This article is contributed by Nelson Li, Country Head of IQI Hong Kong.
In the second quarter of 2024, Hong Kong’s overall economic growth stood at 3.3%, mainly supported by continuous growth in the export of goods. Visitor arrivals to Hong Kong totaled approximately 25 million in the first seven months of 2024, which is equivalent to about 70% of pre-pandemic levels. Notably, the rapid growth of non-mainland overnight tourists contributed to a rise in hotel room occupancy, reaching 83% for the first seven months of 2024 compared to 81% for the same period in 2023.
The Hong Kong government’s focus on promoting an event-based economy was demonstrated by organizing over 200 events in 2024. Successful cultural events, such as the “Doraemon” exhibition and the film “Kowloon Walled City,” set examples of how to enhance tourism and boost private consumption expenditure.
However, local retail sales and restaurant receipts faced challenges, leading to a decline in private consumption expenditure. The popularity of online shopping and increased regional competition for similar goods and services have caused structural changes in the local consumer market. To attract residents and tourists, enhancing innovative, distinctive service experiences would be crucial in boosting consumption.
In the financial market, Hong Kong’s stock market surged from around 16,600 to over 19,000 points due to Mainland China’s recent economic stimulus. However, the IPO market remained weak, with only about 30 companies going public in the first half of 2024, raising around HK$13.4 billion—a 25% drop from the same period in 2023. Forecasts for IPOs have been revised down to HK$50 to HK$80 billion from the initial estimate of HK$100 billion at the start of 2024.
In response to the US Federal Reserve’s rate cut, local banks immediately reduced prime rates by 0.25%, slightly decreasing actual mortgage rates. Reports indicate that banks have been tightening mortgage loans, particularly affecting lower-quality properties and commercial real estate, leading to liquidity challenges for corporations seeking property financing. The recent establishment of a dedicated task force by the Hong Kong Monetary Authority to address SME financing is expected to positively impact coordination between banks and corporations.
Hong Kong Property Market
Residential property transactions dropped significantly after hitting a near 12-year high of 8,551 units in April 2024, averaging about 3,744 units monthly from June to August. Property prices fell by approximately 4.1% in July from their peak in April, reaching levels last seen in the first quarter of 2015.
Developers accelerated sales after the removal of “spicy measures” in February 2024, with 11,399 primary property transactions recorded between January and August 2024—surpassing the annual totals of 2021 and 2022. However, the secondary market was affected as homebuyers shifted their focus to the primary market.
Despite cautious sentiment, the residential rental market performed well due to the housing demand from talents relocating under the “Top Talent Pass Scheme,” with rental prices increasing by about 4.4% in July 2024 compared to the end of 2023. Some developers have adjusted their strategy by converting projects from sale to rental.
It is expected that this trend will continue, as unsold inventory remains high, exceeding 20,000 units.
The luxury property segment outperformed the rest of the private residential market. The number oftransactions from January to the present in 2024 has surpassed the total for 2023, with significant increases in volume on Hong Kong Island. Several developments have remained unaffected by the overall market decline, setting new price-per-square-foot records within their districts. Luxury properties are expected to remain stable due to their market uniqueness.
Overall, the performance of the commercial property market has lagged behind the residential market in 2024. Investors’ attention shifted to the residential market after the removal of “spicy measures” in February 2024, while distress sales by developers and strategic investors further dampened market sentiment. Office, industrial, and retail property prices have dropped by 15.9%, 9.7%, and 10.8%, respectively, this year—significantly higher than the 4.7% decline in residential prices.
Discover the latest on Hong Kong’s economic growth, real estate trends, and tourism revival—read on to see how these shifts could impact you!
Data extracted in September 2024