CLOSE X

Register - if you don't have an account

Yes! Sign me up for Global Property Guide's fortnightly email newsletter.


Login - for registered users

Forgot Password?
Explore destinations
continent map couldn't be loaded Pacific Europe & Russia North America Latin America Asia Africa Middle East Caribbean

 


Financial Overview

Directory

Property Search

Global Statistics

Regional Statistics






Last Updated: Jun 24, 2016




Hong Kong’s residential property price index dropped 7.31% (-9.91% inflation-adjusted) during the year to end-Q1 2016, a sharp turnaround from an annual increase of 19.61% (-14.62% inflation-adjusted) during the same period last year, according to the Ratings and Valuation Department (RVD). In fact, it was the steepest y-o-y decline in almost seven years. Quarter-on-quarter, residential property prices fell by 5.19% (-5.93% inflation-adjusted) in Q1 2016.

Surprisingly, smaller-sized properties had the biggest price falls. Prices of apartments smaller than 40 sq. m. plunged by 14.3% during the year to Q1 2016, and apartments 40-69.9 sq. m. dropped by 10.9%. Prices of apartments 70-99.9 sq. m. rose by a meager 0.7%, while prices of apartments 100-159.9 sq. m. declined by 6.7%. On the other hand, apartments with sizes bigger than 160 sq. m. were relatively unscathed, with prices rising by 8.6% y-o-y in Q1 2016.

“The current downward trend in the housing market did not have much impact on ultra-luxury properties,” according to Colliers International. “Prices for trophy properties continued to hover near record levels in Q1 2016.”

Hong Kong’s residential property market has risen relentlessly for several years. From 2008 to 2013, house prices skyrocketed by 134% (95.7% inflation-adjusted), driven higher by a flood of money from developed markets’ central banks in the wake of the global financial crisis. However, the market slowed sharply in the first half of 2014, with house prices rising only by 2.9%, due to government cooling measures. But the housing market bounced back quickly in the second half of 2014, with prices rising by 8.2% in Q4 2014, 14.6% in Q1 2015, 16.9% in Q2 2015, and 12.7% in Q3 2015. Hong Kong’s currency peg to the dollar kept borrowing costs near record lows, fuelling continued property demand.

However, the housing market has slowed sharply in the past several months mainly due to the sharp decline in the flow of money following the intensification of government crackdowns on the wealthy in Mainland China. Worse, other factors are now aggravating the situation, including the following:
  • the increase in housing supply;
  • intensified competition from other global cities like Tokyo, Singapore or London;
  • Hong Kong’s economic slowdown;
  • the potential interest rate rise in the U.S. this June 2016, and;
  • the continuing implementation of government cooling measures.

The country’s housing market is expected to remain down in the coming months, amidst anemic demand for new developments and low sales transactions. House prices are projected to drop by around 10% this year, according to Colliers International. On the other hand, Goldman Sachs projects that HK house prices would fall 20% in the next two years, as Fed hikes interest rates.

Hong Kong House price annual“We do not expect a sudden collapse but they [house prices] could fall by as much as 30% over the next three years,” according to Colliers International.

Hong Kong’s economic growth slowed sharply to 0.8% during the year to Q1 2016, from an annual growth of 2.1% in the same period last year, mainly due to decline in tourist arrivals and falling retail sales. Hong Kong’s economy is expected to grow by around 1% to 2% this year, after 2.4% in 2015, 2.6% in 2014 and 3.1% in 2013, according to Financial Secretary John Tsang Chun-wah. The International Monetary Fund (IMF) is more optimistic, projecting the HK economy to grow by 2.2% this year.

Analysis of Hong Kong Residential Property Market »


RENTAL YIELDS
Last Updated: Apr 09, 2016



Hong Kong's property market is in a select band of cities where gross rental yields - the percentage return to owners on renting out their property - is only just above 2%. Effectively, this means that landlords are unlikely to make any profit on their apartments, once empties, administration costs, cleaning and repairs, and other costs are taken into account. Or, if not nothing, then very little. Other such cities are Monaco and Taipei.

That's not to say rents are low. You will pay USD 7,000 per month for a 120 square metre (sq. m.) apartment in Mid Levels. But if you want to buy it, it is likely to cost you USD 3 million.

Hong Kong is not a ‘typical’ market. It is a place where the rich choose to park assets in the form of apartments, as part of a diversified asset-safeguard strategy - like Monaco and Singapore. Such markets typically have lower rental yields than more ‘normal’ housing markets.

Round trip transaction costs are high for foreign buyers in Hong Kong (though the surcharge is unlikely to be permanent). See our  Property transaction costs analysis for Hong Kong and  Property transaction costs in Hong Kong, compared to the rest of Asia.

Read Rental Yields  »



TAXES AND COSTS
Last Updated: Feb 03, 2016



Rental Income: Net property income is taxed at 15% (previously 16%). Net income is computed by deducting a standard 20% for repairs and outgoings from the assessable value (gross rent less irrecoverable rent and rates paid by owners).

