Trend: house prices down 0.92% during 2018

Hong Kong's housing market boom is now over, with residential property prices falling by 0.92% during 2018, in sharp contrast to a y-o-y rise of 12.78% in 2017. On a quarterly basis, house prices dropped sharply by 8.73% in Q4 2018. The recent slowdown was mainly due to slowing demand from Chinese homebuyers, deteriorating affordability, rising mortgage rates, as well as the adverse impact of the ongoing US-China trade war .  

In recent years, Hong Kong´s government has leaned against property price rises. The government raised stamp duties for all non-first time homebuyers starting November 2016 and cut allowable loans on residential and commercial properties in May 2017. In June 2018, Chief Executive Carrie Lam revealed another series of cooling measures, including a tax against vacant flats.

Analysis: Demand is now falling 

In 2018, the number of primary sales in Hong Kong fell by 16% y-o-y to 15,633 units and the value of sales dropped 9% y-o-y to HK$ 219.5 billion (US$28 billion), according to the Ratings and Valuation Department (RVD). In the secondary market, the number of sales dropped 3% to 41,614 units in 2018 from a year earlier while sales value increased 8% to HK$ 339.8 billion (US$43.3 billion) over the same period.

In contrast, residential construction continues to rise. In 2018, completions surged 18% to 20,968 units from the previous year, after y-o-y rises of 22% in 2017 and 29% in 2016.

Rents, rental yields: poor yields, at just above 2%

Apartment costs in Hong Kong are very high, at around $28,570 per sq. m. 

Hong Kong: city centre apartment, buying price, monthly rent (120 sq. m)
  Buying price Rate per month Yield
  $ 3,714,113  $ 7,267  2.35%

Recent news: Sharp economic slowdown amidst US-China trade war

Hong Kong’s economic growth slowed sharply by end-2018, amidst the trade dispute between the US and China and slowing retail sales, with exports showing almost zero growth in the last quarter of 2018.

Hong Kong’s economy grew by just about 1.5% y-o-y in Q4 2018, a sharp slowdown from expansions of 2.9% in Q3 2018 and 3.5% in Q2 2018 and the weakest growth since Q1 2016. Secretary of Finance Paul Chan estimates that HK’s total GDP growth for 2018 reached only 3%, compared to a 3.8% expansion in 2017.