House prices down by 5.2% during the year to Q2 2022

Hong Kong’s housing market is losing steam, amidst struggling economy. Hong Kong’s inflation-adjusted residential property prices fell by 5.2% in Q2 2022 from a year earlier, worse than the previous quarter’s 3.81% decline and in contrast to the prior year’s 1.18% growth. On a quarterly basis, house prices fell slightly by 0.14% in Q2 2022.

Over the past thirteen years, Hong Kong’s residential property prices have skyrocketed by 165% (inflation-adjusted). In contrast, real incomes have virtually stagnated in Hong Kong for years. 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 weakened sharply over the past three years.

 

Demand plummeting, construction activity weakens

In the primary market, the number of property sales plunged 41.4% y-o-y to 4,855 units in the first half of 2022 and sales values plummeted 46.5% to HK$ 61.05 billion (US$7.78 billion), according to the Ratings and Valuation Department (RVD). Likewise in the secondary market, property sales fell by 36.8% to 20,126 units, and transaction values dropped 37% to HK$ 177.11 billion (US$22.57 billion).

Construction activity is also down. Completions fell by 31.1% to 14,386 in 2021 from a year earlier, in sharp contrast to a 53.1% surge in 2020.

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: typical city centre apartment buying price, monthly rent (130 sq. m)
	Buying price	Rate per month	Yield
	$3,714,113	$7,267	2.35%

Recent news: Hong Kong’s ailing economy

Hong Kong’s economy declined by 1.3% year-on-year in Q2 2022, following a 3.9% contraction in the previous quarter, as exports and investments remained subdued, and the persistent Covid-19 pandemic continues to weigh on economic activity, according to the Census and Statistics Department. As a result, the government recently downgraded its 2022 growth forecast to just 1% to 2%, from its earlier projections of a 2% to 3.5% expansion.