Hong Kong’s property market stabilizing

Lalaine C. Delmendo | February 20, 2021

Over the past twelve years, Hong Kong’s residential property prices have skyrocketed by 262% (162% inflation-adjusted), including spectacular growth of 28.5% in 2009, 21% in 2010, 25.7% in 2012, 13.6% in 2014, and 14.7% in 2017. In contrast, real incomes have virtually stagnated in Hong Kong for years.

Hong Kong house price annual

However, due to the combined impact of market-cooling measures, violent protests, the US-China trade war and the ongoing COVID-19 pandemic, Hong Kong’s housing market has stabilized over the past two years.

Hong Kong’s residential property price index was unchanged in 2020 from a year earlier, following a 5.5% increase in 2019, according to the Ratings and Valuation Department (RVD). When adjusted for inflation, residential property prices increased by a minuscule 0.66% y-o-y in 2020. During the latest quarter, prices fell by 1% (-3.05% inflation-adjusted) in Q4 2020.

Surprisingly, larger-sized apartments are more resilient, registering strong price increases during 2020, as compared to smaller-sized apartments which saw falling prices.

  • Apartments smaller than 40 sq. m: prices fell by 1% y-o-y in 2020, to an average of HK$ 181,273 (US$ 23,385) per sq. m.
  • 40-69.9 sq. m. apartments: prices fell by 2.1% y-o-y to HK$ 181,734 (US$ 23,444) per sq. m.
  • 70-99.9 sq. m. apartments: prices dropped 8.9% y-o-y to HK$ 197,941 (US$ 25,535) per sq. m.
  • 100-159.9 sq. m. apartments: prices rose strongly by 9.1% y-o-y to HK 247,681 (US$ 31,952) per sq. m.
  • Apartments with sizes bigger than 160 sq. m: prices soared by 16.7% y-o-y to HK$ 272,580 (US$ 35,164) per sq. m. during 2020

Average prices (per sq. m.) Year-on-year change (%)
Property size Hong Kong Kowloon New Territories Hong Kong Kowloon New Territories
Less than 40 sq. m 181,273 23,385 162,786 21,000 146,638 18,917 -1.0 3.5 3.9
40-69.9 sq. m 181,734 23,444 161,793 20,872 131,767 16,998 -2.1 3.5 6.4
70-99.9 sq. m 197,941 25,535 183,003 23,608 131,946 17,021 -8.9 5.8 5.9
100-159.9 sq. m 247,681 31,952 221,578 28,584 123,786 15,969 9.1 13.3 19.6
Greater than 160 sq. m 272,580 35,164 281,631 36,331 89,935 11,602 16.7 5.6 -6.3
Sources: Ratings and Valuation Department (RVD), Global Property Guide

Demand continues to fall. In the first eleven months of 2020, the number of property transactions in Hong Kong fell by 4.9% y-o-y to 53,813 units, while sales values dropped 5.4% to HK$489.49 billion (US$63.15 billion), according to the RVD.

Construction, however, is rising. Completions surged 32.9% to 18,077 in 2020 from a year earlier, following a y-o-y decline of 35.1% in 2019 and annual rises of 17.9% in 2018, 21.9% in 2017, and 29.4% in 2016.

From 2008 to 2013, Hong Kong 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 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 last year due to pandemic-related travel restrictions and lockdown measures imposed worldwide.

Hong Kong’s economy contracted by about 6.1% in 2020 from a year earlier, following a decline of 1.2% in 2019, according to government estimates. The Hong Kong economy grew by an annual average of 3.8% from 2000 to 2018. The International Monetary Fund (IMF) expects economy to grow by 3.7% this year and by another 3.4% in 2022.

Hong Kong property market remains the world’s most unaffordable

Housing demand in Hong Kong 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.


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 0.0 0.7
Sources: Ratings and Valuation Department, Global Property Guide

For the tenth year in a row, Hong Kong’s property market is rated the world’s most unaffordable by the 16th Annual Demographia International Housing Affordability Survey: 2020. Average home prices were 20.8 times gross annual median household income in 2019, slightly down from 20.9 times in 2018, but up from 19.4 times in 2017, 18.1 times in 2016, 19 times in 2015, 17 times in 2014 and 12.6 times in 2013.

This is in line with Mercer’s 2020 Cost of Living Survey, which ranked Hong Kong as the world’s most expensive city for expatriates to live in.

Among 24 major cities in the 2020 UBS Real Estate Bubble Index, Hong Kong’s house prices remain one of the most overvalued and at a greatest risk of a real estate bubble.

“In Hong Kong, even those who earn twice the city’s average income would struggle to afford an apartment [measuring 60 square meter],” said the UBS.

A skilled service worker in Hong Kong needs to work about 20 years to be able to buy a 60 sq. m. flat near the city centre.

“The Hong Kong housing boom kicked off almost 20 years ago. Between 2003 and 2019 real prices almost quadrupled, fueled largely by strong economic growth and mainland investment demand. A weakening economy from mid-2019 brought that seemingly unchecked surge to a halt, and currently prices are roughly 5% below their peak in mid-2019,” the UBS noted.

