Hong Kong home prices hit record lows in 8 years

Meanwhile, residential transactions declined for four straight months.

According to a Knight Frank report, home prices in Hong Kong continued their downward trajectory in July, dropping by 1.9% MoM, and 4.7% YTD, reaching the lowest level in nearly eight years. There has been a significant decline of 25% from the historical peak in September 2021. 

Here’s more from Knight Frank:

Residential transactions have declined for four consecutive months following a recent peak of over 8,500 transactions in April. The total transaction volume remained low at 3,652 in August, according to the Land Registry. However, sales of new developments, including ONE INNOVALE – Archway, in Fanling, and NOVO LAND Phase 1A, in Tuen Mun, supported by discounts, were well received. First-hand transactions surged nearly 40% MoM to 1,154 in August. 

Despite the slow economic recovery, demand for luxury homes remained steady. The most notable transaction recorded during the month was at Mont Verra in Beacon Hill, where an 11,382-sq-ft house was sold for HK$1,028 million, or HK$90,318 per sq ft. 

The rental market, in contrast, maintained its upward trend. Overall rents increased by 1.1% MoM in July, reaching a record high since August 2019. The strong demand was driven mainly by newly arrived talent and students from the mainland. Flats near the universities with rents ranging from HK$7,000 to HK$8,000 are highly sought-after by non-local university students. Postgraduate students prefer larger flats with a monthly rent of over $20,000. 

According to the latest data from the Education Bureau, the eight publicly funded universities have admitted a total of 14,756 non-local undergraduate students this academic year, and the universities plan to double the quota to 40% in the future. Recently, the 63-room Popway Hotel in Tsim Sha Tsui was sold for HK$180 million, and plans are underway to transform it into student housing to meet future demand. 

With the US Fed announcing a 0.5% interest rate cut in September, a new cycle of interest rate cuts has officially begun. The Hong Kong Interbank Offered Rate (HIBOR) is expected to continue to fall, while the Prime Rate (P) will go down more slowly. The overall high-interest rate environment will continue to affect the cost of new mortgages. 

As the actual mortgage rate has risen considerably since 2022, there is still insufficient short-term purchasing power in the market. Given the high inventory of primary stock, we expect property prices to remain under pressure in the near term. Secondhand properties will struggle given aggressive developer pricing.