Here’s what to expect from Hong Kong’s luxury home market this year

Prices could grow 3-5%, but not until the second half of the year.

The Hong Kong luxury residential market will see mixed sentiment this year with border closures, emigration and capital outflows, as well as possible rate hikes likely in the first half of 2022. 

Nevertheless, Savills reveals that the demand profile for super luxury homes in Hong Kong is gradually shifting: while three to five years ago only local and Mainland traditional HNWIs were buying trophy assets, over the past few years we have seen more ‘emerging affluents’ who have made their fortunes in the New Economy, either via trading cryptos, NFTs or running successful start-ups often using A.I. and metaverse related technologies. Popular assets have included luxury cars, watches, antiques, art pieces as well as super luxury properties. 

Here’s more from Savills:

Meanwhile, with the 25th anniversary of the change of sovereignty for Hong Kong this year, the Central government may yet come up with ways to boost the Hong Kong economy. As such, luxury residential sentiment may improve in the second half of the year. 

After global QE from 2009 the local economy was awash with liquidity, taking real interest rates into negative territory, one of the key factors supporting the luxury price rally of the past decade. Although the US is highly likely to raise interest rates this year to tackle inflation, increases are expected to be moderate. 

According to Oxford Economics, short term interest rates in Hong Kong could rise from 0.19% in 2021 to 2.04% in 2025, while inflation should remain at around 2% to 3%. This suggests that the negative real interest rate environment may persist until at least 2025, supporting future luxury price levels. 

Coupled with limited supply, luxury prices may experience some small adjustment (in the order of 5% or less) in the first six months of 2022, before resuming growth of 3% to 5% in the second half of the year.