Hong Kong Property Market Forecasts for 2024

The 2023 Hong Kong property market has certainly not been smooth sailing. We witnessed declines of up to 30% in certain property sectors in one year alone. A number of factors have been responsible for these declines. Covid-19 precipitated office workers to work from home and since then the market for commercial real estate never quite fully recovered and many workers still continue to work from home or remotely. This has dampened the demand for office space and commercial real estate vacancy is at its highest in 10 years. High interest rates has been the primary factor driving down asset prices such as real estate because putting fixed deposits in banks would generate higher returns than rental yield. Secondly, official and unofficial figures estimated that up to half a million people have left Hong Kong in the last 3 years which not only added significant supply to the second hand market it also significantly hampered demand. Both these factors would put downward pressure on prorperty prices. Lastly with the economy in China slowing down dramatically in recent years the influx homebuyers coming from the mainland we saw 5 years ago has dropped dramatically and this trend will likely continue in the foreseeable future. The culmination of all these factors has caused significant declines in the Hong Kong property market. It is probably fair to say that it has been a tough year for the entire sector as a whole; in fact arguably the toughest year in the last decade. 

Looking forward to 2024, as much as we would like to paint a rosier picture for the coming we are expecting the declines to continue for the Hong Kong real estate sector. The two main factors which will impact property prices will be interest rates and changes in the population. Interest rates will likely remain at current levels until the end of the year with some small downward revisions towards the second half of the year; but probabaly not enough to prop the market up. Slight declines in the population have been projected for this year which will continue to put pressure to property prices. So we do not see any turn around this year in the property market for Hong Kong. As to how much decline we shall see this year, this will be hard to predict because each property type will vary but from the trends of 2023, the projected deline will range from 10-25%. 

OneDay has been actively tracking the listing prices for both the rental and sales market and across the whole spectrum of property types, including residential, commercial, industrial, car park spaces and retail shops. It is important to note that within the property sector there are different property types and each will perform differently short and long term in rental yield and price movements. Focusing on the positives we believe industrial properties and warehousing space will be the best performer both in the short and long term. This sector did not go up as much as other property types like retail and residential in the last decade due to the government's curbs on lending to industrial property purchases to a maximum of 30% LTV so all the transactions in the last decade were either cash purchases or ones with very little borrowing by the purchasers which was only revised to 50% in July 2023. In addition many leaving Hong Kong have decided to store their personal effects in warehouses rather than ship everything out to wherever they have decided to move to. There are still many industrial units in Hong Kong selling for under HK$4,000/sq. ft and these units have held firm on their valuation in the last year even though many other sectos saw significant delinces. Furthermore,  they are in limited supply because developers are not building anymore industrial buildings. 

First-hand residential properties will likely be the least attractive because in general they are priced above comparable properties. Buyers who borrow 90% LTV (Loan to Value) are exposed to significant risks because they may end up in negative equity the moment property prices drop more than 10% and banks may request further funds to cover shortfalls. Developers sitting on a large stock pile of unsold new homes may be forced to slash prices to free up liquidity and this would put further downward pressure on the market and cause those who bought early to become negative equity. 

Many experts believe that the interest rates will not stay at the current levels as economies around the world are not strong enough to support them in the long run. And they believe in the next 12-18 months interest rates will start to come back down. This will be positive to the property prices as this would mean lower borrowing cost. So given this, there may be buying opportunities towards the end of the year for people who have been planning to get into the market but have been sitting on the sidelines waiting for the property prices to stablise.

These forecasts are based on the past trends and current circumstances and excludes extrinsic factors such as governments suddenly levying a capital gains tax or the Hong Kong dollar depegging from the US dollar or China going to war with Taiwan. If the government lifts the special stamp duty and other punitive taxes on property transaction or reduced borrowing requirements the property market react positively to them. 

In conclusion, we are likely to see a continuation of the downward trend for 2024 but for those looking to get into the market there may be some buying opportunities towards the end of the year.  

Footnote
The content in this page is not and shall not be construed as investment advice. This Information is meant to be informative and for general purposes only. It does not take into account your individual needs, investment objectives and specific financial circumstances.