Hong Kong housing oversupply could hamper market growth
After a prolonged slump, Hong Kong’s property market is showing signs of recovery. However, analysts do not expect prices to rise significantly. According to them, a three-year oversupply of residential properties is restraining this trend.
The market recovery has been made possible by the introduction of a number of initiatives aimed at improving housing affordability. In particular, the government overhauled the tax system and simplified the mortgage process. Combined with lower interest rates, these measures have stimulated demand and increased buying activity. According to Centaline, the number of transactions in the property market reached its highest level in three years in 2024.
State of Hong Kong market
Despite Hong Kong’s GDP growth in 2024, the housing market experienced a slowdown. In September, property prices reached their lowest level since 2016. Until February last year, prices had fallen for 10 consecutive months. To support the sector, the authorities have removed additional taxes, including:
– duties for foreigners;
– charges for second-home buyers;
– taxes on property owners who sell their properties within two years of purchase.
These measures have stimulated increased market activity. However, in the first quarter of 2024, 30% of transactions in the secondary residential sector were unprofitable.
Despite the slowing market, Hong Kong remains the leader in Asia in terms of property values. The price per square metre of residential property is USD 22,554. By comparison, the figure is USD 5,000 in Japan and USD 4.5,000 in China. The second most expensive country in the region is Singapore (USD 19,264), followed by South Korea with USD 11,964 per square metre.
Rental sector overview
Alongside the fall in sales in Hong Kong, there has been an increase in activity in the rental sector. These trends are due to a number of factors, among which:
– the high cost of mortgage loans;
– the introduction of government initiatives to attract foreign professionals;
– an influx of students from the mainland due to the start of the new academic year.
As a result, rental values in September were close to their all-time high for 2019. At the same time, property yields are relatively low at 3.5%. In Georgia, for example, yields are estimated at 9% on average.
Analysts are optimistic about the market’s future. They believe that falling interest rates and the stability of the rental sector should contribute to increased activity. Patrick Wong of Bloomberg predicts that the volume of transactions will grow by around 10% in 2025. He also does not rule out a further rise in house prices, which could coincide with lower mortgage rates. Rising rental rates could also stimulate investor interest.