Hong Kong’s private home market faces a significant downturn as prices plummeted by 6.8% in 2023, with forecasts anticipating continued decline amidst economic challenges and high interest rates.

In a setback for Hong Kong’s property market, private home prices endured a sharp decline of 6.8% throughout 2023, marking the eighth consecutive month of downturn, driven by a combination of fragile market sentiment, elevated interest rates, and a bleak economic outlook.

Official data unveiled on Monday revealed a staggering 1.4% drop in home prices in December compared to the preceding month, following a revised 1.9% decrease in November, underscoring the persistent downward trend.

Projections for the current year paint a gloomy picture, with UBS and Citi anticipating a further 10% decline, building upon the 20% drop witnessed since the market peaked in 2021.

Knight Frank’s outlook aligns with this sentiment, forecasting an additional 3-5% dip in prices during the initial half of the year, foreseeing stabilization only in the latter half as the impact of the interest rate hike cycle diminishes.

Martin Wong, the Greater China head of research and consultancy at Knight Frank, remarked, “The market obviously lacks confidence in the short term; the housing prices will appear to be a ‘L’ shape this year,” attributing additional pressure to developers slashing selling prices to liquidate inventory.

In a move reflecting the market’s sluggishness, the Hong Kong government announced in early January its decision to abstain from selling any residential or commercial land in the first quarter of 2024, citing tepid market sentiment and high vacancy rates. This decision marks the first time the government has refrained from rolling out any residential sites in a quarterly sale.

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