House prices down by 12.82% during the year to Q3 2022

Hong Kong’s housing market conditions are deteriorating again, amidst struggling economy. Hong Kong’s inflation-adjusted residential property prices plunged by 12.82% in Q3 2022 from a year earlier, in sharp contrast to the previous quarter’s 2.45% increase. On a quarterly basis, house prices fell by 5.43% in Q3 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 three years.

 

Demand plummeting, construction activity weakening

In the primary market, the number of property sales plunged 32% y-o-y to 9,703 units in the first ten months of 2022 and sales values plummeted 47.5% to HK$ 102.22 billion (US$13.13 billion), according to the Ratings and Valuation Department (RVD). Likewise in the secondary market, property sales fell by 39.1% to 30,109 units, and transaction values dropped 41.1% to HK$ 258.6 billion (US$33.23 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 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 shrank by 4.5% year-on-year in Q3 2022, following annual contractions of 1.3% in Q2 and 3.9% in Q1, mainly due to the weak performance of external trade, as well as declining gross fixed investment, according to the Census and Statistics Department. Exports of goods plunged 15.6% while services dropped 3.8%. At the same time, gross fixed investment also fell by 14.3% y-o-y in Q3 2022. On a quarterly basis, HK’s GDP declined 2.6% during the latest quarter, following a 1% growth in the previous quarter.

With these negative developments, the government has recently downgraded further its 2022 economic forecast for Hong Kong – from its earlier projections of a 1% to 2% growth to a contraction of 3.2%.