Hong Kong Housing Market: Prolonged Price Adjustments

Hong Kong Housing Market Faces Surplus, Longer Price Adjustments

Hong Kong's housing market is set to experience a phase of "relative surplus" between 2024 and 2027, according to a report by JLL, a leading real estate services firm. The study highlights that the average annual sales of new homes in Hong Kong have been only 16,400 from 2002 to 2023. This data forms the basis for JLL's prediction of an upcoming relative surplus in the housing market.

Hong Kong Housing Market Trends in 2024

The anticipated surplus in housing supply will result in prolonged adjustments to home prices in the region. JLL explains that the long cycle of residential development projects often leads to a lag in housing supply compared to price fluctuations.

When property prices are high, construction commencements increase, and when prices are low, construction commencements decrease. This pattern creates a cycle that can span around a decade, with the residential completion figure following the trend.

Research into Hong Kong Housing Market

JLL further divides the housing supply cycle into two distinct phases: relative surplus and relative shortage.

The residential market generally experiences a downward trend in property prices during periods of relative surplus, while prices tend to rise during relative shortage. JLL acknowledges that external factors, such as politics and the economy, can also influence the market but emphasizes the impact of the housing supply cycle.

To support their analysis, JLL points out that when the three-year moving average for private residential supply remained above the average primary transaction volume between 1997 and 2007, the overall home price index in Hong Kong dropped by 12.3%. Conversely, when the supply fell below this baseline between 2008 and 2017, the index saw a significant surge of nearly 200%.

As the relative surplus phase approaches, it becomes crucial for prospective buyers and investors in Hong Kong's housing market to be aware of the potential adjustments in home prices.

The cycle of housing supply and its correlation with property prices provide valuable insights into the market's dynamics. Understanding these patterns can help individuals make informed decisions when it comes to buying or selling residential properties in Hong Kong.

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