Hong Kong’s housing market remains depressed

Hong Kong’s housing market woes persist, amidst a chronic supply shortage and falling property demand caused by the continuing affordability crisis and surging interest rates in the city.

Hong Kong’s residential property price index fell by another 6.56% in November 2023 from a year earlier, its 22nd consecutive month of year-on-year price decline, according to data released by the Ratings and Valuation Department (RVD). When adjusted for inflation, residential property prices were down by 8.84% over the same period.

Variations in price movements per property size and region.

  • Apartments smaller than 40 sq. m: prices fell by 5.66% y-o-y in November 2023, to an average of HK$142,572 (US$18,260) per sq. m.
  • 40-69.9 sq. m. apartments: prices were down by 5.98% y-o-y to HK$150,334 (US$19,254) per sq. m.
  • 70-99.9 sq. m. apartments: prices dropped 7.45% y-o-y to HK$173,324 (US$22,199) per sq. m.
  • 100-159.9 sq. m. apartments: prices plummeted by a huge 22.9% y-o-y to HK$171,406 (US$21,953) per sq. m.
  • Apartments with sizes bigger than 160 sq. m: prices fell by 3.35% y-o-y to HK$217,299 (US$27,831) per sq. m. in November 2023.

Hong Kong’s house price annual change

Demand is still falling. In the first ten months of 2023, the number of property transactions in Hong Kong dropped by 5.8% y-o-y to 37,519 units, following a whopping 39.4% fall during the full year of 2022, according to the RVD. Likewise, sales volume declined by 4.3% y-o-y to HK$345.26 billion (US$44.22 billion) over the same period, following a 44.4% drop in 2022.

“Over the past year, interest rates have risen significantly, various economies have shown moderated growth, and transactions of the local residential property market have declined alongside a downward adjustment of property prices,” said Hong Kong Chief Executive John Lee.

Residential construction activity seems to be slowing again. In the first ten months of 2023, there were just 10,570 dwellings completed in Hong Kong, less than half of the completions recorded for the full year of 2022, according to figures released by RVD. This is in sharp contrast to the annual growth of more than 47% seen in the prior year. Hong Kong continues to suffer a chronic housing shortage – a problem that has dragged on for over two decades.

AVERAGE HOUSE PRICES, NOVEMBER 2023
Property size Average prices (per sqm) Year-on-year change
Hong Kong Kowloon New Territories Hong Kong Kowloon New Territories
HKD USD HKD USD HKD USD % % %
Less than 40 sqm 142,572 18,260 128,828 16,500 116,838 14,964 -5.66 -6.12 -10.41
40-69.9 sqm 150,334 19,254 136,362 17,465 109,228 13,989 -5.98 -0.03 -9.33
70-99.9 sqm 173,324 22,199 157,304 20,147 121,289 15,534 -7.45 1.12 -2.72
100-159.9 sqm 171,406 21,953 201,145 25,762 120,860 15,479 -22.90 4.98 15.36
Greater than 160 sqm 217,299 27,831 370,255 47,421 96,154 12,315 -3.35 95.63 13.48
Sources: Ratings and Valuation Department (RVD), Global Property Guide

From 2008 to 2013, Hong Kong’s dwelling prices skyrocketed by 134% (95.7% inflation-adjusted), driven by a flood of money in the wake of the global financial crisis.

The market slowed in the first half of 2014, but bounced back in the second half, with prices rising by 13.6% in Q4 2014, 19.6% in Q1 2015, 20.4% in Q2 2015, and 15% in Q3 2015.

After a brief housing market slowdown, house prices surged again by 41.5% (35.5% inflation-adjusted) from H2 2016 to H1 2018.

The housing market slowed from the end of 2018 until the first half of 2019 due to macro uncertainties and social unrest. After a short-lived recovery in the second half of 2019, the housing market struggled again in 2020 due to pandemic-related travel restrictions and lockdown measures imposed worldwide. Then in 2022, things got worse, with house prices plunging by 15% (-16.7 inflation-adjusted), following a modest increase of 3.7% in 2021 and a meager growth of 0.2% in 2020.

