House prices up 2.38% during 2019

Hong Kong’s housing market continues to grow, despite 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 rose by 2.38% y-o-y in 2019, in contrast to an annual decline of 0.64% in 2018. Yet on a quarterly basis, house prices fell by 1.21% in Q4 2019.

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. As such, 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; construction plummeting

In 2019, the number of primary sales in Hong Kong skyrocketed by 21% y-o-y to 18,917 units and the value of sales rose by 3.7% y-o-y to HK$ 227.6 billion (US$29.3 billion), according to the Ratings and Valuation Department (RVD). In the secondary market, on the other hand, the number of sales dropped 7% to 38,689 units in 2019 from a year earlier, and sales value fell by 5.5% to HK$ 321.19 billion (US$41.36 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%

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 is now struggling

After months of violent protests, real GDP declined by 1.2% in 2019 - the first annual decline since 2009.  Now the coronavirus outbreak threatens to make things worse. In an effort to contain the contagion, retail stores, theme parks and other hotspots have closed and the government decided to restrict cross-border mobility, cancelled school for weeks, ordered civil servants to work from home and urged private companies to do the same.

For 2020 the Economist Intelligence Unit forecasts about 0.5% to 1% GDP growth, but Dutch bank ING expects the economy to contract by a huge 5.8%.

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