House prices up 2.63% during the year to Q3 2020

Hong Kong’s housing market is showing signs of improvement, after severe blows from market-cooling measures, the impact of the violent protests, the US-China trade war, and the COVID-19 outbreak. Hong Kong’s residential property prices rose by 2.63% during the year to Q3 2020, following y-o-y declines 2.49% in Q2 and 2.32% in Q1. On a quarterly basis, house prices increased 1.31% in Q3 2020.

Over the past decade, Hong Kong’s residential property prices have skyrocketed by 153% (inflation-adjusted). In contrast, real incomes have virtually stagnated in Hong Kong for 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.


Demand is mixed; supply plummeting

In the first nine months of 2020, the number of primary sales in Hong Kong plunged 41.2% y-o-y to 9,959 units and the value of sales dropped 37% y-o-y to HK$ 113.27 billion (US$ 14.61 billion), according to the Ratings and Valuation Department (RVD). In the secondary market, on the other hand, the number of sales rose by 9.7% to 32,833 units in the first nine months of 2020 from a year earlier, and sales value increased 7.5% to HK$ 268.06 billion (US$ 34.58 billion) over the same period.

Residential construction is plunging. In 2019, completions fell by a whopping 35% from a year earlier, after y-o-y rises of 18% in 2018, 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: 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 economy continues to suffer. Months of violent protests and the US-China trade war forced HK’s economy into its first recession in a decade last year, contracting by 1.2% last year. Now the coronavirus outbreak threatens to make things worse, after the economy declined by 9.1% y-o-y in Q1 2020, 9% in Q2, and another 3.5% in Q3 – Hong Kong’s worst contractions since records began in 1974. On a quarterly basis, the economy grew by 2.8% in Q3 2020, the first quarter of expansion following five consecutive quarters of q-o-q decline. The HK government expects the economy to contract by 6.1% this year.