HK’s housing market woes will continue in the medium term, with house prices expected to fall further in 2024. Citigroup projects HK house prices to fall by another 10% this year.

Despite this, Hong Kong’s overall economy is now recovering, after suffering a contraction of 3.5% during 2022. To boost economic activity, the HK government recently unveiled a number of measures, including offering cash handouts to residents, cutting salaries tax, and attracting more workers and foreign investments. With this, the economy grew by 4.1% y-o-y in Q3 2023, following annual increases of 1.5% in Q2 and 2.9% in Q1, supported by strong domestic demand and improved tourism. This is in sharp contrast to the prior year’s contractions (-3.9% in Q1 2022; -1.2% in Q2; -4.6% in Q3; and -4.1% in Q4).

For the whole year of 2023, the HK economy was estimated to have expanded by a modest 3.2%.

Hong Kong property market remains the world’s most unaffordable

Hong Kong’s housing boom in the past decades has been propelled by a combination of stringent government regulations on development, low interest rates, and currency stability; while the supply of land, which the government controls, continues to diminish.

Hong Kong’s currency peg to the dollar kept borrowing costs near record lows, fuelling continued property demand.

HOUSE PRICE INDEX, Y-O-Y CHANGE (%)
Year Nominal Inflation-adjusted
2009 28.5 26.5
2010 21.0 17.7
2011 11.1 5.1
2012 25.7 21.2
2013 7.7 3.3
2014 13.6 8.2
2015 2.4 0.1
2016 7.9 6.6
2017 14.7 12.8
2018 1.9 -0.6
2019 5.5 2.6
2020 0.2 1.1
2021 3.7 1.3
2022 -15.0 -16.7
Sources: Ratings and Valuation Department, Global Property Guide

Despite improved affordability because of the recent decline in house prices, Hong Kong’s property market remains the world’s most unaffordable for the twelfth year in a row, according to the Demographia International Housing Affordability Survey 2023. Average home prices were 18.8 times the gross annual median household income in 2022, down from 20.7 times in the prior year and the lowest level since 2016.

Despite the substantial improvement, “Hong Kong’s current housing affordability remains more severe than that of any other market over its period of coverage by Demographia (12 years),” said the report. “Hong Kong has been given a clear responsibility by the central government to improve housing affordability, and increase house sizes.”

Similarly, in Mercer’s 2023 Cost of Living Survey, Hong Kong was ranked as the world’s most expensive city for expatriates to live in, followed by Singapore and Zurich.

Hong Kong, along with Zurich, Tokyo, Miami, Munich, and Frankfurt, also tops the 2023 UBS Global Real Estate Bubble Index.

“Between 2003 and 2018, real house prices in Hong Kong nearly quadrupled while incomes stagnated and rents increased by just 50% in inflation-adjusted terms. Housing is barely affordable: A skilled service worker requires more than 20 times the average annual income to buy a 60 sqm flat. The city has constantly been at bubble risk levels since the first edition of this study in 2015,” said the UBS report.

“After declining 7% between mid-2022 and mid-2023, inflation-adjusted house prices in Hong Kong are back to levels last seen in 2017. Household leverage stabilized and rents have been virtually unchanged in the last four quarters as population inflow increased. However, high mortgage rates and a slow economic recovery in mainland China put pressure on house demand. Overall, we now see the city in overvalued territory,” the UBS report added.

Hong Kong Property Price Indices graph

Property sales continue to fall

In the first ten months of 2023, the number of property transactions in Hong Kong dropped by 5.8% y-o-y to 37,519 units, following a huge 39.4% fall during the full year of 2022, according to the RVD. Likewise, sales volume declined by 4.3% y-o-y to HK$345.26 billion (US$44.22 billion) over the same period, following a 44.4% drop in 2022.

