Hong Kong’s notoriously unaffordable property prices have started to turn down.
In thinking about how bad the reversal may get, four words offer a useful guide: location, location, location; and size.
The real estate broker’s mantra holds as true for the Chinese city as for housing markets anywhere: Prices of homes in the most central districts will be more resilient than those in the suburbs. The distinguishing feature of Hong Kong is the premium on space. In a city where rising prices have encouraged developers to build ever tinier apartments, the relative undersupply of larger properties should ensure they hold up better in a slump.
Hong Kong property prices rose more than five fold between 2003 and the middle of this year, and the city is frequently ranked as the world’s least affordable market in global surveys. With the US-China trade war cranking up and the Federal Reserve raising interest rates, prices dropped in September and October. They’re down about 3 per cent from their August high, according to an index of second-hand home prices compiled by Centaline Property Agency. Most analysts, including those at CLSA and Jones Lang LaSalle, are now forecasting top-to-bottom declines of about 15 per cent.
The falls will be patchy, though.
Consider what happened during the last downturn in 2015-16. The decline in Hong Kong island was 16 per cent, according to data from the government’s Rating and Valuation Department. In the suburban New Territories, prices fell an average of 22 per cent, according to the department’s index.
Filtering by size shows a similar bifurcation: apartments measuring less than 430 square feet dropped about 12 per cent, while the loss for homes of 750 square feet to 1,075 square feet was 9 per cent. Also hit harder were the micro-apartments that developers had started building in order to keep homes within the reach of younger and less affluent buyers – as small as 128 square feet, or the size of a California garden shed.
There’s every reason to expect that pattern to repeat itself.
The supply of new housing has been greatest in the New Territories, according to JLL’s head of research, Denis Ma. In upmarket Hong Kong island districts such as the Peak and Mid-Levels, a lack of land for redevelopment restricts the supply of new homes.
Assessing how far and for how long the overall market will fall is a trickier proposition. Banks have started raising interest rates for the first time since the global financial crisis. Hong Kong rates track those in the US because of the city’s currency peg to the dollar, and the Fed has signalled that it will continue tightening.
A sagging stock market is also taking a toll on buyers’ confidence in Hong Kong, while the trade war will pressure an already slowing Chinese economy. That could impact Hong Kong’s unemployment rate, which at 2.8 per cent at the end of September was the lowest since before the Asian crisis in 1997.
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Read more:
Dubai and Abu Dhabi rents in Q3 2018: All you need to know
Home sales soar 51 per cent in Singapore
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To top it off, the influx of mainland Chinese buyers who helped to power the boom has slowed to a trickle. They accounted for just 1.2 per cent of sales in the first nine months of 2018, down from 4.5 per cent before the Hong Kong government introduced curbs on non-local buyers. A Chinese crackdown on capital outflows has also deterred purchases.
Developers, meanwhile, have scaled back sales of new projects and are offering discounts and sweeteners to attract buyers, a signal they accept the boom is over. At the same time, the government has brought in rules including a vacancy tax designed to prevent developers from hoarding apartments in the hope of higher prices.
Some investors may feel the correction is overdue. A 500-square foot apartment in Taikoo Shing, a middle-class enclave in the east of Hong Kong island, rose by 51 per cent or HK$3.1 million (Dh1.8m) between 2012 and 2017. That gain could pay for a monthly meal in a three-star Michelin restaurant for 87 years or two daily rides on the city’s subway for 960 years, CLSA analyst Nicole Wong has calculated.
As homeowners hunker down to wait out the slump, those sitting in cramped apartments far from the city centre have most to fear.
NO OTHER LAND
Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal
Stars: Basel Adra, Yuval Abraham
Rating: 3.5/5
Real estate tokenisation project
Dubai launched the pilot phase of its real estate tokenisation project last month.
The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.
Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.
FROM%20THE%20ASHES
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Company profile
Company: Verity
Date started: May 2021
Founders: Kamal Al-Samarrai, Dina Shoman and Omar Al Sharif
Based: Dubai
Sector: FinTech
Size: four team members
Stage: Intially bootstrapped but recently closed its first pre-seed round of $800,000
Investors: Wamda, VentureSouq, Beyond Capital and regional angel investors
Profile
Company name: Jaib
Started: January 2018
Co-founders: Fouad Jeryes and Sinan Taifour
Based: Jordan
Sector: FinTech
Total transactions: over $800,000 since January, 2018
Investors in Jaib's mother company Alpha Apps: Aramex and 500 Startups
At a glance
Global events: Much of the UK’s economic woes were blamed on “increased global uncertainty”, which can be interpreted as the economic impact of the Ukraine war and the uncertainty over Donald Trump’s tariffs.
