According to forecasters, the longest bull market in Hong Kong’s history in the property market has ended in the second half of 2019 caused by local unrest with Mainland China and other economic uncertainties engulfing the unrest.
Mass and luxury residential homes have seen capital values drop in the second half of 2019 on the back of a weakening market. Mass residential properties seem to be more resilient on prices supported by continual demand and the relaxation in mortgage rules.
The luxury residential market has backed by PRC capital over the past 5 to 10 years. PRC buyers have become inactive this year due to the tightening capital outflow policy and the United States and China’s trade war.
Capital values on luxury residential properties dropped 4.7% since July, harming the growth achieved in the first half of the year.
Hong Kong has experienced property crashes in the past, dating back to 1997.
Property prices plunged 50% due to the Asian financial crisis and dropped even lower to 43% during the dotcom bubble a SARS outbreak period and last occurrence with a drop of 24% which happened I 2008 during the global financial crisis.
Chairman and Head of Capital Markets at JLL, Joseph Tsang, said capital values of mass residential properties dropped by 2.5% during the second half of the year due to the political unrest.
The economic slowdown in Mainland China and Hong Kong will decrease the demand for housing, particularly in the luxury residential market that relies on PRC demand.
Capital values for luxury residential will continue to drop to 20% in 2020. Developers will experience increased pressure in pricing in order to offload stock due to the vacancy tax and an increase in housing supply.
Prices for mass residential are expected to drop by 10 to 15% next year as well.