“The UBS Global Real Estate Bubble Index score for Hong Kong has crept down over the last four quarters, but the market remains in bubble risk territory.”

Primary sales down; secondary sales up

In the first eleven months of 2020, the number of property transactions in Hong Kong fell by 4.9% y-o-y to 53,813 units, while sales values dropped 5.4% to HK$489.49 billion (US$63.15 billion), according to the RVD.

Hong Kong property sales

But these figures conceal huge variations:

  • Primary market property sales plummeted by 35.4% y-o-y to 13,206 units, based on data from RVD. Likewise, total transaction values fell by 32.2% to HK$ 146.64 billion (US$18.92 billion).
  • Secondary market property sales rose by 12.3% to 40,607 units, and transaction values increased 13.8% to HK$ 342.84 billion (US$44.23 billion).

Residential construction activity rising strongly

Completions surged 32.9% y-o-y to 18,077 in 2020, according to the provisional figures released by RVD in November 2020. Over the same period:

  • Class A completions (properties with an area of 40 sq. m. and below) rose by 7.2% y-o-y to 7,089 units, following a 7.2% rise in 2019.
  • Class B completions (40 to 69.9 sq. m.) rose strongly by almost 85% y-o-y to 7,653 units, following about 50% decline in the prior year.
  • Class C completions (70 to 99.9 sq. m.) soared by 66.3% to 2,505 units, a sharp turnaround from the prior year’s 55.9% fall.
  • Class D completions (100 to 159.9 sq. m.) fell by 51.3% to 499 units, following a 33.5% fall in 2019.
  • Class E completions (160 sq. m. and above) rose by 4.7% y-o-y to 331 units, an improvement from the prior year’s 44% fall.

Hong Kong completions

The stock of flats in Hong Kong stood at 2,868,000 units in 2020, up by 7.5% from 2,668,000 units in 2015, according to the Transport and Housing Bureau.

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 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$2.64 billion). Scheduled for completion by 2030, it will reclaim 130 hectares off northern Lantau and extend Tung Chung new town to provide 49,000 flats for 144,000 people, plus 870,000 sq. m. of commercial floor area.

Hong Kong housing stocks

“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.

Currently, the total housing stock stood at 1,206,444 units, up 1% from the previous year, according to the RVD.

No intention to lift market-cooling measures

Recently, Financial Secretary Paul Chan indicated that the government has no plan of easing market-cooling measures in the residential sector, following Chief Executive Carrie Lam Cheng Yuet-ngor’s decision to scrap the double stamp duty for commercial properties in November 2020.

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 of 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 a maximum 40% of a site’s value, replacing the earlier limit of 50%. Also, the amount of loans allowed for residential property with value less than HK$10 million was reduced from 60% to 50% and those with value exceeding HK$10 million was also cut from 50% to 40%.

Also, 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.
  • In an effort 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.

Low interest rates

The HKMA lowered its base rate by 64 basis points to 0.86% in March 2020, following a similar move made by the U.S. Fed at the onset of the COVID-19 pandemic. 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.

Major banks’ best lending rates are at record-low levels for Hong Kong. HSBC Holdings PLC, Bank of China (Hong Kong), and Hang Seng Bank retained their best lending rate at 5%. The best lending rate of China Citic Bank International, Standard Chartered Bank, and Bank of East Asia stands at 5.25%.

Mortgage interest rates are even lower, now currently at about 2.5%.

Hong Kong interest rates

“It is hard to go any more further as the bank’s profitability is very thin already,” said Eric Tso Tak-ming of mortgage consultancy firm mReferral Corporation.

Yet to support the ailing economy, amidst the coronavirus outbreak, from February 2020 HSBC and Citigroup are allowing residential mortgage borrowers in Hong Kong to make interest-only payments for up to a year. This comes a week after other banks, including Bank of China (Hong Kong), Bank of East Asia, China Citic Bank International, Dah Sing Bank, Hang Seng Bank, ICBC Asia, and Standard Chartered Bank, and DBS, among others, rolled out their own relief measures.

“We hope these measures will bring some relief to those who are under stress from the economic fallout of Covid-19, allowing them to focus on getting through these critical days without having to worry about their finances,” said Diana Cesar, HSBC’s Hong Kong chief executive.

Moreover, the Hong Kong Mortgage Corporation Limited (HKMC) has recently introduced a pilot scheme for fixed-rate mortgages for 10, 15 and 20 years, in an effort to reduce homebuyers’ risks from interest rate volatility, thereby improving the banking sector’s long-run stability. The maximum loan amount of residential mortgage under the scheme is HK$ 10 million (US$1.29 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. The application period runs until October 30, 2021.


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% 1st year: 3% 2nd year: 2% 3rd year: 1%
15-year 2.09%
20-year 2.19%
Source: HKMC

New mortgage lending rising strongly

New residential mortgage loans approved rose strongly by 22.8% to 7,986 in November 2020, from 6,505 in the same period last year, according to according to Hong Kong Monetary Authority (HKMA). Likewise, the value of newly approved residential mortgage loans soared 32% y-o-y to HK$37.19 billion (US$4.8 billion) in November 2020.