Growth forecasts: Cut for 2025 from 2 per cent to 1 per cent. The OBR watchdog also estimated inflation will average 3.2 per cent this year
Welfare: Universal credit health element cut by 50 per cent and frozen for new claimants, building on cuts to the disability and incapacity bill set out earlier this month
Spending cuts: Overall day-to day-spending across government cut by £6.1bn in 2029-30
Tax evasion: Steps to crack down on tax evasion to raise “£6.5bn per year” for the public purse
Defence: New high-tech weaponry, upgrading HM Naval Base in Portsmouth
Housing: Housebuilding to reach its highest in 40 years, with planning reforms helping generate an extra £3.4bn for public finances
THE SPECS
Engine: 6.75-litre twin-turbocharged V12 petrol engine
Power: 420kW
Torque: 780Nm
Transmission: 8-speed automatic
Price: From Dh1,350,000
On sale: Available for preorder now
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
A MINECRAFT MOVIE
Director: Jared Hess
Starring: Jack Black, Jennifer Coolidge, Jason Momoa
Rating: 3/5
Bridgerton%20season%20three%20-%20part%20one
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Election pledges on migration
CDU: "Now is the time to control the German borders and enforce strict border rejections"
SPD: "Border closures and blanket rejections at internal borders contradict the spirit of a common area of freedom"
Paatal Lok season two
Directors: Avinash Arun, Prosit Roy
Stars: Jaideep Ahlawat, Ishwak Singh, Lc Sekhose, Merenla Imsong
Rating: 4.5/5
In numbers: PKK’s money network in Europe
Germany: PKK collectors typically bring in $18 million in cash a year – amount has trebled since 2010
Revolutionary tax: Investigators say about $2 million a year raised from ‘tax collection’ around Marseille
Extortion: Gunman convicted in 2023 of demanding $10,000 from Kurdish businessman in Stockholm
Drug trade: PKK income claimed by Turkish anti-drugs force in 2024 to be as high as $500 million a year
Denmark: PKK one of two terrorist groups along with Iranian separatists ASMLA to raise “two-digit million amounts”
Contributions: Hundreds of euros expected from typical Kurdish families and thousands from business owners
TV channel: Kurdish Roj TV accounts frozen and went bankrupt after Denmark fined it more than $1 million over PKK links in 2013
The National's picks
4.35pm: Tilal Al Khalediah
5.10pm: Continous
5.45pm: Raging Torrent
6.20pm: West Acre
7pm: Flood Zone
7.40pm: Straight No Chaser
8.15pm: Romantic Warrior
8.50pm: Calandogan
9.30pm: Forever Young
Russia's Muslim Heartlands
Dominic Rubin, Oxford
COMPANY%20PROFILE
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Cinco in numbers
Dh3.7 million
The estimated cost of Victoria Swarovski’s gem-encrusted Michael Cinco wedding gown
46
The number, in kilograms, that Swarovski’s wedding gown weighed.
1,000
The hours it took to create Cinco’s vermillion petal gown, as seen in his atelier [note, is the one he’s playing with in the corner of a room]
50
How many looks Cinco has created in a new collection to celebrate Ballet Philippines’ 50th birthday
3,000
The hours needed to create the butterfly gown worn by Aishwarya Rai to the 2018 Cannes Film Festival.
1.1 million
The number of followers that Michael Cinco’s Instagram account has garnered.
India squad for fourth and fifth Tests
Kohli (c), Dhawan, Rahul, Shaw, Pujara, Rahane (vc), Karun, Karthik (wk), Pant (wk), Ashwin, Jadeja, Pandya, Ishant, Shami, Umesh, Bumrah, Thakur, Vihari
THE%20JERSEYS
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The specs
Engine: 3.0-litre six-cylinder turbo
Power: 398hp from 5,250rpm
Torque: 580Nm at 1,900-4,800rpm
Transmission: Eight-speed auto
Fuel economy, combined: 6.5L/100km
On sale: December
Price: From Dh330,000 (estimate)
The Buckingham Murders
Starring: Kareena Kapoor Khan, Ash Tandon, Prabhleen Sandhu
Director: Hansal Mehta
Rating: 4 / 5