Both primary and secondary markets experienced a continued fall in demand during the first ten months of 2023:

  • Primary market property sales were down by 4.7% y-o-y to just 9,246 units, after plummeting by 32% in the same period of 2022, based on data from RVD. In contrast, total transaction values increased by 9.2% to HK$111.63 billion (US$14.30 billion), following a huge fall of 47.5% in the prior year.
  • Secondary market property sales also fell by 6.1% to 28,273 units, after plunging by 39.1% y-o-y in Jan-Oct 2022. Also, transaction values were down by 9.7% y-o-y to HK$ 233.63 billion (US$29.92 billion), after a huge fall of 41.1% over the same period in 2022.

This is in line with the recent figures released by the Land Registry, which showed that a total of 58,035 properties changed hands in 2023, down by 2.7% from a year earlier and the lowest level seen since 1991. Similarly, the total value of property transactions dropped 13.8% to a 10-year low of HK$477.9 billion (US$61.21 billion).

“The figures reflect a sluggish market for the year 2023 as interest rates soared and the local economy slowed down,” said Yeung Ming-yee, senior associate director at Centaline Property Research.

Hong Kong Property Sales graph

Property curbs relaxed

To help boost its struggling housing market, Hong Kong slashed stamp duties for homebuyers in October 2023 – easing its property cooling measures for the first time in over a decade.

Among the property market curbs relaxed:

  • The Buyer’s Stamp Duty (BSD) and the New Residential Stamp Duty (NRSD) were halved from 15% to 7.5%.
  • The Special Stamp Duty (SSD) – equivalent to 10% of the property price – that was previously imposed on transactions involving property held for less than three years will now only apply to transactions for property held for less than two years.
  • All stamp duties on property purchases by newly-arrived foreign talents in Hong Kong are suspended, but it is subject to the new residents obtaining permanent residency.

However, some market experts believe that the move will have a limited impact on the housing market, primarily due to persistently high-interest rates.

“The special stamp duties were intended to curb speculation, but purchasing power is still heavily affected by the interest rate and the current economy though current property price has fallen by 15% as compared to the peak in 2021,” said Hannah Jeong, Head of Valuation & Advisory Services of Colliers International.

“Given the persistent high-interest rate and the economic instability in the past few years, residential home buyers maintain a ‘wait and see’ approach in the flat purchase, we estimate the overall full-year residential home prices will see a 4% to 5% drop in 2023 and we expect the property price will continue its downward trajectory in 2024,” Jeong added.

This is supported by Joseph Tsang, chairman of JLL Hong Kong, who claimed the move as a “band-aid solution”.

“The housing market would benefit when the market sentiment is positive. However, we are experiencing an economic downturn, and the demand for buying a second home is limited. It has no impact on the housing market,” Tsang said.

Earlier in September 2022, the Hong Kong Monetary Authority (HKMA) relaxed its stress-test requirements for new mortgage borrowers by 100 basis points, effectively making the test easier to pass. The recent move came amidst falling property demand, after homebuyers saw their purchasing power fall by HK$1 million (US$128,000) since January 2022, following increases in both HIBOR and banks’ prime rates.

Several rounds of market-cooling measures

Before the recent relaxation of property curbs, the HK government implemented several rounds of housing market-cooling measures in the past years to reduce speculative buying and regulate house price growth.

To discourage developers from hoarding, in June 2018 Carrie Lam introduced a vacancy tax on unsold homes that are not leased or have remained unoccupied six months after receiving an occupation permit. The tax rate is two times the rental income or 5% of the home’s value.

Aside from the tax, the government also allocated nine plots of land, including three in the prime Kai Tak district, for public housing.

