Hong Kong home prices to follow an ‘L-shaped’ trend this year

Knight Frank expects prices to decline in the first half before remaining flat in the second half.

Given the existing high interest rate environment, insufficient purchasing power, and a high level of unsold inventory in completed projects, the Hong Kong residential market has remained subdued. According to a Knight Frank report, residential prices, beset with headwinds, have slackened for the sixth consecutive month. 

“We expect residential property prices to fall by 5% in 2023 and the number of first-hand and second-hand transactions to drop to about 43,000 units, reaching the lowest level since 1997. Under the bleak economic conditions and uncertain future interest rate adjustments, we believe that the relaxation of the cooling measures is unlikely to reverse the downward trend in home prices in the short term,” said Martin Wong, Knight Frank’s Director and Head of Research & Consultancy, Greater China.

Here’s more from Knight Frank:

Looking ahead to 2024, we expect residential property prices in Hong Kong to follow an “L-shaped” trend, declining in the first half of the year and remaining flat in the second half. Mass residential property prices are set to drop by 0% to 5% and luxury residential property prices will remain stable. It is expected that the total volume of first-hand and second-hand transactions will rebound slightly to 48,000-53,000 units, with first-hand transactions accounting for approximately 30% of the total.

The leasing market, in contrast, remained robust, as supported by the growing demand from an increased number of overseas talent attracted to Hong Kong through the Top Talent Pass Scheme. We expect mass residential rents to go up by 5% to 8% in 2024, while that of luxury residential will go up by 3% to 5%.

We estimate that the government land sale revenue in 2024 will reach HK$20-25 billion, while the annual land premiums are expected to reach HK$15-20 billion.