Hong Kong’s property bears top 17 global markets in pessimism, spooked by higher rates, tepid growth and weak demand, CBRE survey shows

The survey, conducted in November and December, showed Hong Kong’s sentiment at the very bottom of 17 major real estate markets across the world, where net buying intention ranged from 7 per cent to 15 per cent, CBRE said.

South Korea, Japan and Singapore were the three most bullish markets in respective order, the consulting firm added. The overall intention to sell surged to 50 per cent, the highest since the survey began in 2014.

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“Following significant capital value declines in their home market, Hong Kong investors exhibited the weakest buying intentions,” CBRE said. “Negative carry deepened and investment appetite shrank by half, hitting a 15-year low as financing costs reached a 22-year high.”

Property transactions in the city shrank to a 33-year low of 58,035 deals last year, while the value fell 13.8 per cent to HK$477.9 billion (US$61.1 billion), according to the Land Registry’s data.

Hong Kong’s decade-long property bull run, stopped in its tracks during the Covid-19 pandemic, plunged into negative territory after the local monetary authority raised interest rates in lockstep with the US Federal Reserve. The city’s base rate has surged 5.25 percentage points since March 2022, weighing on mortgage charges and borrowing costs.

The market is likely to remain in the doldrums, as 60 per cent of investors this year expect the monetary authorities to keep interest rates “higher for longer”, compared with about 40 per cent in 2023, the survey showed.

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Besides the high borrowing costs, Hong Kong’s sluggish economy also affected investors’ demand for property, even as numerous distressed assets such as China Evergrande Group’s 27-storey Wan Chai headquarters have flooded the market. Seasonally adjusted, Hong Kong’s economy grew 0.1 per cent in the third quarter of 2023 from the previous three months, according to official data.

The slump extended to Hong Kong’s secondary real estate market. The prices of lived-in homes dropped by 5.6 per cent in the first 11 months of last year, dragging the official index to its lowest level since February 2015. That has forced major developers such as Sun Hung Kai Properties to slash prices, offering its Yoho West residential project in Tin Shui Wai at a six-year low.

In terms of cross-border investment, Hong Kong is the fifth most-preferred destination among developed markets, with Japan and Singapore being the top two choices, respectively.

Still, CBRE said Hong Kong’s economy is expected to recover in 2024 on the back of stronger growth in mainland China, while potential interest rate cuts will improve investment sentiment.