Tepid prospects

However, multiple financial institutions are not optimistic, warning it would be hard seeing the growth momentum last until the end of 2024 because of high borrowing costs and a glut of new homes. Citibank says it expects Hong Kong’s housing prices to drop 10 percent this year, as local banks might not immediately follow suit and pass on an anticipated US Federal Reserve interest-rate cut in the second half of the year. UBS Group maintained its previous forecast of a 5 percent fall in home prices in 2024.

“Most developers have held up newly completed projects because of the relatively weak market sentiment (last year). After the extra stamp duties were shelved earlier this year, builders have been actively putting up units for sale,” says Rosanna Tang, executive director and head of research at Cushman & Wakefield.

The supply of new homes in Hong Kong reached a record high for the second consecutive quarter in late March, according to the Housing Bureau. Supplies are expected to reach 112,000 units in the next three to four years — a quarter-on-quarter rise of 3,000 units — from the projected supply of 109,000 units at the end of December.

Meanwhile, Hong Kong is grappling with a rapidly aging population. The Census and Statistics Department estimates that the proportion of residents aged 65 and above will reach 36 percent of the city’s population by 2046.

From 2019 to 2023, the number of residents living in Hong Kong for one to three months within a year had risen by 119,000, while the number of residents staying for three to six months had plunged by 136,400, according to the Census and Statistics Department.

Hong Kong’s various talent attraction programs aimed at easing the labor crunch since the pandemic had attracted 120,000 people to work and live in the city as of April, mostly from the Chinese mainland who have been granted two-year visas.

“The question is whether mainland property owners with extra money are willing to buy houses in Hong Kong,” says Shih Wing-ching, who founded Centaline Property Agency — one of Hong Kong’s largest property agencies. “We have found they are indeed eager to invest here because of the market’s transparency, ease of selling and a fair pricing system that reflects current conditions.”

“Hong Kong’s move to dump all extra stamp duties has helped to revive the real situation of investment preferences among mainland buyers. Once investment preferences in the local housing market are fully reflected upon, it would offset the negative effects of a shrinking population, partly due to the low birth rate and the middle-class exodus during the pandemic,” he says. Since the scrapping of the property cooling measures, mainland buyers have accounted for 50 percent of the transaction value in Hong Kong’s primary market for luxury apartment sales.

On the other hand, the central government’s decision to lift property purchase curbs in over 20 mainland cities in May, including Zhongshan, Zhuhai and Foshan, is not expected to trigger a homebuying spree by Hong Kong residents in the Guangdong-Hong Kong-Macao Greater Bay Area, analysts say. As a result, the impact on Hong Kong’s housing prices is likely to be restricted.