies contribute to the bleak outlook, but Hong Kong’s immigration crisis and sky-high interest rates remain the key takeaways.
While there is pressure from a declining birth rate and a rapidly aging population, the collapse of immigration and a warming wave of migration have added fuel to the fire.
Hong Kong recently raised the prime rate to 4.28%, pushing up borrowing costs. highest since March 2008.
“The weak economic environment in both Hong Kong and globally, coupled with rapidly rising borrowing costs are the most important drivers of falling property prices,” said Nelson Wong, managing director of research at the real estate firm. Jones Lang LaSalle estate told CNBC.
“Intensity has been a bit deeper than expected mainly due to escalating geopolitical risks [from the Ukraine war] and a strong trajectory of interest rate hikes,” Wong continued.
Population growth is the key factor
Hong Kong’s growing population plays a decisive role in its domestic demand.
“While there is pressure from a declining birth rate and a rapidly aging population, the decline in immigration and a warming wave of migration have added fuel to the fire,” Natixis said.
Hong Kong residents have left the city in flood since 2021, partly due to the strict Covid measures implemented in 2020, which were only recently eased in October. In his inauguration speech as chief executive of Hong Kong, John Lee cam end will Attracting talent from all over the world.
Hong Kong CEO John Lee during his post-policy press conference at the Central Government Complex on October 19, 2022 in Hong Kong, China, where he delivered the keynote address its first book with measures to attract foreign talent and businesses to the city by offering incentives . (Photo by Anthony Kwan/Getty Images)
Anthony Kwan | Getty Images News | beautiful pictures
What can prevent the collapse?
While the real estate market downturn is likely to last, According to Natixis, the rate of decline could slow over the next two years.
French investment bank said there will be limited decline in 2024 without more economic and policy adjustments to underpin sentiment.
However, analysts say that China’s lifting of Covid-19 restrictions could bring it back investor confidence.
Further easing of stamp duty on non-residents and permanent residents intending to buy a second property could also help boost real estate market, they said.
— Monica Pitrelli of CNBC contributed to this report.
