News release

Rising price trend is losing momentum in the near term

Interest rates hikes, decreasing marriages and birth rate dampen housing demand

May 09, 2023

Yvonne Liu

Public Relations Director, Hong Kong and Macao
+852 2846 5264

HONG KONG, May 9, 2023 – Hong Kong's residential prices are losing growth momentum in the near term due to the interest rate hikes and decreasing birth rate and marriages, according to JLL's latest Residential Market Monitor released today.

In the past three years, Hong Kong's population has fallen by 187,000 and the expected number of new births is also on a downward trend. In 2020-2022, the average number of marriages registered per year was 28,248, 41.8% lower than the average of 48,556 in 2017-2019. The total fertility rate (live births per 1,000 women) decreased from 1,128 in 2017 to 772 in 2021, below those in Japan and Singapore.

Norry Lee, Senior Director of Projects Strategy and Consultancy Department at JLL in Hong Kong, said: "With fewer home formation and new births, the less starter home demand and upgrade demand, and the interest rate hikes are also affecting the buying interests of local and mainland buyers."

In 2017, mainland Chinese buyers accounted for over 15% of residential transaction volume. However, changes in economic reality have become less conducive for these buyers to enter the market. Mainland Chinese investors attracted by Hong Kong's lower borrowing costs and higher rental yields are finding these factors less appealing than before, and while the average mortgage rate in Hong Kong rose by 213 bps to 3.58% in 2022, the nationwide average mortgage rate in mainland China dropped to a record low of 4.26%. In addition, the rental yield of Class A property in Hong Kong narrowed from 2.8% in 2017 to 2.5% in 2022. Furthermore, non-local end users settling in Hong Kong face more difficulties in buying homes than local buyers because they need to prepare a much higher upfront payment than local buyers for the same property, due to higher stamp duties and the lower maximum LTV ratio allowed.

HSBC's 12.5 bps increase in the prime rate in May will also raise the monthly mortgage payment for a HKD 5 million mortgage by HKD 350. The impact of the latest increase may be marginal but the cumulative burden since the beginning of the rate hike cycle is becoming increasingly unbearable. Even if the rate hike cycle has ended, mortgage rates are likely to stay elevated, which is not conducive for demand growth, and although the economic recovery will eventually translate into higher income and greater affordability to support home prices, that process could be gradual.

Cathie Chung, Senior Director of Research at JLL in Hong Kong, said: "Having said that, some stimulatory policies and external factors will lend support to housing demand in the future. New policy measures, including a revamped investment-immigration scheme and tax incentives, could help Hong Kong attract non-local investors and family offices. Since the government launched the Top Talent Pass Scheme in December 2022, more than 12,000 applications have been approved, along with 8,300 visas granted to the dependents of the scheme's applicants. Moreover, Singapore raised the Additional Buyer's Stamp Duty in April to 60% from 30%, potentially increasing Hong Kong residential assets' relative appeal to non-local investors. However, the outlook of Hong Kong's housing market depends largely on whether these stimulatory policies and external factors can offset the negative influence of the structural factors." 


About JLL

For over 200 years, JLL (NYSE: JLL), a leading global commercial real estate and investment management company, has helped clients buy, build, occupy, manage and invest in a variety of commercial, industrial, hotel, residential and retail properties. A Fortune 500® company with annual revenue of $20.9 billion and operations in over 80 countries around the world, our more than 105,000 employees bring the power of a global platform combined with local expertise. Driven by our purpose to shape the future of real estate for a better world, we help our clients, people and communities SEE A BRIGHTER WAYSM. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com.