In addition, the Hong Kong Monetary Authority (HKMA) imposed new restrictions on bank lending to property developers in May 2017, restricting loans to property developers to a maximum of 40% of a site’s value, replacing the earlier limit of 50%. Also, the number of loans allowed for residential property with a value less than HK$10 million (US$1.28 million) was reduced from 60% to 50% and those with a value exceeding HK$10 million (US$1.28 million) were also cut from 50% to 40%.

In addition, a 30-person Land Supply Task Force was set up to consider long-term solutions to Hong Kong’s housing crisis, given the outcry about ‘coffin homes’.

In recent years, Hong Kong’s government has leaned against property price rises:

  • In November 2010, the government imposed a ‘flip tax’ of 15% on properties resold within six months (though in May 2014 the rule was somewhat relaxed), and doubled stamp duties to 8.5% on properties worth HK$20 million (US$2.6 million) or more.
  • On October 26, 2012, the government imposed a 15% extra tax on property purchases made by foreigners.
  • In February 2013, the government doubled the stamp duty on all property transactions worth more than HK$2 million (US$254,790), though again, this measure ended in May 2014.
  • In April 2013, the Residential Properties (First-hand Sales) Ordinance to shield buyers from dishonest sales practices came into full effect.
  • In February 2015, the government required buyers of self-used residential properties valued under HK$7 million (US$900,000) to make larger down payments.
  • In November 2016, the government raised stamp duties for all property transactions to 15%, except for first-time homebuyers who are charged just 4.25%. However, house price rises continued to accelerate, amidst a surge in the number of multiple home purchases on one single transaction as investors take advantage of lower tax rates.
  • To close the loophole, the government also announced that first-time homebuyers acquiring more than one property in a single contract will be charged the same 15% stamp duty that applies to purchases of a second property starting April 2017.

Interest rates rising rapidly

The HKMA kept its base rate unchanged at 5.75% in December 2023, following eleven consecutive rate hikes in the past 21 months. The HKMA moves in lockstep with the Fed, giving the local currency’s peg to the US dollar.

“The Fed´s future interest rate decisions will continue to be dependent on the latest economic data and the impact of continual rate hikes on the economy during the past year or so,” the HKMA said. “There remains uncertainty in the interest rate path and the high interest rate environment may last for some time.”

Hong Kong’s currency has been pegged at around HK$7.8 per U.S. dollar since October 1983, so when the US Federal Reserve interest rates move, so too do Hong Kong’s interest rates.

As such, major banks’ best lending rates are also increasing in Hong Kong. HSBC Holdings PLC, Hang Seng Bank, and Bank of China (Hong Kong) raised their best lending rate to 5.875%. For other banks such as China Citic Bank International, Standard Chartered Bank, and Bank of East Asia, the best lending rate stood at 6.125% in December 2023.

Hong Kong Interest Rates Percentages graph

Fixed-rate mortgage scheme converted from pilot to permanent program

At the height of the Covid-19 pandemic, the Hong Kong Mortgage Corporation Limited (HKMC) introduced a pilot scheme for fixed-rate mortgages for 10, 15, and 20 years, to reduce homebuyers’ risks from interest rate volatility, thereby improving the banking sector’s long-run stability. The maximum loan amount for residential mortgages under the scheme is HK$ 10 million (US$1.28 million). At the end of the fixed-rate period, the borrower has the option to re-fix the mortgage rate or convert it to a floating-rate loan.

In October 2021, HKMC announced that the scheme would be converted from a pilot program into a permanent offering starting from November 1, 2021.

“Proposed in the 2020-21 Budget, the Fixed-rate Mortgage Scheme has approved loans totaling around HK$400 million in the past year and a half. This reflects a certain market demand for fixed-rate mortgage products,” said Financial Secretary Paul Chan. “The scheme has filled a market gap, and its permanent offer will continue to provide an alternative financing option to homebuyers for mitigating their risks arising from interest rate volatility, thereby enhancing banking stability in the long run.”

