Source: Mansion Global —
Hong Kong, often labeled as the world’s most expensive city, could be about to get a little less pricey, according to some local experts. As a result, the global city’s luxury housing market may present attractive opportunities for wealthy house hunters and investors in 2022.
Recently released research by Morgan Stanley predicted Hong Kong’s home prices to fall by 2% this year. The data contradicts other industry insiders who have tipped gains of between 3% and 10% for the local housing market. If the drop does eventuate, it would signal a halt in the city’s 13-year long positive real estate run.
Home prices rose 3.9% in the first 10 months of 2021 alone, according to data from the local Rating and Valuation Department and it now costs an average of HK$16,239 (US$2,082) for a square foot of property in Hong Kong.
Morgan Stanley’s researchers have noted that an 18% plunge in the Hang Seng Index, a benchmark for blue-chip stocks traded on the Hong Kong stock exchange, in the second half of 2021 has created a “negative wealth effect” for investors.
Morgan Stanley’s equity analyst Praveen Choudhary wrote in the Dec. 15 report that sales volumes of existing homes could fall by as much as 15% this year, a dramatic drop from the 29% surge seen in the first 11 months of 2021. The report also predicted that transactions of newly built homes could decrease by 5% this year, compared with the 24% growth in 2021.
Mr. Choudhary wrote that the stock market fall “suggests a negative wealth effect which has historically resulted in a decline in property prices.” Morgan Stanley subsequently downgraded its view of the Hong Kong property sector to “cautious” from “attractive.”
Whichever expert camp you follow—an impending drop in values or a modest increase— the truth remains that Hong Kong price growth is in “go-slow” mode, thus signaling a window of opportunity for buyers in 2022.
For 11 years running, the Demographia Housing Affordability Report has ranked Hong Kong as the world’s least-affordable housing market, however recent data suggests the island city might now be more affordable than it has been in more than a decade.
One unpredictable factor at play that will impact property prices, however, is the status of travel to Hong Kong. Despite most of the preparations for a reopening of the border with mainland China already being underway, Beijing has yet to decide when restrictions will be lifted. It is still unclear when international borders will reopen as Hong Kong is currently dictated by China’s Covid-zero strategy. Borders have been sealed to most travelers since February 2020.
Growth Is Still on the Horizon
Contrary to Morgan Stanley’s forecast of falling prices, other property analysts are still predicting increases this year.
Knight Frank has tipped a 3% increase in Hong Kong’s home prices, while JLL reported potential growth of up to 5%.