Capital Gains: No capital gains tax exists in Hong Kong.

Inheritance: Inheritance tax or estate duty was abolished from 11 February 2006.

Residents: Taxation in Hong Kong is based on the territorial source principle; i.e., where the income was earned. Income derived from outside Hong Kong is not taxed in Hong Kong.

Read Taxes and Costs  »



BUYING GUIDE
Last Updated: Sep 30, 2014



The total roundtrip transactions costs of buying and selling an apartment are high. There is a special stamp duty (SSD) at varying rates, from 5% to 20%, depending on the holding period of the residential property. Property held for longer than 36 months will not be subject to SSD. There is also buyer’s stamp duty BSD) at a flat rate of 15% on all residential properties acquired as of 27 October 2012.

Read Buying Guide  »



LANDLORD AND TENANT
Last Updated: Jun 20, 2006



Landlords have an easy life in Hong Kong.

Rents: Rents can be freely negotiated in the private sector, which comprises about half of the rental market.

Tenant Security: The Landlord and Tenant (Consolidation) Ordinance 2004 removed security of tenure, i.e. domestic tenants no longer have the statutory rights to renew their tenancy at prevailing market rates.

Read Landlord and Tenant  »



ECONOMIC GROWTH
Last Updated: Jun 24, 2016


Hong Kong’s economy continues to slow

hong kong apartments for sale Hong Kong’s economic growth slowed to 2.1% in Q1 2016 from a year earlier, down from 1.9% growth in Q4 2015, mainly due to decline in tourist arrivals and falling retail sales.

Retail sales dropped 12.5% y-o-y in Q1 2016, after an annual decline of 3.5% in 2015. Over the same period, the country’s merchandise exports declined by 6.8%, after falling by 1.8% in 2015.

Likewise, visitor arrivals also plunged 10.9% y-o-y in Q1 2016, after falling by 2.5% in 2015. Those from Mainland China, which account for almost 80% of all visitor arrivals in Hong Kong, dropped 15.1% in Q1 2016 from a year earlier.

Hong Kong’s economy is expected to grow by around 1% to 2% this year, after 2.4% in 2015, 2.6% in 2014 and 3.1% in 2013, according to Financial Secretary John Tsang Chun-wah. Though, the International Monetary Fund (IMF) is more optimistic, projecting the HK economy to grow by 2.2% this year.

Hong Kong gdp inflationHong Kong’s small open economy depends largely on variables it cannot control – tourist spending, trade income, and foreign money inflows. With an average real GDP growth rate of 7.4% from 2004 to 2007, growth slowed to 2.1% in 2008, and then contracted by 2.5% in 2009. The economy bounced back strongly, with real GDP growth rates of 6.8% in 2010, and another 4.9% in 2011, but GDP growth fell sharply to 1.6% in 2012, according to the IMF.

In April 2016, nationwide inflation rate slightly eased to 2.7%, from 2.9% in the previous month and 2.8% in the same period last year, mainly due to a slowdown in food price rises, and declines in the charges for package tours, according to the Census and Statistics Department. The country’s inflation rate averaged 4.2% from 2011 to 2015, in sharp contrast from an average of -0.8% from 2000 to 2007.

HK’s overall inflation rate is projected at 2.5% this year and 2.6% in 2017, according to the IMF.

The country’s jobless rate remains low. Unemployment was 3.4% in Q1 2016, slightly up from 3.3% by end-2015, according to the Census and Statistics Department. Hong Kong’s unemployment rate averaged 3.7% from 2010 to 2015, down from an average of 5.5% from 2000 to 2009, according to the IMF.







  • Pro-landlord rental market
  • Low transaction costs
  • Strong & stable economy
  • Moderate rental income tax
  • Low to moderate yields
RESIDENTIAL PROPERTY FACTS
Price (sq.m): $25,551 For a 120 sq. m. property, usually an apartment.
Rental Yield: 2.75% For a 120 sq. m. property, usually an apartment.
Rent/month: $7,024 For a 120 sq. m. property.
Income Tax: 11.40% Assumptions: Owners are a non-resident couple drawing US$ / €1,500 per month in rent, with no other local income.
Roundtrip Cost: 34.11% The total cost of buying and then reselling an apartment. Includes:

* all transaction taxes and charges:
* lawyers' and notaries' fees
* agents' fees

Assumptions: The buyers are non-resident foreigners. The apartment cost US$250,00 / €250,000.
Cap Gains Tax: n.a. Assumptions: The property was bought for US$250,000 / €250,000, and sold 10 years later, after a 100% appreciation.
Landlord and Tenant Law: Pro-Landlord Rating is based on a detailed study of each country’s law and practice.

News & Discussion



Free Newsletter

Fortnightly updates from the global property arena directly to your inbox.


Email Address:





Connect to professional advice in Hong Kong





PROPERTY RECOMMENDATIONS

 
Download free property reports from international research houses

Our Newsletter

 
Fortnightly updates from the global property arena directly to your inbox.

Manage subscriptions