Hong Kong Property Market Hits 33-Year Low in Transactions

Analysts predict a continued downturn for the 2024 real estate market.

General view of Hong Kong's cityscape is seen on October 16, 2022 in Hong Kong. Anthony Kwan/Getty Images

Hong Kong’s property market continues to experience a significant downturn, with the latest figures from the Centa-City Leading Index (CCL) showing property prices hitting a near-seven-year low. In a concerning trend for the region, 2023 recorded the lowest number of property market transactions in 33 years.

This downturn coincides with a notable population decrease in nearby Pearl River Delta cities like Guangzhou, Shenzhen, and Dongguan, marking an unusual historical event. Analysts are interpreting this as an indicator of broader economic challenges in the Greater Bay Area.

The decline in Hong Kong’s property market is also seen as a potential harbinger for similar trends in the Pearl River Delta, emphasizing the interconnected nature of the region’s economies.

Detailed Market Analysis: A Deep Dive into the Figures

The CCL, a key indicator of Hong Kong property prices, fell to 147.21 points on Jan. 5. This represents a 0.93 percent decrease in the last week of December, culminating in a continuous seven-week decline.

Since the onset of the COVID-19 pandemic in January 2020, the index has plummeted by 17.10 percent, with a three-year cumulative decrease of 16.46 percent. The decline is evident across various property types, with large and medium-small units seeing respective three-year drops of 11.80 percent and 17.38 percent.

Centaline Property’s research reveals a stark reality: the total number of registered building sales contracts in 2023, encompassing residential, parking spaces, and commercial properties, was merely 58,023. This is the lowest since 1991 and represents a significant downturn in the market. The total transaction value also reached a ten-year low, echoing the reduced sales volume in both new and second-hand residential properties.

Yang Mingyi, senior joint director at Centaline Property’s research department, attributes this slump to rising interest rates and a slowing local economy, painting a grim forecast for the 2024 real estate market.

Morgan Stanley’s recent report echoes this sentiment, predicting a continued downturn for 2024. The firm anticipates a 10 percent decrease in residential property prices, alongside fluctuating commercial property rents.

Mortgage Trends Reflect Market Challenges

The property mortgage sector has not been immune to these market challenges. According to recent data, the number of property mortgages in Hong Kong has fallen to a 20-year low. The total existing building mortgages in 2023 dropped by 11.4 percent, reaching a 23-year low since records began in 2001. The number of pre-sale building mortgages also hit its lowest annual figure since 2005.

Cao Deming, chief vice president of Meridian Mortgage Referral, notes that the combination of an unrecovered economy and the looming threat of rising interest rates has significantly impacted the launch of new projects and the performance of the secondary housing market.

Ji Da, a senior political commentator, summarizes the situation succinctly to The Epoch Times: “After 33 years, the Hong Kong real estate transactions have broken historical records. With the current trend of price reductions and recent property prices hitting a seven-year low, the myth of Hong Kong’s ever-rising property market has undoubtedly been shattered.”

Population Decline in Key Cities Raises Economic Concerns in the Greater Bay Area

Since the Chinese Communist Party (CCP) introduced the Greater Bay Area initiative in 2014, the Hong Kong Special Administrative Region government has been keen to transform the region into a world-class tech hub, rivaling Silicon Valley and Tokyo Bay. However, recent demographic trends in the Pearl River Delta’s key cities, including Guangzhou, Shenzhen, and Dongguan, suggest potential economic challenges ahead.

Chen Qin, Chief Economist at China Pulse Technology and Deputy Director of the Digital China Research Institute, provided an analysis of 2023’s population movements in major Chinese cities. His findings revealed a significant shift: cities like Shanghai, Dongguan, Chengdu, Shenzhen, and Suzhou experienced a net decrease in population, a stark contrast to the trend observed in 2021 where these cities saw a net inflow after the Chinese New Year.

This change was particularly pronounced in Shanghai and Shenzhen, both experiencing a notable and continuous population outflow. This demographic shift is unusual, considering that in previous years, cities experiencing pre-New Year outflows would typically see a compensatory influx post-New Year.

Economic Implications of Demographic Changes

Shi Shan, a China expert, interprets this population decrease in China’s first-tier cities as indicative of underlying economic problems in the country’s most developed regions, including the Yangtze River Delta and the Pearl River Delta. The latter, a crucial component of the Greater Bay Area, is particularly significant.

Mr. Shi highlights Guangdong Province’s historical population growth, from 54 million before reforms in the 1980s to over 126 million in 2021. The recent net outflow from Guangdong, he argues, underscores the direct correlation between population movements and economic health.

Chen Qin’s cross-analysis corroborates Shi Shan’s observations. The economic fluctuations and increasing job uncertainty in first-tier cities have led migrant workers to reduce their job-search radius, often returning to their hometowns or nearby provincial capitals. This trend has been particularly evident since 2023.

In 2022, all four first-tier cities experienced simultaneous population declines, a trend that accelerated in 2023. Such a scenario is unprecedented in the 45 years since China’s economic reforms began.

Hong Kong and the Greater Bay Area: Interlinked Economies

Senior commentator Ji Da suggests that Hong Kong’s economic challenges have a ripple effect on the Greater Bay Area. Historically, Hong Kong has been the economic leader and a critical facilitator for the Pearl River Delta in areas like corporate financing and technology transfer. The downturn in Hong Kong’s property market, therefore, has significant implications for the entire region.

“The fate of Hong Kong and the Greater Bay Area are closely intertwined. As Hong Kong faces economic difficulties, the impact on the Pearl River Delta region is inevitable. The adage ‘one’s loss is everyone’s loss, and one’s success is everyone’s success’ aptly describes this interdependency,” Mr. Ji said.