Hong Kong’s property downturn yet to run its course, with home prices set to decline by up to 10% this year, S&P says

• There is pent-up home-buying demand in Hong Kong, but this will only be released when economic growth stabilises and interest rates start easing, S&P analyst says
• Supply of primary residential units could hit 100,000 in the next three years, compared with 80,000 to 100,000 units from 2015 to 2021, ratings agency says

Hong Kong’s current property market downturn is cyclical and not structural, according to S&P Global Ratings, which expects home prices to decline by as much as 10 per cent this year as elevated interest rates keep demand in check.

“We believe that there is pent-up home-buying demand in Hong Kong, [but] this will only be released when economic growth stabilises and interest rates start easing,” said Wilson Ling, associate director for corporate ratings at the credit rating agency, during a webinar on Monday.

Meanwhile, unsold inventory of new homes is keeping prices in check despite the recent easing of property cooling measures by the government, he said, adding that elevated interest rates were the main reason weighing on demand.

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Since March 2022, the Hong Kong Monetary Authority, the city’s de facto central bank, has raised interest rates 11 times to a level last seen in September 2007, in lockstep with the US Federal Reserve to keep the local currency’s peg to the US dollar.

Listings for residential properties are seen at a property agency in Hong Kong. Photo: Bloomberg

Late last month, Financial Secretary Paul Chan Mo-po scrapped all cooling measures restricting property transactions as he unveiled a budget aimed at restoring the city’s flagging fiscal health, addressing mounting calls from the property and business sectors to ditch the decade-old measures.

The announcement came as lived-in home prices fell for a ninth straight month in January to a level last seen in 2016.

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The scrapped measures include the Buyer’s Stamp Duty that targeted non-permanent residents and a New Residential Stamp Duty for second-time purchasers. Homeowners will also no longer need to pay a Special Stamp Duty if they sell their homes within two years.

Supply of primary residential units could hit 100,000 in the next three years, compared with 80,000 to 100,000 units that were completed from 2015 to 2021, S&P said.

Given these dynamics at play, Ling said home prices were likely to decline between 5 per cent and 10 per cent this year.

“Even if there’s some support from all these policy stimulations, there’s probably still a long way to go from a demand perspective and before supply is digested to really reverse the oversupply situation,” he said.

As of March 15, 1,581 property transactions were recorded including car parks, shops and office units, according to data tracked by Midland Realty. In January, there were 4,401 transactions, while in February 3,189 units changed hands.

Separately, CK Property Development, part of billionaire Li Ka-shing’s Cheung Kong Group, on Monday launched a lease promotion at its Horizon Hotels & Suites in Ma On Shan in the New Territories. It has set aside 30 suites ranging from two to three bedrooms for as low as HK$18,500 (US$2,365) a month for tenants willing to stay for at least six months.

The promotion runs until end of April and the leases do no require security deposits.

“Tenants can stay longer than six months if they want to,” said a company spokeswoman.

The promotion comes amid Hong Kong’s bid to attract talent to the city.

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This article originally appeared on the South China Morning Post (www.scmp.com), the leading news media reporting on China and Asia.

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