The fixed interest rates per annum under the scheme, which was maintained until end-January 2022, were as follows:

FIXED-RATE MORTGAGE PILOT SCHEME
Fixed-rate Period Gross Mortgage Rate (GMR) Full/Partial Prepayment Penalty (% of the Prepaid Amount)
Fixed interest rate GMR After the Fixed-rate Period
10-year 1.99% The then prevailing fixed mortgage rate or Hong Kong Prime Rate minus 2.35% 1´st year: 3%
2´nd year: 2%
3´rd year: 1%
15-year 2.09%
20-year 2.19%
Source: HKMC

After that, the new rates are announced monthly. Currently, the new fixed interest rates are as follows, based on the HKMC website:

  • For 10-year mortgage loans: 4.99%
  • For 15-year mortgage loans: 5.14%
  • For 20-year mortgage loans: 5.29%

The application period is from October 3, 2023, until further notice. The drawdown period is within two months upon receipt of application by the bank.

New mortgage lending continues to fall

New residential mortgage loans approved fell by 12.3% to 5,124 in November 2023 as compared to the same period last year, according to the HKMA figures. Likewise, the value of newly approved residential mortgage loans plunged 13.1% y-o-y to HK$24.53 billion (US$3.14 billion) in November 2023.

The secondary market accounted for about 42% share of all new mortgage loans approved during the period. The primary market and refinancing accounted for 22% and 36%, respectively.

Despite the decline in new loans, the value of mortgage loans outstanding increased by a modest 3% to HK$ 1.86 trillion (US$237.71 billion) in November 2023 from a year earlier, following growth of 4.2% in 2022, 9.8% in 2021, 7.8% in 2020, and 9.8% in 2019, based on figures from the HKMA.

The average loan-to-value (LTV) ratio of newly approved loans increased to 57.1% in May 2023, up from 55.2% both in the previous month and from a year earlier.

Over the same period, the mortgage delinquency ratio remained low at about 0.05 to 0.08 while the rescheduled loan ratio was unchanged at 0.00%.

Hong Kong Residential Mortgage Loans graph

Rental yields gradually increasing, but are still low by international standards

While Hong Kong’s rental yields are gradually rising, they remained extremely low by international standards, which can be attributed to the surge in property prices in recent years. 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.

Hong Kong Rental Yields graph

Rental yields in Hong Kong in October 2023:

  • Property Class A (properties with an area of 40 sq. m. and below) rental yields were 3.2%, up from 2.7% a year ago and 2.4% two years earlier, according to figures from RVD.
  • Property Class B (40 to 69.9 sq. m.) rental yields stood at 2.7%, up from 2.4% in the previous year and 2.2% two years ago.
  • Property Class C (70 to 99.9 sq. m.) rental yields were 2.5%, higher than the 2.2% a year earlier and 2.1% two years ago.
  • Property Class D (100 to 159.9 sq. m.) rental yields averaged 2.4%, up from 2.1% in October 2022 and 2% in October 2021.
  • Property Class E (160 sq. m. and above) rental yields were 2.2%, slightly up from 2.1% a year earlier and 2% two years ago.

This is supported by the recent Global Property Guide research conducted in August 2023.

  • In New Territories, gross rental yields for apartments ranged from 1.03% to 3.93% in Q3 2023, with a city average of 2.89%.
  • In Kowloon, apartments offer rental yields between 1.48% and 5.59%, with city average of 3.22%
  • In the Outlying Islands, rental yields ranged from 2.8% to 4.26%, with a city average of 3.23%.

Hong Kong Residential Prices vs Rental Prices graph

Rental rates movements

Rents vary considerably in Hong Kong, with smaller-sized apartments showing stronger rent increases as compared to larger-sized apartments. 

