Heal house prices down by 16.81% during 2022

Hong Kong’s housing market conditions are deteriorating fast, amidst struggling economy. The inflation-adjusted residential property prices plunged by a whopping 16.81% in 2022 from a year earlier, in sharp contrast to the previous quarter’s 1.25% increase. On a quarterly basis, house prices fell by 7.89% in Q4 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 Covid-19 pandemic, Hong Kong’s housing market has weakened sharply over the past four years.

 

Demand falling sharply, construction activity surging

In the primary market, the number of property sales plunged 41.6% y-o-y to 10,315 units in 2022 and sales values plummeted 52.5% to HK$ 109.72 billion (US$13.98 billion), according to the Ratings and Valuation Department (RVD). Likewise in the secondary market, property sales fell by 38.7% y-o-y to 34,735 units last year, and transaction values dropped 40.8% to HK$ 298 billion (US$37.96 billion).

Yet, residential construction activity is increasing sharply. Completions rose by a huge 47.1% to 21,168 units in 2022 from a year earlier, in sharp contrast to a 31.1% decline in 2021.

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

Hong Kong: city centre apartment buying price, monthly rent (2-BR apartments)
	Buying price	Rate per month	Yield
New Territorries	$737,584	$1,911	3.11%
Kowloon	$837,139	$1,885	2.67 %

Recent news: Hong Kong’s ailing economy

Hong Kong’s economy suffered a 3.5% contraction last year, according to official government figures, following an expansion of 6.3% in 2021, and contractions of 6.5% in 2020 and 1.7% in 2019, 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. The HK economy is projected to grow by between 3.5% and 5.5% this year.