Prices keep going up in the city-state and across much of the region – except in the one city that for decades reigned supreme. finews.asia takes a look.
Until recently, when it came to the property market, Hong Kong could do no wrong. For decades, prices rose faster and for longer than in the rest of the Asia Pacific.
At times, it was frequently cited as the most expensive – and unaffordable - residential property market in the world. But now – not so much – as the Centa-City Index (CCI) shows a steep decline in value since 2022 after an extended four-year period going back to 2018 when things largely remained flat.
The question is who has it been replaced by? The answer? Pretty much everyone else, although Singapore has clearly assumed the regional crown.
Stark Picture
At least that seems to be the case according to an Asia Pacific residential review by real estate consultancy Knight Frank as it cast an eye over property developments in the first half.
The picture they paint, however, is a stark one when it comes to the two main cross-border financial centers as prices were up almost 8 percent in Singapore while they were down almost 9 percent in Hong Kong.
In the rest of Asia, prices rose strongly in India, Thailand, and Malaysia, with the cities of Mumbai (up 6 percent) and Penang (up almost 6 percent) placing second and third respectively.
Really Down Under
China and Australia cum New Zealand posted the biggest downward corrections, with the former affected by a real estate slump while the latter two were impacted by the strong rise in interest rates.
Overall, the consultancy indicated that prices across the region had «plateaued» after the «bull run» seen in recent years.
«Out of the 25 cities tracked by Knight Frank, 14 registered positive year-on-year growth in the first half of 2023, which decreased from 18 in H2 2022. Although rate hikes are expected to have reached the tail end of the hiking cycle, uncertainty will still carry through till the end of the year,» the consultancy wrote.
Surprise Performer
Singapore continued to see sharp rises in value even though the economy itself barely escaped a technical recession in the first part of the year.
Malaysia was a surprise, with Penang being the second-best performer in Southeast Asia - an additional laurel on top of its overall solid performance in the region.
«Developers have continued to launch projects, confident that demand will hold, albeit economic growth is set to moderate to 4.5-5.0% for the full year,» Knight Frank indicated.
China Worries
China remains the main source of worry across the region, with buyers kept back by negative stock market developments, high-interest rates, and «sluggish» economic growth, the consultancy maintained.
«Despite bottoming-out prices, (the) annual change in transaction volume for Chinese cities is still negative, reflecting (the) lackluster effect its 16-point rescue package had on demand since implementation in late 2022,» Knight Frank says.
The same goes for Hong Kong, which is additionally impacted by the lack of stimulus that the Chinese market is benefiting from, although the Hong Kong Monetary Authority (HKMA), the city’s defacto banking regulator, recently loosened down payment requirements in an effort to «invigorate the dormant sector».
Commercial Doldrums
But in Hong Kong, it might take something more for the property market to recover as it is not only the residential market that is suffering but the commercial one as well, something finews.asia commented on recently.
Investment in commercial real estate has fallen to levels not seen since the early 2010s while flagship buildings remain empty or underused.
Indeed, larger forces are potentially at play in a post-pandemic world increasingly populated by digital nomads, and many may be questioning the typical Asia-based model of high-rise offices and apartments linked up to mass transit stations and malls.
No Logic
If so, that should send a chill down the spine of all those landlords and property owners who have grown used to quasi-irrational, knee-jerk increases in prices and rents that have no real economic reason or logic behind them.
In fact, a walk down most streets in Hong Kong today is a picture if a potential inflection point. Many storefronts, even large ones on prominent streets, have now remained empty and shuttered for years.
It hopefully shows that many of those landlords are no longer getting away with that kind of irrational behavior anymore -at least for now.