In November 2023:

  • Rents for apartments smaller than 40 sq. m. were up by 5.1% from a year earlier, to an average of HK$ 456 (US$ 58) per sq. m per month.
  • Rents for 40-69.9 sq. m. apartments rose by 4% y-o-y, to HK$ 391 (US$ 50) per sq. m. per month.
  • Rents for 70-99.9 sq. m. apartments rose by 5.3% y-o-y, to HK$ 437 (US$ 56) per sq. m. per month.
  • Rents for 100-159.9 sq. m. apartments rose strongly by 13% y-o-y, to HK$ 469 (US$ 60) per sq. m. per month.
  • Rents for apartments larger than 160 sq. m. were up by 8.2% y-o-y, HK$460 (US$59) per sq. m. per month.
AVERAGE RENTS, NOVEMBER 2023
Property size Average rents (per sqm) Year-on-year change
Hong Kong Kowloon New Territories Hong Kong Kowloon New Territories
HKD USD HKD USD HKD USD % % %
Less than 40 sqm 456 58 398 51 320 41 5.1 4.7 6.0
40-69.9 sqm 391 50 344 44 266 34 4.0 8.5 6.4
70-99.9 sqm 437 56 375 48 260 33 5.3 15.0 3.6
100-159.9 sqm 469 60 367 47 256 33 13.0 12.2 5.3
Greater than 160 sqm 460 59 354 45 211 27 8.2 23.3 -0.9
Sources: Ratings and Valuation Department (RVD), Global Property Guide

Residential construction activity slowing again

Completions rose strongly by more than 47% y-o-y to 21,168 in 2022, following a decline of 31.1% in 2021 and a surge of 53.1% in 2020, according to figures released by RVD. It was the highest level recorded since 2004.

Over the same period:

  • Class A completions (properties with an area of 40 sq. m. and below) skyrocketed by 88.2% y-o-y to 9,881 units, following a decline of 43.1% in 2021.
  • Class B completions (40 to 69.9 sq. m.) increased 15.8% y-o-y to 7,668 units last year, in contrast to an annual fall of 14.4% in 2021.
  • Class C completions (70 to 99.9 sq. m.) continued to fall by 4.4% y-o-y to 2,046 units, following a 23% decline in 2021.
  • Class D completions (100 to 159.9 sq. m.) surged by more than 322% to 1,052 units, after a fall of 67.2% in the prior year.
  • Class E completions (160 sq. m. and above) more than quadrupled from a year earlier to 521 units, in contrast to a 68% fall in the prior year. 

But residential construction activity seems to be slowing again. In the first ten months of 2023, there were just 10,570 dwellings completed in Hong Kong, less than half of the completions recorded for the full year of 2022.

The stock of flats in Hong Kong totaled 2,949,000 units, up by 7.4% from 2,745,000 units in 2017, according to the Transport and Housing Bureau.

Hong Kong Construction Competitions graph

How to solve Hong Kong’s chronic housing shortage?

Increasing supply is the key.

“We are looking at a shortfall of at least 1,200 hectares of land to meet our future supply and demand, and this is not taking into account extra land needed to improve the living space of each individual,” said Task Force on Land Supply chairman Stanley Wong Yuen-fai.

The government recently unveiled Hong Kong’s first major reclamation project since 2003, at an estimated cost of HK$20.5 billion (US$2.63 billion). Scheduled for completion by 2030, it will reclaim 130 hectares off northern Lantau and extend Tung Chung´s new town to provide 49,000 flats for 144,000 people, plus 870,000 sq. m. of commercial floor area.

“It will greatly help solve the current shortage of housing,” said Financial Secretary Paul Chan. Besides this, the government’s 10-year housing strategy aims to provide land for 28,000 public flats annually, alongside 18,000 private homes.

Following Chinese President Xi Jinping’s call on Hong Kong to provide “more decent” homes for the poor, the HK government has recently unveiled a HK$26.4 billion (US$3.36 million) light housing project that plans to build about 30,000 temporary apartments over the next five years. This will give people an option to move out of cramped quarters, like the city’s infamous “coffin homes”, while waiting for public housing. However, the new scheme has faced public backlash because of its high cost and since it is seen as merely a band-aid solution to the city’s festering housing crisis.