The secondary market accounted for about two-thirds of all new mortgage loans approved during the period. The primary market and refinancing accounted for 15.8% and 16.2%, respectively.

The value of mortgage loans outstanding increased to a record HK$ 1.57 trillion (US$202.85 billion) in November 2020, up 7.7% from a year earlier, based on figures from the HKMA.

Hong Kong outstanding loans

The average loan-to-value (LTV) ratio of newly approved loans also increased to 57.3% in November 2020, up from 51.2% in the same period last year.

Both the mortgage delinquency ratio (more than 6 months) and the rescheduled loan ratio were almost unchanged in November 2020, at 0.03% and 0% respectively.

Hong Kong’s rental yields remain low; rents falling

Hong Kong’s extremely low rental yields 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

Rental yields are falling. In November 2020:

  • Property Class A (properties with an area of 40 sq. m. and below) rental yields were 2.4%, down from 2.5% a year earlier.
  • Property Class B (40 to 69.9 sq. m.) rental yields were 2.2%, slightly down from 2.3% from the previous year.
  • Property Class C (70 to 99.9 sq. m.) rental yields were 2.2%, unchanged from a year earlier.
  • Property Class D (100 to 159.9 sq. m.) rental yields were 2.1%, also unchanged from the previous year.
  • Property Class E (160 sq. m. and above) rental yields were 2%, down from 2.1% a year earlier.

Rents are generally falling in Hong Kong, except for larger-sized apartments. In December 2020, apartment rents for all classes fell by 6% from a year earlier.

Hong Kong prices rents

In December 2020:

  • Apartments smaller than 40 sq. m. registered the biggest y-o-y decline, with the average rent falling by 10.9% to HK$ 417 (US$ 54) per sq. m. per month.
  • Rents for 40-69.9 sq. m. apartments fell by 3.6% y-o-y, to HK$ 404 (US$ 52) per sq. m. per month.
  • Rents for 70-99.9 sq. m. apartments fell by 7.8% y-o-y, to HK$402 (US$52) per sq. m. per month.
  • Rents for 100-159.9 sq. m. apartments fell by 1.8% y-o-y, to HK$427 (US$55) per sq. m. per month.
  • Rents for apartments larger than 160 sq. m. rose by 7.9% y-o-y, HK$450 (US$58) per sq. m. per month.


Average rents (per sq. m.) Year-on-year change (%)
Property size Hong Kong Kowloon New Territories Hong Kong Kowloon New Territories
Less than 40 sq. m 417 54 371 48 297 38 -10.9 -3.9 -4.5
40-69.9 sq. m 404 52 334 43 260 34 -3.6 -1.8 -1.9
70-99.9 sq. m 402 52 377 49 265 34 -7.8 -2.1 0.4
100-159.9 sq. m 427 55 350 45 293 38 -1.8 -6.9 13.1
Greater than 160 sq. m 450 58 325 42 182 23 7.9 -22.4 -28.6
Sources: Ratings and Valuation Department (RVD), Global Property Guide

HK’s economy continues to struggle; unemployment rising

Hong Kong’s 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 6.1% from a year earlier, following a decline of 1.2% in 2019, according to government estimates.

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

The International Monetary Fund (IMF) expects HK economy to grow by 3.7% this year and by another 3.4% in 2022.

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 to the already ailing economy.

As a result, tourism plummeted. Visitor arrivals fell sharply by nearly 94% y-o-y in 2020 to just 3.57 million people, according to the Hong Kong Tourism Board, from 55.9 million people welcomed in 2019 – a year when arrivals have already dropped due to social unrest during the period. It was the lowest number of visitors in 36 years.

In addition, Hong Kong’s exports fell by 1.5% y-o-y in 2020 while imports dropped 3.3%. A trade deficit of HK$ 342.2 billion (US$ 44.14 billion) was recorded last year.

Hong Kong gdp inflation

In December 2020, inflation was -0.7%, sharply down from 2.9% 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.

Unemployment is rising rapidly. In Q4 2020, the seasonally-adjusted unemployment rate surged to 6.6%, up from 6.3% in the previous quarter and 3.3% in Q4 2019, according to Census and Statistics Department, as a new wave of COVID-19 cases halted a wide range of economic activities. In fact, it was the highest since Q4 2004 when jobless rate also hit 6.6%.

“As the fourth wave of local epidemic continues to weigh on local consumption sentiment and disrupt economic activities, the labour market will remain under notable pressure in the near term,” said Labour Secretary Law Chi-kwong.


Old Entries


Be the first to comment on this article!

Login or Register to submit a comment!
In order to promote open and spam-free conversations, Global Property Guide moderates commetns on all articles. You can expect that your comment will be published within 24 hours.


Get GPG fortnightly newsletters delivered to your inbox

A quick summary of global real estate trends.