Hong Kong’s notoriously unaffordable property prices have started to turn down.
Chinese city as for housing markets anywhere prices of homes in the most central districts will be more resilient than those in the suburbs. The distinguishing feature of Hong Kong is the premium on space.
Hong Kong property prices rose more than fivefold between 2003 and the middle of this year. The city is frequently ranked as the world’s least affordable market in global surveys. With the U.S. China trade war cranking up and the Federal Reserve raising interest rates, prices dropped in September and October. They’re down about 3 percent from their August high, according to an index of second hand home prices compiled by Centaline Property Agency. Most analysts, including those at CLSA Ltd. and Jones Lang LaSalle Inc., are now forecasting top to bottom declines of about 15 percent.
Consider what happened during the last downturn in 2015-16. The decline in Hong Kong island was 16 percent, according to data from the government’s Rating and Valuation Department. In the suburban New Territories, prices fell an average of 22 percent, according to the department’s index.
The supply of new housing has been greatest in the New Territories, according to Jones Lang Lasalle’s head of research, Denis Ma. In upmarket Hong Kong island districts such as the Peak and Mid-Levels, a lack of land for redevelopment restricts the supply of new homes.
Assessing how far and for how long the overall market will fall is a trickier proposition. Banks have started raising interest rates for the first time since the global financial crisis. Hong Kong rates track those in the U.S. because of the city’s currency peg to the dollar, and the Fed has signaled that it will continue tightening.
The influx of mainland Chinese buyers who helped to power the boom has slowed to a trickle. They accounted for just 1.2 percent of sales in the first nine months of 2018, down from 4.5 percent before the Hong Kong government introduced curbs on nonlocal buyers. A Chinese crackdown on capital outflows has also deterred purchases.