The total housing stock stood at 1,256,722 units in 2022, up by only 1.5% from the previous year, according to the RVD.

Hong Kong Housing Stock graph

HK economy improving, buoyed by private consumption and the tourism sector

Like the housing market, the overall economy struggled in 2022. Hong Kong’s economy suffered a 3.5% contraction last year, according to official government figures, following an expansion of 6.3% in 2021, as weakening global demand and strict Covid restrictions hurt consumer spending and exports.

To boost economic activity, the HK government recently unveiled a number of measures, including offering cash handouts to residents, cutting salaries tax, and attracting more workers and foreign investments. With this, the economy grew by 4.1% y-o-y in Q3 2023, following annual increases of 1.5% in Q2 and 2.9% in Q1, supported by strong domestic demand and improved tourism. This is in sharp contrast to the prior year’s contractions (-3.9% in Q1 2022; -1.2% in Q2; -4.6% in Q3; and -4.1% in Q4).

On a seasonally adjusted quarterly basis, real GDP increased by 0.1% in Q3 2023.

“Looking ahead, inbound tourism and private consumption will continue to underpin economic growth for the rest of the year. More visitors could be received as handling capacity recovers further. As regards private consumption, continued improvement in household income and the Government’s various support initiatives including “Night Vibes Hong Kong” should provide support,” said the HK government.

From January to November 2023, visitor arrivals in Hong Kong reached 30,069,674 people, from just 113,763 arrivals in the same period last year, according to figures from Hong Kong Tourism Board (HKTB). About 79.2% of the total number of arrivals came from Mainland China.

In November 2023, the average hotel room occupancy rate increased strongly by 21% y-o-y to 87%.

Tourist arrivals averaged about 56 million people annually from 2011 to 2019. However, tourism has become almost nonexistent in the past three years due to pandemic-related travel restrictions. Arrivals dropped to 3.57 million people in 2020, and then to just 91,398 people in 2021 and 604,564 people in 2022.

Hong Kong Tourist Arrivals graph

However, global economic uncertainty and geopolitical tensions continue to adversely impact the domestic market. “Yet, the difficult external environment amid increasing geopolitical tensions and tight financial conditions would continue to weigh on exports of goods and investment and consumption sentiment,” the HK government noted.

As such, HK’s real GDP growth forecast for 2023 was recently trimmed down to 3.2%, from the earlier estimate of a 4% to 5% expansion.

The HK economy suffered greatly for most of 2019 from social unrest as well as the US-China trade tensions, and for the whole year of 2020 from the COVID-19 pandemic. In 2020, real GDP contracted by about 6.5% from a year earlier, following a decline of 1.7% in 2019. When the first COVID-19 case was detected in January 2020, the HK government immediately rolled out social distancing measures and travel restrictions, putting further strain on the already ailing economy.

The HK economy grew by an annual average of 3.8% from 2000 to 2018.

Hong Kong GDP Growth and Inflation graph

Hong Kong’s total value of exports decreased by 9.4% y-o-y in the first eleven months of 2023, and imports declined by 7.3%. This resulted in a trade deficit of HK$407.9 billion (US$52.2 billion), equivalent to 9.7% of the value of imports of goods, which was recorded in Jan-Nov 2023.

In November 2023, overall inflation stood at 2.4%, unchanged from the previous month but up from 1.8% in the same period last year, according to the Census and Statistics Department. Hong Kong’s inflation rate averaged 3.3% from 2010 to 2019 before slowing sharply to 0.25% in 2020. Then inflation rose again to 1.6% in 2021 and 1.9% in 2022.

Unemployment is now falling again. In the three months to November 2023, the seasonally-adjusted unemployment rate fell to 2.9%, from 3.6% in the previous year, based on figures from the Census and Statistics Department.

Sources: