Hong Kong's property market is cooling after a rise in activity following the removal of purchase restrictions in February 2024. The elimination of additional stamp duties initially boosted home sales and increased prices by 0.5% in April. However, prices dropped by 1.2% in May, indicating a shift. Contributing factors include an oversupply of unsold properties, the highest in 20 years, and high interest rates making mortgages expensive. Experts predict a further 5% to 10% price decline for the rest of 2024, with Knight Frank and S&P anticipating continued downward pressure due to these market conditions.
Hong Kong's property market is showing signs of cooling after a brief period of increased activity following the removal of all purchase restrictions in February 2024.
In late February, Hong Kong eliminated additional stamp duties on property purchases for foreign buyers, second-time homebuyers, and those selling within two years of buying. This move came after property prices had plunged 20% from their 2021 peak due to rising mortgage rates, talent outflow, and a weak market outlook. The removal of restrictions initially sparked a surge in home sales, with prices even increasing by 0.5% in April. However, this trend appears to be short-lived. Prices dropped 1.2% in May, indicating a potential shift in the market.
Several factors are contributing to the slowdown. Firstly, a significant number of unsold properties remain on the market from the record high seen in 2023. This oversupply, estimated by Knight Frank to be the highest in 20 years, puts downward pressure on prices. Secondly, interest rates remain high in Hong Kong, making mortgages more expensive for potential buyers.
Real estate experts predict further price declines in the near future. High interest rates and an oversupply of homes are expected to lead to a 5% to 10% drop in prices for the rest of 2024. Knight Frank senior director Martin Wong expects prices to fall by 5% this year, while S&P predicts a decline of 5% to 10%.
The future of Hong Kong's property market remains uncertain. A decrease in the number of unsold units and potential interest rate cuts could help stabilize prices. However, many experts believe a significant rebound is unlikely in the short term. The significant drop in May prices after a brief rise suggests the market is still adjusting to the removal of restrictions and may face headwinds until these factors are addressed.
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