House prices down 3.12% during the year to Q1 2020

Hong Kong’s housing market has been struggling, amidst market-cooling measures, the impact of the continuing violent protests, the US-China trade war, and the COVID-19 outbreak. Hong Kong’s residential property prices fell by 3.12% y-o-y in Q1 2020, in contrast to an annual rise of 0.28% a year earlier. On a quarterly basis, house prices fell by 0.94% in Q1 2020.

 

Over the past decade, Hong Kong’s residential property prices have risen by 153% (inflation-adjusted), although real incomes have virtually stagnated. 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 plunging; construction plummeting

In Q1 2020, the number of primary sales in Hong Kong plummeted by 57.4% y-o-y to 2,261 units and the value of sales dropped 59.3% y-o-y to HK$ 24.89 billion (US$ 3.21 billion), according to the Ratings and Valuation Department (RVD). In the secondary market, the number of sales dropped 7.1% to 7,943 units in Q1 2020 from a year earlier, and sales value fell by 5.6% to HK$ 62.05 billion (US$ 8 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%. Now the coronavirus outbreak threatens to make things worse, after the economy declined by 8.9% in Q1 2020 from a year earlier – its worst drop since records began in 1974. The IMF forecasts that the HK economy will shrink by 5.8% this year.